June 26, 2008	Thursday	Jamadi-us-Sani 21, 1429

NEW DELHI: India’s government said on Wednesday that the country’s economic growth outlook was “positive” despite a fresh round of monetary tightening by the central bank to tackle high inflation.

Inflation in Asia’s third-largest economy rose to a 13-year high of 11.05 per cent in the week ended June 7, well above the RBI’s declared comfort level of 5.5 per cent.

“These steps are necessary in the face of rising inflation due to relentless increase in crude oil prices,” the finance ministry statement said, adding the Reserve Bank of India needed to “moderate and manage aggregate demand.”

On Tuesday the central bank raised its repo rate at which commercial banks borrow funds from the central bank to 8.5 per cent from 8.0 per cent with immediate effect.

It also announced a two-stage hike of the cash reserve ratio, or the amount of cash banks must hold in reserve, by 25 basis points to 8.50 per cent effective July 5, and by another 25 basis points to 8.75 per cent on July 19.

“The policy stance adopted by the RBI should boost the confidence of investors both domestic and foreign, and augur well for economic growth,” the finance ministry statement added.

Price rises have overshadowed better-than-expected growth of 9.0 per cent in the last fiscal year.

Economists expect growth to slow this year to around 7.8 per cent on higher borrowing costs and tough global financial conditions. The prime minister has projected growth of over eight per cent.—AFP