RBI reports show the imparting a downward bias


The Annual Report for 2010-11, a statutory publication of the Reserve Bank of India's central board, covers two broad areas — assessment of macro economy in 2010-11 as well as prospects for 2011-12 and working and operations of the RBI and its financial accounts. The economy returned to a high growth path in 2010-11. However, there were significant challenges: investment slowed, fiscal consolidation was achieved through one-off and cyclical factors and inflation remained sticky on the back of new pressures. In response, the RBI has raised the policy rates by 475 basis points (on a cumulative basis) since March, 2010. The central bank's medium-term target for inflation has been 3 per cent. After growing slightly above its recent trend in 2010-11, the economy can be expected to decelerate this year. But quite significantly, the growth rate will still be around 8 per cent. However, there is a possibility of global problems getting magnified and imparting a ‘downward bias' to India's growth rate. Indian equities may have shrugged off the latest increase in policy rates, but the outlook for the markets remains cautious amid concerns over stubborn inflation and the Reserve Bank of India's continued hawkishness

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