India to project growth below 6 pc in FY10: RBI

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Bangalore, May 15: India may expand at a slower pace in the current financial year that began in Apr than initially thought and there are more rate cuts in the pipeline, a survey of 17 forecasters conducted by the central bank showed on Thursday, May 13.

The survey is conducted by the Reserve Bank of India (RBI) every quarter since Sep 2007 and does not reflect its views.

Forecasters have cut their 2009/10-growth forecast to 5.7 percent from six percent.

"The RBI released 2009-10 annual policy where we revised the growth estimate of last year that is 2008-2009 downward in the range of 6.5 per cent and projected GDP growth for the current year 2009-2010 to be around six per cent," said Duvvuri Subbarao, Governor, Reserve Bank of India.

At a review in Apr, where it cut its main lending rate by 25 basis points to 4.75 percent, the central bank pencilled in 2009/10 growth at six percent.

The survey expects the central bank to cut its main lending rate to 4.5 percent and its main borrowing rate or the reverse repo rate to three percent by the end of current financial year. The reverse repo rate now stands at 3.25 percent.

The survey expects wholesale price inflation on a year-on-year basis in the first quarter of 2009/10 to fall to -1.4 percent from an earlier estimate of 2.4 percent.

Latest data showed headline inflation in early May at 0.48 percent, below previous week's rise of 0.70 percent.

The central government's fiscal deficit is expected to widen to 6.2 percent of GDP in 2008/09, whereas the combined gross fiscal deficit is likely to come in at 9.8 percent, the survey showed.

Both these figures have been revised upwards from five percent and eight percent, respectively, in the last survey. Subbarao said the response of Indian authorities to the global credit crisis and economic slowdown had helped financial markets to function normally and also checked growth moderation.

Since Oct, the central bank has cut its key lending rate by 425 basis points, and the government has slashed factory gate duties and service tax to protect growth and jobs.

Subbarao said the recovery signs needed to be more widespread across indicators and more durable to draw any clear inference on the timing and pace of recovery.

"The most frequently asked question today is whether the worst is behind us. I wish I could precisely say when the economy will start to recover. The pace of decline in certain areas has, however, started to moderate with some sectors showing tentative signs of recovery. There are incipient signs of revival of business confidence," he added.

Recent data has shown some early signs of a recovery is taking shape with improved cement, auto and steel sales, but industrial output posted a sharp annual fall in Mar.


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