NEW DELHI, October 20, 2008 (AFP) – India must brace itself for slower growth due to worldwide financial turmoil, Prime Minister Manmohan Singh warned Monday, as the central bank cut a key lending rate to shore up the economy. India was experiencing the “ripple effects” of the worst financial crisis in nearly 80 years and “must be prepared for a temporary slowdown,” Singh told parliament in his first public statement on the impact of the credit tremors.
But “once the global situation stabilises, we will return to the growth trajectory of nine percent”, he promised in a nationally televised speech.
His statement came just hours after the central bank cut the repo — the rate at which it lends funds to commercial banks — by a surprise full percentage point to eight percent to bolster the economy.
The cut cheered investors who drove up shares by 2.48 percent or 247.74 points — back above the psychologically key 10,000 level to 10,223.09.
But India’s leading Sensex 30-share index is still down by half since the start of 2008 while the rupee is nudging five-year lows as risk-averse foreign investors dump Indian assets.
The rate cut marked a turn in a hiking cycle that began in 2004 to fight inflat