Bank to cut growth, raise inflation forecasts

The bank said in November that inflation would be below its 2 percent target at around 1.6 percent in two years time but was likely to rise sharply above target in the near term, with risks broadly balanced for the end of 2011.

Inflation accelerated at a record pace in December, with prices rising by an annual 2.9 percent, although largely due to an unflattering comparison with a year earlier.

The economy emerged from its longest recession since the Second World War last quarter at a much slower pace than expected, at just 0.1 percent, and is seen trundling along with growth between 0.4 and 0.5 percent per quarter this year.

(Reporting by Jonathan Cable, polling by Bangalore Polling Unit; Editing by Patrick Graham)