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RBI Macroeconomic Review: FY14 growth forecast cut to 4.8% Vs 5.7%

The RBI macroeconomic report released ahead of its monetary policy review on Tuesday lowered FY14 and FY15 growth forecast and raised WPI inflation forecast for this fiscal year.

The Reserve Bank of India's Macroeconomic Survey released on Monday lowered FY14 growth forecast to 4.8 percent from 5.7 percent, thus fuelling street fears that governor Raghuram Rajan will resort to a hawkish stance while announcing the monetary policy on Tuesday. Also Read: RBI may hike interest rate, MSF rate cut likely RBI may hike interest rate, MSF rate cut likely. The report also lowered FY15 growth forecast to 5.8 percent from 6.5 percent and warned that both wholesale and consumer price inflation (WPI & CPI) are likely to stay above comfort level in the second half of this fiscal. While it raised FY14 average WPI forecast to 6 percent from 5.3 percent, it lowered FY15 WPI forecast to 5.5 percent to 5.7 percent. The central bank is widely expected to increase the repo rate by 25 basis points on Tuesday to 7.75 percent to fight inflation even as it continues to unwind its rupee defense steps, a Reuters poll showed. India's headline wholesale price index inflation rose to a seven-month high 6.46 percent in September, driven by food prices such as a 322 percent jump in the cost of onions, while consumer inflation quickened to 9.84 percent. In its report, the RBI noted that a drop in food inflation is required to bring down broader consumer price inflation. "However, pending sufficient supply responses, it is important that monetary policy keeps a tight leash to prevent relative price shocks in the current year from getting generalised," it said.

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