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Outlook for India's economy mixed: RBI

With real GDP growth moderating in the first-half of 2008-09, industrial activity, particularly in the manufacturing and infrastructure sectors, is decelerating, RBI said.

business Updated: Jan 27, 2009 01:14 IST

There is evidence of a slowing down of economic activity and the outlook for India's economy going forward is mixed, the Reserve Bank said.

With real GDP growth moderating in the first-half of 2008-09, industrial activity, particularly in the manufacturing and infrastructure sectors, is decelerating, RBI said in its Macro Economic and Monetary Developments Third Quarter Review 2008-09, released in Mumbai on Monday.

"The services sector too is slowing," the apex bank said, adding that the slowdown is mainly in the construction, transport, communications, trade, hotels and restaurants sub-sectors.

Higher input costs and dampened demand have dented corporate margins while the uncertainty surrounding the crisis has affected business confidence, it said.

The major inputs of the construction sector - cement and steel - continued to record deceleration in growth in April-October 2008, the apex bank said adding that various leading indicators of services have also witnessed deceleration in growth during FY'09 so far.

"It may also be recognised that unlike in the advanced countries where the contagion spread from the financial to the real sector, in India, the slowdown in the real sector is affecting the financial sector, which in turn, has a second-order impact on the real sector," RBI said.

However, there are some positive factors expected to boost consumption demand, such as the debt waiver for farmers, 6th Pay Commission awards, pre-election expenditure and rise in basic exemption limits and tax slabs, it said.

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