The
Reserve Bank on Monday said growth moderation in the economy, which started in the last quarter of the past fiscal, will continue through the second quarter of the current fiscal, as monetary transmission effect has started taking firm root.
However,
the central bank , in its Macroeconomic and Monetary Developments report released on eve of the first quarter credit policy due on Tuesday, asserted "taming inflation warrants continuation of anti-inflationary monetary stance" and that growth can be sacrificed to achieve this objective.
"Notwithstanding the growth slowdown, high inflation requires continued anti-inflationary bias with a close watch and responsiveness to new information," the report said.
"Inflation risks stay, while growth showed signs of moderation. On current reckoning, growth is likely to stay around trend growth of around 8 per cent. However, downside risks have increased. Overall, some moderation in growth is expected in 2011-12."
However, citing its Professional Forecasters' survey, the report notes that GDP growth may peter down by 30 basis points to 7.9 per cent in the current fiscal.
Basing its forecast to the troika of monsoon, global commodity prices and the ongoing Eurozone crisis, it said, "The baseline growth and inflation projections may arise from three factors - a significant departure of monsoon from normal; a collapse or re-build of global commodity price bubble; and the Eurozone debt crisis assuming full-blown proportions."
The report pointed to the rising inflationary expectations in the advanced economies saying this trend is posing challenges to the fragile global recovery.
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