The Reserve Bank on Thursday pegged the country's economic growth at 7.7 per cent for this fiscal and said the monetary policy would continue to focus on price control and stability in financial markets.

The policy stance would also be conducive to continuation of growth momentum, RBI said in its mid-term review of Macro-economic and Monetary Developments.

The medium forecast (according to a survey conducted in September by professionals authorised by RBI) of GDP growth for 2008-09 was 7.7 per cent against 7.9 per cent in the earlier survey done in June, the report said.

Global commodity and crude oil prices along with food have eased somewhat during second quarter of the fiscal but they still remain at elevated levels, it said.

Metal prices too have eased during this period, reflecting weak construction demand in the Organisation for Economic Co-operation and Development (OECD) countries and some improvement in supply, especially in China, RBI said.

On food prices, the report said that they too have declined during the period under review on the back of improved supply prospects, particularly for oilseeds and grains in major producing countries.

However on a year-on-year basis, prices of several food items are still high, the apex bank said. International sugar prices, which had declined somewhat during the first of this fiscal, have increased thereafter by about 12 per cent during the June-September 2008 period.

Cotton production too was expected to fall by about 11 per cent and its prices are expected to rise by about 8 per cent in FY 09, the report said.

India story upbeat despite slowdown
 
Notwithstanding the moderation in agriculture, industry and services sectors, the country's GDP growth continues to be one of the highest in the world, Reserve Bank said.

The moderation seen in core sectors in FY 09 reflected a cyclical downturn and is unlikely to pose challenges to the economy with the structural drivers of growth continues to be favorable, the Reserve Bank said in its Macroeconomic and Monetary Developments mid-term review 2008-09.

On account of a lower growth in both manufacturing and electricity sectors, the year-on-year expansion in the industrial production decelerated to 4.9 per cent during April-August 2008-09 period as compared to 10 per cent in the year-ago period, the RBI report said.

Similarly, the core infrastructure sector recorded a lower 3.4 per cent growth during the period as compared to 7.1 per cent in the same period in last year primarily owing to a sharp deceleration in the electricity sector and subdued performance of petroleum refinery products, the report said.