RBI sees downside risk to growth

MUMBAI (Reuters) - The Reserve Bank of India (RBI) said on Monday the balance of risks on the growth outlook for Asia's third-largest economy had tilted towards the downside due to the global slowdown and deterioration in world financial markets.
"Several significant global and domestic developments recently have rendered the outlook uncertain and have increased the downside risks associated with real GDP growth," the RBI said in its review of macroeconomic and monetary developments.
It said an RBI survey of forecasters in December had placed 2008/09 growth at 6.8 percent, down from 7.7 percent forecast three months earlier.
The central bank will review its monetary policy on Tuesday, as evidence of sharp downturn in the economy began to surface against the backdrop of an economic slowdown around the world.
The economy and markets took an unexpected knock from the global credit squeeze in the wake of the collapse of Lehman Brothers last September, exposing the country's vulnerability to shocks elsewhere.
In order to boost business sentiment and shore up growth, the central bank has aggressively cut rates and banks' cash reserve requirement since mid-October while the government has announced a modest fiscal stimulus.
But the RBI saw some silver lining amid the gloom.
"While downside risks would be extending to the future, the fall in commodity including oil prices and the coordinated fiscal and monetary stimulus are expected to revive the growth momentum," it said.