Economic growth could fall to 8%: RBI

Growth prospects for the year 2011-12 seem to be relatively subdued compared to the previous year due to a number of unfavourable developments,it said.

“Global uncertainties have increased. If global financial problems amplify and slows down global growth markedly,it would impart a downward bias to the growth projection,” it said.

Besides,high food and non-food commodity price inflation pose risk to growth,the central bank said.

The global oil and commodity prices,even after some correction,remain high and could adversely impact growth.

Persistent inflationary pressures,rising input costs,rise in cost of capital due to monetary tightening and slow project execution are some of the factors that are weighing on growth,it said.

While the prospect for the farm sector looks encouraging with the normal south-west monsoon so far,industrial sector growth is likely to decelerate due to above mentioned factors,it added.

The growth of the services sector will be driven by the unfolding of the global and domestic economic situation,but is largely expected to keep its momentum.

It is expected that the robustness of the services sector,which accounts for more than 65 per cent of GDP,would continue to support the growth process,it said.

From the demand side,it said moderation is expected as investment may remain soft in the near-term,while private consumption may decelerate.

In face of moderating demand,expenditure-switching from government consumption expenditures to public investments would help,the report said.