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K.R. Srivats

New Delhi, Aug 19 Economist Intelligence Unit, a B2B intelligence arm of the Economist Group, expects the Reserve Bank of India (RBI) to hike its repo rate by 50 basis points in the second half of the current fiscal as part of its efforts to tame inflation.

“Our forecast is that RBI would go in for further hike in repo – 25 basis points each in two stages during the second half of the current fiscal. We feel inflation would continue to remain high for the rest of the fiscal, much higher than the RBI comfort level, and put more pressure on monetary policy”, Mr Manoj Vohra, Director-Research India, EIU, told Business Line.

Mr Vohra said that the services sector would be badly hit in 2009-10 if inflation was not brought under control. EIU has forecast Indian GDP growth at 7.1 per cent for 2009-10.

“To us, it is industrial sector performance that would pull Indian GDP growth in 2008-09 to 7.7 per cent. There is every possibility that we will revise GDP forecast again. The risks are more downside. Global slowdown is not the one that is pulling the growth down. It is domestic issues like inflation and rising interest rates,” he added.

EIU expects industrial growth in India to slow down to 6.5 per cent in 2008-09 as against 8.5 per cent recorded in 2007-08.

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