Indian economic outlook uncertain - Subbarao

The near-term outlook for the Indian economy remains uncertain, and the Reserve Bank of India (RBI) is ready to follow up last weekend's aggressive rate cuts if needed to boost the economy, Governor Duvvuri Subbarao said on Thursday.

Asia's third-largest economy is struggling to fend off damage from the global credit crisis. Last weekend, the Reserve Bank of India cut its key short-term rates by 1 percentage point and the government unveiled a fiscal package including $4 billion of extra spending.

"The situation way forward is quite uncertain. The RBI will take appropriate action as and when required," Subbarao told reporters after a board meeting in the eastern city of Kolkata.

"The RBI will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action as appropriate."

The RBI would also work to minimise stress on the economy, and Subbarao said the sharp fall in inflation would be a consideration at the next scheduled policy review on Jan. 24.

The annual inflation rate fell to an 8-month low of 8 percent at end November, data showed on Thursday. The inflation rate had peaked at 12.91 percent in early August.

"Certainly, the development will reflect on our next policy (review)," Subbarao said when asked whether the central would revise downwards its inflation forecast for 2008/09.

On Wednesday, Subbarao said growth projections for the financial year ending in March 2009 may be revised downwards and 2009/10 may be a "more difficult year".

Evidence of a sharp slowdown is surfacing consistently in several sectors such as automobiles, textiles, exports, real estate and many analysts expect overall economic expansion to slow to 7 percent in 2008/09.

The RBI's board approved a previously announced 40 billion rupee refinance facility for the National Housing Bank for liquidity support to the housing sector.

It also approved a 50 billion rupee refinance facility to the Exim Bank to help struggling exporters.