RBI Governor D. Subbarao listed risks to the economy in the annual credit policy speech. They include, sovereign debt problems in the euro-zone, high commodity prices, especially of oil, and accentuation of inflationary pressure in the emerging market economies.
The central bank’s projections are “based on the assumption of a normal monsoon, and crude oil prices averaging USD 110 a barrel over the full year 2011-12,” he said, adding that “our baseline projection of real GDP growth is around 8 per cent“.
On the back of estimated 8.6 per cent GDP growth in 2010-11, the government had projected the country’s economy to expand at 9 per cent (plus or minus 0.25 per cent) this fiscal. It had expanded at 8 per cent in 2009-10.
The International Monetary Fund and the World Bank had forecast that India’s economy would grow at 8 per cent and 9 per cent, respectively.
Mr. Subbarao, however, warned that global events may impact the domestic economy.
“Should the global recovery slacken...it will impact our economy through trade, finance and confidence channels,” he said.
Recent political turmoil in Egypt and Tunisia, followed by the ongoing civil war in Libya, a major oil exporter and OPEC member, have pushed up global crude prices.
On growth-inflation trade-off, Mr. Subbarao said high and persistent inflation undermines growth by creating uncertainty for investors, and driving up inflationary expectations.
“An environment of price stability is a pre-condition for sustaining growth in the medium-term,” he said. source www.thehindu.com...
Tag ; emerging market economies outlook 2011, pre-condition, global crude prices, inflationary, indian growth-inflation trade For the latest updates PRESS CTR + D or visit Stock Market news Today
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