India growth sits near three-year lows India's economic growth languished near three-year lows during the first quarter, as gloom over high interest rates and political gridlock in New Delhi kept investment depressed and hit consumer spending. The economy grew a slightly better than expected 5.5 per cent between April to June, compared with the same period last year. It was up marginally from the three-year low of 5.3 per cent recorded in January to March, the last quarter of the 2011-2012 financial year. Jim Walker, founder of economic research agency Asianomics, said, however, that India would have a "slower economic growth rate . . . than anyone would have thought possible even one year ago." India's economy grew 6.5 per cent during the past financial year, its slowest pace in three years, and down sharply from the 8 per cent growth that it registered in 2010-2011. Manmohan Singh, prime minister, has insisted the economy will expand at a faster pace in the current financial year. But the weak first-quarter growth has reinforced many analysts" views that the economy will decelerate further, and grow less than 6 per cent in the current year. Gross fixed capital formation, a measure of investment, rose just 0.6 per cent from April to June, reflecting the lack of investment. Consumption, one of the main propellers of the economy over the past few years, grew 3.9 per cent, down from 4.9 per cent during the same quarter last year, and its slowest pace since 2004. Koushik Chatterjee, chief financial officer of Tata Steel, said the economy's sluggish performance reflected the lack of policy direction by the Congress-led government, which has been mired in corruption allegations and internal feuds over the next generation of reforms. "Without any measure, India grows about 5 per cent, with some initiative, it grows at 6 per cent, and with a huge amount of policy impetus is reaches 7," Mr Chatterjee told Indian reporters. There isn't any impetus being provided on the economic front. During the first quarter, the manufacturing and mining sectors hardly grew at all, just 0.2 and 0.1 per cent, respectively. The main bright spot was the construction sector, which expanded 10.9 per cent, up from 3.5 per cent. However, analysts suggested that the strong growth in construction would be a statistical anomaly as delayed monsoon rains allowed more building activity - which normally stops once the rains begin - to continue a little later in the year. Rajiv Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry, said he expected growth to remain at the current sluggish pace for many months ahead, or sink further, even to below 5 per cent, unless the government took urgent action to shore up investor confidence. "Private investment sentiment is at the weakest for a very long time," he said. This is going to make sure that the downward moment in growth will continue in the next quarter, and there will be tougher times ahead.