The Reserve Bank of India (RBI) said on Monday that global shocks may slow the economy to its lowest growth rate in six years.
Between expert surveys conducted September and December 2008, the median GDP growth forecast for 2008/09 has slipped to 6.8 per cent from 7.7 percent. The RBI had in October lowered its GDP growth forecast to 7.5-8.0 per cent from around 8 per cent but the picture looks more bleak now in the wake of new light on recession in the US, Europe and Japan.
In its macroeconomic report on the eve of its third quarterly review of the monetary policy, the RBI said emerging economies including India face a greater threat and “second round effects” in eroded exports, trade losses and restricted external financing.
“At present, the indications are that the global downturn may be deeper and more protracted than expected earlier,” it said.
RBI noted that the services sector, which has been the prime growth engine for the last five years, is slowing, mainly in the construction, transport and communication, trade, hotels and restaurants sub-sectors.
The positive factors are the expected increase in consumption demand, but only in the medium term, the RBI said.