No recession in India: RBI guv Subbarao

India would not see recession, even if the international situation remained uncertain, said RBI governor D Subbarao. However, he added that the growth momentum will be more moderate if the global financial crisis continued for sometime.“First if there is a recession (outside India), our exports will be hurt. And the longer the recession, the deeper the hurt,’’ Subbaro said. However, he did not accept the theory of decoupling of Indian economy from the turmoil in the global economy, saying that if at all any large economy could decouple from the advanced countries, it would be India due to its deep domestic demand and consumption base.Pegging GDP growth for 2008-09 at 7.5-8%, he said, this was “our best growth estimate’’, even though there were other estimates ranging from 7.2-8.7%. India had grown at 9% in 2007-08. Justifying RBI’s cautious credit policy announced on Friday that left the key rates unchanged, Subbarao said that as a central bank, it had to balance growth and financial stability with price stability during global market turmoil even though it sees inflation declining to 7% by March from 11% at present. Between October 6 and 20, the RBI 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 explained.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. “If there are liquidity constraints or anything needed to be done within RBI’s mandate, we will do it,’’ he said, adding that the RBI would act swiftly and pro-actively to face up to evolving situations. Asked what would be his message to the market which crashed on Friday, Subbarao said RBI was not in the business of reacting to equity markets. “We are the monetary authority, we give monetary policy signals and hope that they get appropriate signals,’’ he said. Turning to inflation, the RBI governor said: “In mathematical terms, it is coming down and should be at around 7 % by end-March.’’But inflation continues to be a matter of concern as the RBI forecast is based on not merely the wholesale price index but also other data. “The RBI makes a deeper study and if one analyses the consumer price index, the CPI for agricultural and rural labour was up by 11% and that for industry was up 9%,’’ he said.Oil prices, though declining, still continued to be volatile and kharif output, though promising, is forecast lower, he said, adding, “a weakening rupee also adds to inflationary pressures’’. The RBI has announced its monetary policy in the light of these concerns and balanced the need for financial and price stability while propping up sagging growth.

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