Indian economic growth moderated to 7.9 per cent in the first quarter of current fiscal, against 9.2 per a year ago as rising borrowing costs impacted manufacturing and some other sectors.

However, moderation in the GDP growth was expected as RBI hardened interest rates to control double-digit inflation.

If the first quarter GDP growth continues in the remaining months of this fiscal, the economy would expand at the rate more or less projected by Finance Minister P Chidambaram.

He projected the economy to grow by close to 8 per cent, compared to 9 per cent in the previous fiscal.

Manufacturing growth almost halved to 5.6 per cent, against 10.9 per cent as rising interest rates impacted their expansion. Even though agriculture grew by lower rate of three per cent, it is quite considerable on the high base of 4.4 per cent.

The other sectors which witnessed considerable decline in growth rate are electricity, gas and water supply, which expanded at the rate of 2.6 per cent against 7.9 per cent.

In the services sector, trade, hotels, transport and communication grew by 11.2 per cent, against 13.1 per cent.

Finance, insurance, real estate and business services expanded by 9.3 per cent, against 12.6 per cent.

However, community, social and personal services grew by higher rate of 8.4 per cent, against 5.2 per cent.

Construction activities also expanded at higher rate of 11.4 per cent, as compared to 7.7 per cent, while mining and quaring grew by 4.8 per cent, against 1.7 per cent.

In absolute terms, India's GDP stood at Rs 7,82,357 crore (Rs 7,823.57 billion) in the first quarter of this fiscal, against 7,24,949 crore (Rs 7249.49 billion) in the corresponding period of 2007-08.

In services, trade, hotels, transport and communication grew by 11.2 per cent against 13.1 per cent, while financing, insurance, real estate and business services rose at the rate of 9.3 per cent against 12.6 per cent.

However, community, social and personal services grew at higher rate of 8.4 per cent against 5.2 per cent.

Commenting on the growth figures, PM's EAC member Saumitra Chaudhuri said, "It is on expected lines. When EAC came out with the GDP projection, monsoon conditions were not clear. If monsoon turns out to be good, which seems to be the case, there could be some upside."

What is heartening is that investment in the economy continues to be buoyant.

"The investment-GDP ratio has risen to 37.9 per cent, which means GDP growth is likely to be maintained," a finance ministry official said.

However, some analysts believe that economy is likely to expand at lower growth rate in the next quarter. "I expect that the figures would be flat below 7.9 per cent in the next quarter," CRISIL principal economist D K Joshi said.

Moderation in economic growth, particularly in manufacturing, was expected as RBI had tightened monetary policy to curb double digit inflation.

For the first quarter, wholesale prices-based inflation stood at 9.4 per cent. Mineral inflation was at a huge 46 per cent, while food articles inflation stood at 5.8 per cent, fish at 1.5 per cent, manufactured products at nine per cent and electricity at 1.4 per cent.

The consumer price index for industrial workers, which is a better indicator of the impact of price rise on the common man, rose by 7.7 per cent in the first quarter.