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India's economic growth rate is expected to remain subdued at 7% during the current fiscal, mainly on account of the impact of continuing global crisis, the Asian Development Bank (ADB) said today.
The Asian Development Outlook (ADO), ADB's flagship report, said the Indian economy will only register a moderate increase in growth rate in the current fiscal, up from 6.9% a year ago, and the country would need to push reforms and increase investments to achieve higher economic expansion.
The ADB's growth projection at 7% for 2012-13 is lower than government's forecast of 7.6%.
As regards developing Asian region, the ADO said that economic growth in the region would decline to 6.9% from 7.2% in 2011-12, on account of continued uncertainty in eurozone and slump in global trade.
The ADO also highlighted the growing income inequality in the developing Asian countries including India and cautioned that the rich-poor divide could threaten region's stability.
"Asia's rapid growth is leaving millions behind, causing a widening gap between rich and poor that threatens to undermine the region's stability," the ADO said.
Referring to India, the report said that average rate of inflation, after remaining around 9% of the most part of the last fiscal, is expected to be 7%in 2012-13.
The Reserve Bank had hiked interest rates 13 times between March 2010 and October 2011 to contain inflation and this has reduced investments and slowed down industrial activity.
ADB deputy country director Narhari Rao said the RBI might cut repo rates in days ahead to boost growth. "Easing of monetary policy looks a distinct possibility. The rate cut could come," Rao said.
"We expect softening of interest rates." said Rao.
The RBI is scheduled to announce the annual credit policy on April 17.
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