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The Reserve Bank on Tuesday lowered the economic growth forecast to 7.6 per cent for the current fiscal even as it expressed hope that inflation will start coming down from December.
“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,” RBI said in its Monetary Policy Review.
The RBI had earlier projected the Indian economy to grow by 8 per cent in 2011-12, lower than 8.5 per cent recorded in 2010-11.
“While growth in advanced economies is already weakening, there is a risk of sharp deterioration if a credible solution to the euro area debt problem is not found,” the RBI said.
Besides inflation, the RBI said slowdown in project investments was also impacting growth. The overall inflation has remained above 9 per cent since December 2010. It was 9.72 per cent in September.
“Elevated inflationary pressures are expected to ease from December 2011. The projection for WPI inflation for March 2012 is kept unchanged at 7 per cent,” the RBI added.
The RBI also indicated that it might not go in for another rate hike in its mid-quarterly review in December 16, provided the inflation does not shoot up further.
“If the inflation trajectory conforms to projection, further rate hikes may not be warranted,” the RBI said.
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