The Indian economy is expected to grow at a lower rate than projected by the government in the current fiscal, industry lobbies said Tuesday, after official data showed the economy expanded at a slow 7.7 percent in the quarter ending June.

The fresh data released by the Central Statistical Organisation (CSO) on India's gross domestic product (GDP) presented a mixed bag for the Indian economy, with agriculture being the surprise, growing at a relatively higher rate of 3.9 percent.

The economy had grown by 8.8 percent in the April-June quarter of 2010-11. The Prime Minister's Economic Advisory Council (PMEAC) had projected GDP to grow 8.2 percent in the current fiscal.

"This growth rate is the lowest since third quarter of 2009-10 and the third straight quarter of a decline," said Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry.

"More importantly, there has been a significant downward revision in the GDP growth rate of first quarter of 2010-11 from the earlier 9.3 percent to 8.8 percent. This has pushed up the growth rate in Q1 of 2011-12 to 7.7 percent," he added.

The CSO data also indicated that the lower growth rate was mainly on account of a comparatively lower expansion in manufacturing output of 7.2 percent, against 10.6 percent in the corresponding period of 2010-11.

The gross domestic product had grown by 8.5 percent in 2010-11 and 8 percent in the year before.

Kumar said that if the economy had to grow 8.2 percent, according to the PMEAC projection then the GDP would have to expand by 8.3 percent for the remainder of the fiscal.

"That would mean, agriculture growing at 2.7 percent, industry at 7.7 percent and service sector at 10 percent respectively. It is unlikely that this growth rates will now be achieved," said Kumar.

Tuesday's data showed a sharp fall in the growth of construction and mining sectors, at 1.2 percent and 1.8 percent in the quarter ended June, from 7.7 percent and 7.4 percent, even as the growth in services such as transport and trade was higher at 12.8 percent.

Electricity and gas output rose by 7.9 percent, against 5.5 percent, while financial services grew by 9.1 percent, as against 9.8 percent.

"The industrial sector has been particularly affected by structural problems such as delays in the implementation of large projects. Indeed, this is reflected in the extremely poor growth of the mining and construction sectors," said Chandrajit Banerjee, director general of the Confederation of Indian Industry.

"Although CII expects GDP growth to recover in the second half, achieving the 8 percent target is tough," he added.

The industry lobbies also urged the Reserve Bank of India (RBI) to not increase interest rates again, something the central bank has done regularly since Jan 2010 to fight high inflation.

"We would urge the RBI to refrain from hiking interest rates in the forthcoming policy, taking note of the weakness in the economy," said Banerjee. (Economic Times)