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IMF sees India 'slowdown'

The International Monetary Fund (IMF) said yesterday growth in India would slow

<font face="arial, geneva, helvetica" size="2">The International Monetary Fund (IMF) said yesterday growth in India would slow to 8.1 per cent in 2007 from 8.7pc a year ago as the central bank raises interest rates further to tame prices.</font>

<font face="arial, geneva, helvetica" size="2">"In India, growth remains rapid, with strong momentum in the manufacturing and services sectors," the Washington, DC-based lender said in its annual outlook on world economic growth patterns.</font>

<font face="arial, geneva, helvetica" size="2">But it noted that "with inflationary pressures still strong, some further tightening is likely to be needed."</font>

<font face="arial, geneva, helvetica" size="2">The IMF said that for 2008, the nation of 1.1 billion will clock growth of 7.5pc, mostly linked to the effect the current policy of higher interest rates will have on consumer demand and the housing market. India's central bank has raised key interest rates and cash reserve levels for banks steadily since October 2004 as the economy expanded faster than expected and stoked inflation above the top end of a 5.0 to 5.5pc forecast.</font>

<font face="arial, geneva, helvetica" size="2">In March, the Reserve Bank of India surprised investors and hiked the key short term lending rate, known as the repo rate, by a quarter of a percentage point to 7.75pc. It also boosted the cash reserve ratio by half a percentage point to 6.5pc in a bid to take money out of the banking system.</font>

<font face="arial, geneva, helvetica" size="2">The central bank's overnight deposit, or reverse repo rate, was kept stable at 6.0pc. The move came after inflation remained stuck above 6pc for more than a month mainly linked to higher costs for food and raw materials.&nbsp;</font>

<font face="arial, geneva, helvetica" size="2">Global growth can be sustained, says IMF&nbsp;</font>

<font face="arial, geneva, helvetica" size="2">Protectionism and ageing populations pose the biggest long-term threats to a golden era of global economic growth that is on course to be the longest period of expansion since the late 1960s and early 1970s, the International Monetary Fund said today.</font>

<font face="arial, geneva, helvetica" size="2">In its half-yearly health check, the IMF said that there was unlikely to be knock-on effects from the housing-induced slowdown in the US and that global growth would be 4.9% this year and next, after 5.4% in 2006. <br></font>

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