The Reserve Bank today said India's economic growth rate will moderate in the next financial year, even as it retained the forecast for the current fiscal at 8.5 per cent with an upward bias.
"Looking beyond 2010-11, the Reserve Bank expects domestic growth momentum to stabilise, though the GDP growth rate may decline somewhat, as agriculture reverts to its trend (assuming a normal monsoon)," the central bank said in its third quarter review of monetary policy.
As regards inflation, the RBI said that it would ease in the first quarter of the next fiscal (2011-12) but added that several upside risks are already visible in the global environment and more may surface domestically.
For the current fiscal, it projected 7 per cent inflation by March-end. The 1.5 per cent upward revision in inflation projection is based on high global commodity prices and demand-supply imbalances.
The RBI's projection of India's GDP growth rate stabilisation comes amidst talks of double-digit growth to match China's economic growth rate of 10.3 per cent in June quarter.
The Reserve Bank of India (RBI) retained the GDP growth projection for this year at 8.5 per cent.
More From This Section
"...The baseline projection of real GDP growth is retained at 8.5 per cent as set out in the Second Quarter Review of Monetary Policy of July 2010 but with an upside bias," it said.
The central bank expressed satisfaction that Indian economy has bounced back to its pre-crisis growth trajectory, at 8.9 per cent in the first half of 2010-11, powered by domestic factors, including good agricultural growth and rising exports.
It expects the country's growth momentum to persist in the coming years, on the back of robust corporate sales and healthy tax collections, along with a booming service sector.
"Overall, robust corporate sales, large indirect tax collections, advance tax payments and leading indicators of service sector activity suggest persistence of the growth momentum," it said.