Growth forecast to be revised downward: Chief economic advisor

Several multilateral agencies have revised the growth forecast for India downward for the current year. While IMF has lowered its projection to 8.2% from 8.4% for 2011, ADB said India's growth will slow to 8.2% in 2011-12, from earlier estimated 8.7%, on high oil prices

New Delhi: Describing the current level of inflation as "unacceptable", chief economic advisor in the finance ministry Kaushik Basu today indicated the government will revise downward the growth forecast for 2011-12, reports PTI.

According to the government's forecasts given in the Budget, the Indian economy was projected to grow by 9% in the current fiscal (2011-12), against 8.6% in the last fiscal.

However, the Reserve Bank of India (RBI) has reduced the growth estimates to 8% in the face of tight monetary policy to check the near 9% rate of inflation.

"All over the world there has been revision (growth prospects)… So we might go in for a revision. Obviously, it is not going to be upwards," Mr Basu told reporters here.

Several multilateral agencies have revised the growth forecast for India downward for the current year. While IMF has lowered the projection to 8.2% from 8.4% for 2011, ADB said India's growth will slow to 8.2% in 2011-12, from earlier estimated 8.7%, on high oil prices.

While the government generally takes a mid-year stock of the economy, the finance ministry would begin reviewing the targets by the end of this month, he said.

While stating inflation remains at "unacceptably high" level, Mr Basu said "I am expecting it will dip down a bit".

The general inflation for March was 8.98%. Mr Basu said the inflation for April would be "definitely below nine per cent" while not indicating the level.

However, Mr Basu's optimism was not in line with RBI's projections about inflation. The central bank in its annual credit policy said the level of price rise would remain "elevated" till September.

An inter-ministerial group set up at the behest of prime minister Manmohan Singh in February will be meeting tomorrow to take stock of the price situation, especially of the essential commodities. Mr Basu heads the panel and tomorrow's meeting may be attended by RBI governor D Subbarao.

Mr Basu said the inflation has become a global phenomenon, more so in Asia with money flowing in from the developed countries.

Calling for a global coordination to mitigate the problem of rising prices, he said each country is following policies suited to it rather than finding common solutions.

To rein in the inflation, the RBI has hiked policy rates nine times since March 2010. More so the inflation in food items is spilling over to the manufactured items category.

On the issue of growth-inflation trade-off, RBI had said "high and persistent inflation undermines growth by creating uncertainty for investors and driving up inflation expectations."

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Bank credit up 22%, deposits rise 17.5%

The RBI, in its annual monetary policy announced earlier this week, had said that credit is likely to rise at a faster pace because of the economy's growth momentum

Mumbai: Credit offtake from banks grew by over 22% for the one year period ended 22 April 2011, to over Rs40 lakh crore, indicating an upswing in the industrial activity, reports PTI.

According to latest Reserve Bank of India (RBI) data, credit offtake during the period stood at Rs40.39 lakh crore against Rs33.10 lakh crore in the same period of previous year.

During the period, deposits went up to over Rs54.70 lakh crore from Rs46.56 lakh crore as on 23 April 2010, the data showed. This is a rise of about 17.47% on an annual basis.

The RBI, in its annual monetary policy announced earlier this week, had said that credit is likely to rise at a faster pace because of the economy's growth momentum.

"Sustained growth momentum could... continue to exert pressure on interest rates through high demand for credit," it had said.

During the last fiscal, bank credit had increased by 21.5%, while deposits grew by only 15.5%. In its monetary policy for 2010-11, the RBI had estimated credit growth of 20% for the fiscal, while deposit growth was pegged at 17%.

However, in December 2010 the apex bank expressed concern over the widening ratio between credit and deposit rates of banks. Towards the end of last fiscal, however, the gap in the credit-deposit ratio stood reduced.

This time the central bank has not made any projections for growth in credit or deposits for this fiscal.

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