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India not in recessionary mode: RBI

RBI Governor D Subbarao assures that India's growth story will continue despite a slight deceleration, but there will be no recession.

business Updated: Oct 25, 2008 14:02 IST

India's growth story will continue despite a slight deceleration, but there will be no recession as in some advanced economies, Reserve Bank Governor D Subbarao said on Saturday.

"India's growth will continue and even if there is some moderation, it will only be a modest moderation. But it will not be a recession...There will only be a slight deceleration," Subbarao told reporters in Mumbai.

Pegging GDP growth for FY'09 at 7.5-8 per cent, he said, this was "our best growth estimate", even though there were other estimates ranging from 7.2-8.7 per cent.

As India's growth is mainly driven by domestic demand and consumption, the country would be less affected by the global financial turmoil but it would not go completely unscathed, Subbarao said.

Justifying RBI's cautious credit policy announced on Friday, Subbarao said that as a central bank, it had to balance price and financial stability with growth as inflation, though declining, continued to be a matter of concern.

Between October 6-20, the RBI has already injected Rs 1,85,000 crore liquidity into the system and "the one per cent repo rate cut was aimed at getting the financial markets going and giving them confidence," he said.

If the situation warranted, RBI would not hesitate to either infuse or withdraw liquidity from the system, he said, adding that at the same time the central bank wanted banks to focus on credit quality and ensure flow to productive and vulnerable sectors.