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Finance ministry flags risks to growth, sees inflation below RBI target

The survey also said inflation was expected to remain below the RBI's medium-term target of 4%

Reuters  |  New Delhi 

Arvind Subramanian- chief economic advisor
Arvind Subramanian, Chief Economic Advisor of India

The Indian called on Friday for more monetary easing as it flagged risks to and budget targets, citing a series of deflationary impulses weighing on Asia's third-largest economy.

In its mid-year economic survey, Chief Economic Adviser said there were downside risks to the official growth forecast of 6.75-7.5 percent for the fiscal year to March 2018.

Growth slowed to 6.1 percent in the March quarter, hitting its lowest in more than two years following a radical monetary reform that purged high-value banknotes from circulation.

The subsequent launch of a national (GST) has caused chaos on the ground as ambiguous rules have left firms confused on how to price their products.

In a sign of things to come, business surveys showed both services and contracting at their fastest rate in years in July, the month that the was launched.

Disinflationary pressures allowed the last week to cut its main policy rate - the first easing by an this year - by 25 basis points to 6 percent, the lowest since November 2010.

Yet the report by Subramanian, a top adviser to Finance Minister Arun Jaitley, saw "considerable" scope for further easing as the policy repo rate was 25-75 basis above the neutral rate.

The survey also said was expected to remain below the Reserve Bank of India's medium-term target of 4 percent through to the end of March 2018. Retail cooled to 1.54 percent, its lowest level in more than five years.

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