Economic growth to fall below 8%: RBI

The Reserve Bank of India (RBI) today said global economic uncertainties and weakening industrial output on domestic front are likely to pull down growth to below 8% in the current fiscal.

"Some sacrifice of growth is inevitable in the current milieu of high inflation," the RBI said in its review released on the eve of mid-year monetary policy announcement.

In addition to domestic factors, global factors may play a role in slowing down growth, it said adding that with the increasing linkage of domestic industrial growth with global industrial cycle, some further moderation in economic growth is likely, given the weak global PMIs (Purchasing Managers Index.)

The RBI had earlier estimated that the economy would grow by 8% in the current fiscal, below 8.5% recorded in 2010-11.

It also indicated that the financial turmoil in eurozone could spill over to emerging economies like India and impact its growth prospects.

"Importantly, financial stress could extend beyond euro area boundaries. If the euro area slows down further, as currently expected, it may have a domino effect on the global economy with spillovers to emerging markets," the RBI said.

Private sector balance sheets are at risk and significant banking sector weakness is reemerging as a result, it added.

Besides, the RBI said, it expects bank credit growth to moderate on account of slowing GDP (gross domestic product).

"Going forward, credit growth is expected to moderate as growth slows," it said.

The industrial growth, as measured by Index of Industrial Production (IIP) of the country slowed to 4.1% in August on account of the poor performance of the manufacturing sector and a decline in mining output, indicating an economic slowdown.