India?s economic growth may fall short of the 7.5-8% forecast for this fiscal made by RBI and the next year could be even more painful, RBI governor D Subbarao has said. ?All indications are that growth rates in 2008-09 will be revised downwards? when the central bank reviews the annual monetary policy in January,? he told reporters after meeting chief minister Buddhadeb Bhattacharjee at the Writers Building here on Wednesday.
?2008-09 will be a difficult year and 2009-10 will also be a difficult year? perhaps more difficult. IMF has revised global growth and growth of emerging economies. Reflecting that we will be doing our numbers,? said the governor, who was in the city for a meeting of the central bank?s Board.
As per the IMF forecast, the world economy is likely to grow by 2.2% in 2009, as against the earlier projection of 3%.
RBI, which has projected 7.5-8% growth for the current fiscal in October with a downward bias, is slated to announce the quarterly review of the monetary policy on January 27 next year.
The Prime Minister?s Economic Advisory Council, which has projected a GDP growth rate of 7.7% for 2008-09 too is likely to revise the forecast early next year.
The economy, as per the official growth estimates, has recorded a growth rate of 7.8% in the first half of the current fiscal, down from 9.3% in the year-ago period.
Asked about the impact of the global financial crisis on India, Subbarao said, ?Of course India will be impacted. RBI and the government have taken a number of measures to minimise the impact. Even so there will be a period of painful adjustments. It is our collective response to manage the crisis. All indications are that growth rates in 2008-09 will be revised downwards.?
On commercial banks? response to the initiatives taken by the RBI, Subbarao said, ?I hope they will respond to our steps to maintain credit flow to productive sectors of the economy.?
RBI has taken a host of initiatives to deal with the credit crunch, releasing as much as Rs 3,00,000 crore in the system by reducing the mandatory amount that banks are required to park with it and in government securities.
It has also reduced the short-term lending (Repo) rate, at which banks borrow money from the RBI, from 9% in October to 6.5%. The reverse-repo rate too was reduced from 6% to 5%.
The government on Sunday announced a fiscal stimulus, reducing across-the-board excise duty by 4% and proposing additional government expenditure of Rs 20,000 crore in 2008-09.
In addition, RBI as well as the government, has announced special initiatives for those sectors, especially mutual funds, housing and small scale industry, which are facing the heat of the slowdown.