High crude oil, commodity prices slow down Indian economy: Pranab

Rising inflation caused by soaring global commodity prices and high crude oil prices have slowed down the Indian economy, finance minister Pranab Mukherjee said in New Delhi on Wednesday.

Admitting that the gross domestic product (GDP) would slow down to around eight per cent, from 8.5 per cent in fiscal 2010-11, Mukherjee told the annual conference of economic editors that he was hopeful that inflation would start moderating from December.

Referring to growth, he said that even if GDP growth slowed down to eight per cent, it was reason enough for celebration, considering the global economic crisis. ''Most of us are expecting India's growth to go down below eight per cent,'' said the minister. ''This is disappointing. But if we can, we must not lose perspective of the global situation. There is slowdown all over the world.''

In his budget, presented earlier this year, the finance minister was expecting the economy to grow at nine per cent. Mukherjee had also promised to reduce the fiscal deficit to 4.6 per cent, highly unlikely under the current circumstances. The government has not been able to push ahead with its ambitious disinvestment plan, and analysts expect the deficit to widen to 5.6 per cent of GDP.

According to Mukherjee, inflation at around nine per cent, continued to remain 'sticky.' He hoped headline inflation – as measured by the wholesale price index – would start declining from December. ''I am hopeful that we will end the fiscal with seven per cent inflation,'' he added.

The minister also admitted that the tight monetary policy pursued by the Reserve Bank of India (RBI) – which has raised interest rates a dozen times since March 10 – had hurt growth in the current fiscal. The Indian economy grew by 7.7 per cent in the first quarter (April-June) of the current financial year, the lowest in 18 months.