The Governor of Reserve Bank of India, D. Subbarao, while addressing the members of the Karnataka chapter of the Confederation of Indian Industry (CII), said that there is a scope for further reduction in key lending rates and the apex bank may take the issue in its next policy meet.

Mr Subbarao said that India had been marginally affected due to global slowdown as it has less exposure to tainted assets as exports constitutes just 15 per cent in the nation's GDP.

Mr. Subbarao said, ”The world, however, is much more globalizing today, not because of trade flows but also because of greater financial integration.”  

Mr Subbarao, while admitting weakness in the monetary transmission mechanism, said that it has not collapsed completely and still working due to effective financial management by the government.

The bank chief said, "Unlike in other countries where monetary transmission has broken as they are at the centre of the financial crisis, it is working in India though weaker than it was before because of the impact of the crisis."

He stressed the needs to increase public investment, especially in the infrastructure sector, to propel demand across key economic sectors.