Maintaining growth key challenge: RBI

Mumbai: The key challenge facing India's new ruling coalition is to maintain a strong growth rate, which has suffered in the face of the global financial crisis, the Reserve Bank of India’s deputy governor said on Monday.

"We have to observe that uncertainty in the world is still very high and we cannot ignore the fact that we are more integrated to the world than we used to be," Rakesh Mohan told reporters.

The RBI expects the economy to expand about 6 per cent in the current fiscal year ending March 31, 2010, lower from the previous year's estimate of 6.5-6.7 per cent.

In the previous three fiscal years, Asia's third largest economy grew at 9 per cent or more.

Mohan said while India's economy would continue to do well, expectations have to be realistic as the country cannot decouple with the rest of the world.

Merchandise exports contribute less than 15 per cent of India's gross domestic product, reflecting the fact that the country is far less dependent on external demand for spurring growth than other Asian countries.

Still, the economy has been hit by the crisis much more than expected due to large services exports and increased integration of the financial sector, analysts say.

The government and the RBI have taken aggressive steps to revive the economy after the collapse of Lehman Brothers last year hurt sentiment across the world and depressed demand.