The Reserve Bank of India said on Friday that the “Developments in the global economy over the past few weeks are a matter of serious concern,” said RBI. Since its first quarter review of July 26, the RBI said, “the global macroeconomic outlook has worsened.” There is growing consensus that sluggishness will persist longer than earlier expected.

Concerns over the sovereign debt problem in the euro area have added further uncertainty to the prospects of recovery.

Growth momentum is weakening in the advanced economies amidst heightened concerns that recovery may take longer than expected earlier. Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand. This, combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July review are on the downside.

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