Economic recovery 'robust' but inflation still a concern: RBI

MUMBAI: The Reserve Bank on Tuesday said India's economic recovery is "robust" even as it expressed concern over the prevailing high inflation caused by supply-side bottlenecks, which, it warned, could hamper sustainable growth.

However, the near-normal monsoons this year will help in cooling down food inflation, Reserve Bank Deputy Governor Subir Gokarn said after releasing the apex bank's annual report for 2009-10 here.

Besides, the faltering recovery in the US and Europe and a "soft landing" of China's high growth are likely to ensure that commodity prices would not harden in the near future, which in turn will help ease inflation, he noted.

"We have raised our GDP projections to 8.5 per cent because of strong domestic drivers, and global trends will not affect our growth momentum significantly," he said.

Describing the 2010-11 growth outlook as "robust" but warning against inflation, the report said, "going forward, as the monetary position is normalised, addressing structural constraints in several critical sectors is necessary to sustain growth and contain supply-side risks to inflation."

"Improving the overall macro-financial environment through fiscal consolidation, a low and stable inflation regime, strengthening of the financial stability framework and progress on structural reforms will help sustain growth and boost productivity," the report said.