Mumbai, Oct 24: The Reserve Bank of India is tipped to cut its economic growth forecast for the current year when it reviews the Monetary Policy next week, but opinion is divided over whether it will drop interest rates to offset the effect of scanty rains. The RBI said in August the poor rainfall, the worst in 15 years, could dent farm sector output and stall an industrial recovery. Industrial output from April to August was 4.9 per cent higher than a year earlier, when it was showing just 2.4 per cent growth.

"It would be difficult to sustain this growth rate as the impact of the poor monsoon and hence lower agricultural output will be felt in the second half of the year," said M R Madhavan, analyst with Bank of America in Mumbai.

In April, the RBI projected India's gross domestic product for the year to March would be 6.0 to 6.5 per cent higher than in the previous year, but other forecasters have since lowered their expectations.
The RBI reviews monetary policy on October 29. Bureau Report