Global slowdown, reason for lowering growth projection: RBI

Gill Saab

Yaar Malang
Mumbai, Oct 25 (IANS) The Reserve Bank of India (RBI) lowered the growth estimates for fiscal 2011-12 to 7.6 percent citing a slowdown in the global economy and moderating domestic demand.

The central bank had projected the gross domestic product to grow by eight percent in 2011-12.

RBI Governor Duvvuri Subbarao said during the second quarter review of the apex bank's monetary policy for this fiscal that the global economic slow-down would affect domestic demand and industrial production, given the growing inter-linkages between the Indian and international economy.

'Slower global growth will have an adverse impact on domestic growth, particularly on industrial production, given the rising inter-linkages of the Indian economy with the global economy,' Subbarao said.

The governor added that the investment sentiment in the country has declined due to slow pace of project clearance and implementation.

The apex bank pointed out that although the growth projection has been lowered, some sectors like services and agriculture would continue to grow at higher rates.

'The growth in the service sector is holding up well. Based on the normal south-west monsoon and first advance estimates that suggest a record kharif production, agricultural prospects look good. This should provide a boost to rural demand,' the governor said.

The central bank hiked the repurchase rate, or the interest the central bank levies on short-term borrowings by commercial banks to 8.5 percent from 8.25 percent.

Automatically, the reverse repurchase rate, or interest on short-term lending, gets hiked to 7.5 percent from 7.25 percent.