The Prime Minister's Economic Advisory Council (PMEAC) today said it would stick to its 8.2% GDP growth projection for 2011-12 despite the US downgrade and its fallout on the global economy.
"We knew that growth rate in the US in the first half was only 1.8%. The growth rate of 8.2%, which we have projected for current year, is based on the assumption that growth rate in developed countries will be very modest," PMEAC Chairman C Rangarajan said.
In its Economic Outlook for 2011-12, released earlier this month, the PMEAC projected that the economy will slow down to 8.2% this fiscal, amid a difficult global economic scenario, from 8.5% registered in 2010-11.
It said that the global economic and financial situation was unlikely to improve soon and would impact the domestic economic growth.
"We made a projection of growth rate of 8.2%. While projecting that growth rate we had taken into account that growth in developed countries will be very low...," he said.
Markets across the globe have witnessed a meltdown during the past one week following downgrading of US' credit rating by Standard & Poor's. There is apprehension that this is a precursor to further slowdown in the US economy which would, in turn, affect the global economy.
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On the Reserve Bank's policy stance and expectations of further rate hikes at its next mid-quarterly review in September, Rangarajan said it would depend on the inflationary situation.
"It all depends upon how inflation behaves in next four weeks. In my view, RBI should reverse its current stand if there are definite signs of decline in inflation," he said.
The apex bank has hiked its key policy rates 11 times since March 2010 to curb inflation. Overall inflation has been above the 9% mark since December 2010 and was 9.44% in June this year.
In the Economic Outlook, PMEAC has projected inflation to remain high at 9% till October, before moderating to 6.5% by March 2012.
Rangarajan termed as "encouraging" the better-than-expected 8.8% growth in industrial production recorded in June but said that the growth is not visible in all the segments of industry.
"The numbers in June are encouraging. The high growth rate shown in June is particularly because of turnaround in capital goods sector. If we exclude capital goods sector then growth rate is not all that inspiring," he said.