RBI cuts India’s FY’13 GDP growth to 6.5 per cent

The Reserve Bank of India (RBI) has pegged the country's GDP growth for the current fiscal (2012-13) lower, at 6.5 per cent, with overall economic growth projections down in the July-September quarter as well.

The central bank also hinted at status quo on the monetary policy front, warning that the fiscal deficit target, currently at 5.1 per cent of gross domestic product, may be breached "due to likely overshooting of subsidies and shortfall in receipts".

Even as the growth outlook remains weak, inflation is likely to be sticky during 2012-13. As such, RBI said, inflation and macro economic risks will condition growth-enabling policy actions with a view to supporting recovery in a non-inflationary manner.

RBI said outlook on inflation continues to be marked by a number of upside risks in the near term, despite the significant slowdown in growth.

With confidence levels low, RBI said, growth will depend on improving the investment climate by moving quickly to address bottlenecks in infrastructure space and removing constraints on FDI.

Much will also depend on how the global economic scenario turns up. Persistent euro zone problems and weakening growth in emerging and developing economies will be a drag on global growth in 2012, RBI said.