Growth to moderate; India not in recessionary mode: Subbarao

Mumbai, Oct 25 (PTI) India's growth story will continue
despite a slight deceleration, but there will be no recession
as in some advanced economies, Reserve Bank Governor D.
Subbarao said Saturday.

"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 G.D.P. growth for FY'09 at 7.5-8 percent, he
said, this was "our best growth estimate", even though there
were other estimates ranging from 7.2-8.7 percent.

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 R.B.I.'s cautious credit policy announced
yesterday, Subbarao said that 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 6-20, the R.B.I. 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, R.B.I. 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.

Subbarao said that bankers have a "challenging task" and
his message to bankers yesterday was that they should keep
credit flowing to productive and vulnerable sectors. "They
must also keep an eye on credit quality which is important,"
he said.

"If there are liquidity constraints or anything needed
to be done within R.B.I.'s mandate, we will do it," he said,
adding that the R.B.I. would act swiftly and pro-actively to
evolving situations.

Asked what would be his message to the market which
crashed Friday, Subbarao said that the R.B.I. 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 R.B.I. Governor said, "In
mathematical terms it was coming down and should be at around
seven percent by end-March."

But inflation continued to be a matter of concern as
R.B.I. 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 per cent and that for industry was up nine
per cent," he said.

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

The R.B.I. 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, he said.
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