New Delhi: The Reserve Bank of India on Monday said the economy after exhibiting strong growth in the second quarter this fiscal is now slowing down in the wake of the global meltdown.
“The global economic outlook has deteriorated sharply since September 2008 with several countries, notably the US, the UK, the Euro area and Japan experiencing recession. In India too, there is evidence of a slowing down of economic activity,” the apex bank said in its 'Macro Economic and Monetary Developments Third Quarter Review 2008-09'.
Unlike in the advanced countries where the contagion of crisis spread from the financial to the realty sector, in India the slowdown in the realty sector is affecting the financial sector, it added.
“Although agricultural outlook remains satisfactory, industrial growth has decelerated sharply and services sector is slowing,” the review said.
According to the bank, the slowdown was primarily driven by a moderation of consumption growth and widening of trade deficit.
The financial markets in India, which remained strong in the first half of the fiscal turned volatile following the collapse of several global financial institutions, the report said.
“This necessitated the Reserve Bank to undertake a series of measures to inject rupee and foreign exchange liquidity from mid-September 2008 onwards. Liquidity conditions turned around and became comfortable from mid-November 2008,” the review said.
However, the RBI said several factors like expected increase in consumption, debt waiver for farmers and implementation of Sixth Pay Commission's recommendations will have positive impacts on economy.
“The easing of international oil prices and commodity prices may help in softening the inflationary pressure,” it said.
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