RBI SEES GROWTH AT 8%

RBI sees GDP growth at 8% in FY09

MUMBAI: The RBI in its First Quarter Review of Annual Statement on Monetary Policy for FY09 has said, taking into account aggregate demand management and supply prospects, the projection of real GDP growth of the economy in FY09 in the range of 8.0% to 8.5% as set out in the Annual Policy Statement of April 2008 may prove to be optimistic and hence for policy purposes, a projection of around 8.0% appears a more realistic central scenario at this juncture, barring domestic or external shocks.The RBI statement adds, according to the update of World Economic Outlook (WEO) of the International Monetary Fund (IMF) released in July 2008, global real GDP growth on a purchasing power parity basis is expected to decelerate from 5.0% in 2007 to 4.1% in 2008 (3.7% in WEO, April 2008) and further to 3.9% in 2009 (3.8% in WEO, April 2008).In the global financial markets, sentiment has been adversely affected by concerns relating to a deep and prolonged recession in the US, somewhat alleviated by recent data on consumer sentiment, durable goods orders, consumer spending and oil prices. In addition, losses to the financial sector continue to mount in addition to rising debt defaults.Central banks have continued to work together and to consult regularly on liquidity conditions in financial markets.The confluence of slowdown in growth and mounting inflation alongside financial vulnerabilities has complicated the task of monetary authorities across the world and rendered the future direction of policy setting highly uncertain.Some central banks that have tightened their policy rates in the recent months include the ECB; the Reserve Bank of Australia; Bank Indonesia; Bank of Thailand; the Banco Central de Chile; Banco Central do Brasil and Banco de Mexico.