INSTANT VIEW 4-India's June qtr GDP up 7.9 pct y/y

NEW DELHI, Aug 29 (Reuters) - India's economy grew a slower
than expected 7.9 percent in the June quarter INGDPQ=ECI from
a year earlier, easing from the previous quarter's 8.8 percent
as industrial activity slowed due to monetary tightening.

The annual growth for India's fiscal first quarter was
lower than a median forecast of 8.1 percent in a Reuters poll
of economists.
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* KEY POINTS:

- Farm output in the June quarter grew an annual 3.0
percent vs 2.9 percent in Jan-March and 4.4 percent in the
year-ago period.

- Manufacturing grew an annual 5.6 percent in April-June vs
5.8 percent in Jan-March and 10.9 percent in the year-ago
period.

- Construction grew 11.4 percent in April-June versus 12.6
percent in Jan-March and 7.7 percent in the previous year.

- Trade, hotels, transport and communication grew 11.2 pct
in April-June vs 12.4 percent in Jan-Mar and 13.1 percent in
the year-ago period.

COMMENTARY:

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:

"I think it is really a setback as we were all expecting it
to be between 8 to 8.2 percent. Sub-8 percent will certainly be
acting as a dampener. Manufacturing growth slowdown was
expected but farm sector growth has come off."

"And knowing fully well that this year's monsoon was
sub-normal, going ahead agricultural growth will create a major
setback to the overall GDP growth ... For the year as a whole,
I see GDP slipping below 7.5 percent.

"Monetary tightening will continue as RBI has been clearly
saying that it will accord more priority to price stability
than to growth.

"Yesterday's inflation data clearly shows that demand-pull
pressures are still causing inflation to rise which is seen
through the manufacturing products number. And with the
farm-debt waiver money coming into the system, I expect another
25 basis hike in CRR in the October policy."

A. PRASANNA, ECONOMIST AT ICICI SECURITIES, MUMBAI:
"The numbers are broadly in line with our expectations and is
mainly due to a slowdown in the industrial sector which has
been evident from the recent industrial production data.

"Going ahead, we expect some pick up in the industrial
sector and services may decelerate slightly. For the full year,
we expect growth at 7.5 percent.

"For monetary policy, this reinforces our belief that the
RBI needs to maintain a tight stance to ensure that the effects
of past tightening percolate through the economy. India needs
to grow at a maximum of 8 percent in the current context and
structural rigidities to ensure poverty is reduced."

INDRANIL PAN, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI:

"7.9 percent is not a bad number. Given the overall global
slowdown cycle, the biggest plus point is the expansion in the
services sector which continues to grow at a good pace and
which will buffer the pace of slowdown. For the full year we
expect growth at 7.5 percent. In the face of good growth and
loose fiscal policy, I don't expect any relaxation in the
central bank's tight policy stance even though inflation has
moderated slightly."

D.K. JOSHI, PRINCIPAL ECONOMIST, CRISIL, MUMBAI:

"Growth in the coming quarters could be around the same
number. It could be marginally lower than this. I expect
another round of monetary tightening this fiscal year."

AMOL AGRAWAL, ECONOMIST, IDBI GILTS, MUMBAI:

"The numbers are broadly in line with expectations, and
industrial growth may slow down further due to the impact of
tight policy. But I don't expect any easing in the central
bank's policy stance any time soon as inflation is much above
the central bank's comfort zone."

GAURAV KAPUR, SENIOR ECONOMIST, ABN AMRO BANK, MUMBAI:

"GDP growth at 7.9 percent is in line with our
expectations. Growth momentum has been slowing down on tighter
monetary policy and adverse global environment. Higher interest
rates, slower bank credit growth and higher oil and commodity
prices are acting to curb activity levels in the economy.

"That said, consumption spending is going to get a boost
from an expansionary fiscal policy in the second half of the
year. We expect growth for the whole fiscal year to come down
to about 7.5 percent."

SONAL VARMA, ECONOMIST, LEHMAN BROTHERS, MUMBAI:

"Today's GDP growth numbers indicate that global financial
market turbulence and higher inflation have started to moderate
growth. We see this as the start of slower growth ahead and our
full-year estimate for GDP growth is 7.3 percent in FY09. With
slowing growth and lower commodity prices, we do not expect any
further repo rate hikes by the RBI."

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI:

"The GDP numbers have come a bit lower than our
expectations. Agriculture has come lower than expected.
Industry and services have been in line with expectations.
Going forward, we expect some support to industry from
consumption. Services are likely to moderate somewhat. Our
forecast for the year remains unchanged at 7.5 percent."

MARKET REACTION:

- The 10-year bond yield IN082418G=CC eased 1 basis point
to 8.66 percent.

- The rupee INR=IN was steady at 43.75/76 per dollar.

- The stock market held steady, up 2.6 percent.

LINKS:

- Ministry of Statistics and Programme Implementation Web
site at www.mospi.nic.in

BACKGROUND:

- Prime Minister Manmohan Singh's Economic Advisory Council
estimates the economy will grow 7.7 percent in the year to
March-end, below a forecast from the central bank of 8.0
percent.

- Finance Minister Palaniappan Chidambaram has said he
expects the economy to grow close to 8.0 percent this fiscal
and most think-tanks expect expansion in the 7.0-8.0 percent
range.

- India's economy, Asia's third-largest, is largely driven
by domestic demand and strong growth has attracted global
attention.

- Authorities are battling high inflation, now at just
below an annual 12.5 percent, and have taken a slew of fiscal
measures to boost supplies of essential commodities, while the
central bank has raised interest rates and banks' reserve
requirements to tame prices.

- The Reserve Bank of India lifted its main lending rate
three times in June and July to a seven-year high of 9
percent.
(Reporting by Surojit Gupta; Editing by Charlotte Cooper)