Friday, August 1, 2008

Bad Effect Of Record Crude Oil Price - Aug 01 , 2008

The ill effect of record crude oil price and inflation is finally showing up on India''s economic growth story. The RBI has now climbed down from an earlier projection of 8.5% and says the economy will grow only at 8% for the year 2008-09.

There is more to worry about. RBI says the growth is slower than anticipated in industrial and services sector and this is likely to persist in the short-term. Meanwhile leading brokerage houses have cut India''s growth story even further. Lehman Brothers sees GDP growth slowing to 7.3% in FY09 and UBS have already downgraded the GDP forecast to 7.1% from 7.7%.

But the RBI says the challenging global environment is a bigger source of worry, as record fuel prices continue to strain the government''s fiscal position. The central bank also has a word of caution over the outgo on subsidies and farm waivers, and has in fact called for close monitoring on government''s fiscal situation.

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