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RBI governor expects India’s economic growth to miss forecasts of 7.6%

23 Dec 2011 Evaluate

The Reserve Bank of India (RBI) governor, Duvvuri Subbarao has said that India’s economic growth will probably fail to meet the central bank's GDP target of 7.6% for the fiscal year 2011-12 citing concerns over the domestic macro-economic situation. The governor also was of the belief that RBI may revise the growth forecast for Asia’s third largest economy downward in its third quarter monetary policy review meeting scheduled on January 24, 2012.

Subbarao underscored that factors like stubborn inflation and depreciating rupee are serious cause of concerns for the economy’s growth. On one hand, the headline (WPI) inflation in the month of November stayed above the uncomfortable 9% levels for the twelfth straight month, despite thirteen interest rate hikes by Indian central bank since March 2010. While on the other, Indian rupee has become the worst performing currency in Asia depreciating over 15% in 2011 against the dollar.

The RBI had revised the GDP growth forecast for 2011-12 to 7.6%, from 8% on October, 2011 while, the government cut its full-year growth target to between 7.25 - 7.75% earlier this month from 9% in February. Meanwhile, an influential brokerage firm CLSA has slashed India’s GDP growth forecast to 6.7% for the current fiscal year ending March, 2012 from its earlier projection of 7.3%, owing to cyclical deceleration caused by high interest rates, policy inertia and the adverse impact of global headwinds.  

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