Most official Indian forecasts (by the finance ministry, Reserve Bank and the Economic Advisory Council to the Prime Minister) as well as some private sector projections have only recently dropped to less than 8 per cent; by way of contrast, the international forecasters have caught on faster to the extent of the slowdown. Still, some comfort can be obtained from the fact that the growth rate will remain in the 7.5 per cent range, give or take a bit. This reinforces the belief that the underlying trend is strong enough to limit the damage caused by the downturn, a factor critical to sustaining investment levels in the economy.

From the sectoral perspective, agriculture grew by 3 per cent, on trend. However, the somewhat deficient rainfall during July in several parts of the country could adversely affect second-and third-quarter numbers for this sector. Manufacturing grew by 5.6 per cent, down from 10.9 per cent last year, a drop that was clearly visible in the monthly Index of Industrial Production numbers.

The construction sector, however, has been a surprise. Growth accelerated from 7.7 per cent last year to 11.4 per cent this year. Given that this is viewed as an interest-sensitive activity, the interest rate dynamics of the past couple of quarters would have been expected to slow this sector down considerably. The fact that it didn't is probably attributable to the steady increase in investment in infrastructure, as opportunities for the private sector increase.

It is also quite striking that the two largest service sectors, "trade, transport, hotels and communications" and "financial and business services", although growing at slower rates than last year, still displayed great strength. The former grew by 11.2 per cent, compared with 13.1 per cent last year, while the latter grew by 9.3 per cent, compared with 12.3 per cent last year.

Looking at the numbers from the demand side, the investment/ GDP ratio came in at 32.3 per cent, slightly higher than the first quarter of last year but down sharply from the 38.5 per cent believed to have been reached at the peak last year. This suggests that investment activity, while responding to the business cycle, is still quite buoyant, an inference consistent with that emerging from the construction numbers. In fact, growth can probably be sustained at about 7.5 per cent even if the investment/ GDP ratio drops further, to 30 per cent.

As far as policymakers are concerned, these numbers provide some reassurance that, while the recent monetary tightening has affected growth, the impact has not been enough to raise questions about the anti-inflation stance. If the extent of the downturn is going to be limited to 7.5 per cent growth, or marginally less, and even if such a slowdown were to persist for some time, the monetary authority can continue to focus on reining in inflation. The bottom line is that, while there are undoubtedly problems emerging on the macroeconomic front, notably the widening fiscal gap, the economy has so far displayed remarkable resilience in the face of a succession of shocks.