RBI pegs FY 11 GDP growth at 8 pc but also sees downside risks .

MUMBAI: The Reserve Bank was today optimistic about the economy expanding by 8 per cent this fiscal, despite tightening of the monetary policy.

"The Indian economy is firmly on the recovery path... the baseline projection of real GDP growth for 2010-11 is placed at 8 per cent with an upside bias," the apex bank said in its monetary policy statement for FY'11 today.

GDP growth for FY'10 was seen at 7.2-7.5 per cent. The RBI's optimism about an eight per cent growth in FY' 11 is based on the fact that India's exports have been growing and industrial sector recovery has become more broad-based.

"Exports have been expanding since October 2009, a trend that is expected to continue," it said.

Similarly, industrial sector recovery is increasingly becoming broad-based "and is expected to take a firmer hold going forward on the back of rising domestic and external demand," the apex bank said.

The corporate sector has also recorded an improved profitability which is reflective of the improved performance of the industrial sector, it said.

Source : The Economic Times