Mumbai: The Indian economy will grow at 8.5-9 per cent this fiscal despite a slowdown in industrial growth in July, Montek Singh Ahluwalia, deputy chairman of the planning commission, has said.

"We have been predicting a slightly lower growth and the latest industrial output numbers are no reason to reassess the growth estimate," Ahluwalia told reporters on the sidelines of a meeting on ground water management.

He said while growth in the first quarter was good, some slowdown in the second quarter was expected. "I would rather call it a moderation in growth rather than slowdown," he said.

He discounted the slowing effects of a tight money policy on the economy. Rather, he said, the Reserve Bank''s policy was "a successful example of macro economic management, consistent with extracting non-inflationary potential of the economy by maintaining growth."

While the economy grew at 9.3 per cent in the first quarter of the current fiscal, industrial growth slipped to 7.1 per cent in April-July from 13.2 per cent in the same period a year ago.

Most analysts attribute the slowdown to higher interest rates, which forced consumers to cut spending on household items and automobiles, adversely affecting the manufacturing sector.

Manufacturing sector growth came down to 7.2 per cent during the month as compared to 14.3 per cent in July 2006.
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