D. Subbarao with deputy governor S. Gopinath in Mumbai on Tuesday. (PTI)

Mumbai, Jan. 27: The Reserve Bank of India today left benchmark interest rates unchanged but lowered India’s economic growth forecast to 7 per cent — the lowest level in six years.

The 7 per cent growth forecast for the year 2008-09 isn’t cast in stone either: the central bank said the latest forecast had a downward bias. The central bank had earlier forecast growth of 7.5 to 8 per cent for the year.

In the year ended March 2003, the country had reported 3.8 per cent GDP growth.

The IMF is due to come out with its new forecast for global economic growth later this week. The pundits expect the IMF to trim its global economic growth forecast to 1 per cent from 2.2 per cent last November.

In its third quarter review of the monetary policy 2008-09, the RBI also asked banks to reduce their lending rates further so as to pass on the benefits of the measures it had taken since September.

A PTI report said Calcutta’s Uco Bank had decided to slash its benchmark prime lending rate and deposit rates by 0.5 per cent from February.

While the repo rate was kept unchanged at 5.5 per cent, the RBI maintained the reverse repo at 4 per cent and the cash reserve ratio at 5 per cent.

Barring some positive news on the inflation, agriculture and commodity prices front, the central bank cautioned that the global crisis would dent India’s growth trajectory as investments and exports slow. “Clearly, there is a period of painful adjustment ahead of us,” it said.

Later, RBI governor Duvvuri Subbarao told reporters that the next fiscal would be even more challenging than 2008-09.

The RBI forecast that inflation would fall below 3 per cent by the end of March, sharply lower than its earlier projection of 7 per cent.

Industry unhappy

The central bank’s strategy of maintaining the status-quo has disappointed industry.

Assocham president Sajjan Jindal said demand creation and liquidity were still issues and remained so till interest rates were further moderated.

CII said the RBI could have leveraged falling inflation to cut key rates further.