No recession in India: Subbarao

India’s growth story will continue despite a slight deceleration, but there will be no recession as in some advanced economies, Reserve Bank of India (RBI) Governor D Subbarao said today.

“India’s growth will continue and even if there is some moderation, it will only be a modest moderation. But it will not be a recession .... There will only be a slight deceleration,” Subbarao told reporters here.

Pegging the GDP growth for FY09 at 7.5-8 per cent, he said, this was “our best growth estimate”, even though there were other estimates ranging from 7.2-8.7 per cent.

As India’s growth is mainly driven by domestic demand and consumption, the country would be less affected by the global financial turmoil, but it would not go completely unscathed, Subbarao said.

 

Justifying RBI’s cautious credit policy announced yesterday, Subbarao said as a central bank, it had to balance price and financial stability with growth as inflation, though declining, continued to be a matter of concern.

Between October 6 and 20, RBI has already 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 said.

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.

“There are inflationary concerns (in the economy) even though in a mathematical sense, it is coming down .... We have to balance the concerns of maintaining price stability and sustaining growth,” said Subbarao. Inflation continued to be a matter of concern as the RBI forecast is based not merely on the Wholesale Price Index (WPI), but also other data, he said.

Oil prices, though declining, still continued to be volatile and the kharif output, though promising, is forecast to be lower, he said, adding that “a weakening rupee also adds to inflationary pressures”.