New Delhi - India said Friday the economy grew by 5.3 percent in the three months to September year-on-year - weaker than the previous quarter and stirring hopes of an interest rate cut to spur investment.
Growth was below the 5.7 percent logged in the previous three months but the performance still beat consensus market forecasts of 5.1 percent expansion in the second quarter of the financial year, the government said.
The data was released days before the hawkish central bank, which has held its benchmark lending rate at a steep eight percent since last January, meets for its regular policy review.
Most economists expect the Reserve Bank of India, which has vowed to “break the back of chronic inflation”, to hold rates until the next financial year starting in April.
But some expect it to begin lowering rates as early as the next policy meeting Tuesday as growth slows.
India's benchmark Sensex share index closed up nearly one percent at a record high of 28 693.99 points on hopes that slowing growth, easing inflation and a slide in crude oil prices will pave the way for a rate cut.
India's Finance Minister Arun Jaitley has been pressing central bank governor Raghuram Rajan to lower interest rates at the monetary policy review to boost the stuttering economy.
Jaitley has suggested that with India's inflation now finally appearing to be on a downward track, the bank can bring down borrowing costs for businesses to help drive investment.
India's economy has been mired in its worst slowdown in two decades.
Growth was 4.7 percent in the last financial year - around half of the near double-digit levels seen a few years ago - hit by high interest rates to curb inflation, a lacklustre global economy and a fall in foreign investment amid corruption scandals which embroiled the previous Congress government.
Jumpstarting growth is key for India's new Prime Minister Narendra Modi, who led his party to the first single-party parliamentary majority in three decades in May on promises to revive Asia's third-largest economy.
The central bank has forecast growth of 5.5 percent this year, slightly below the government's target of 5.8 percent.
Economists say India needs at least eight-to-nine percent growth to create jobs for a ballooning youth population. - Sapa-AFP