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Srinagar: Putting up a brave front in the face of global meltdown, Prime Minister Manmohan Singh today said that the government is watching the situation on a 'day-to-day and hour-to-hour basis' and asserted that there is no question of recession in India.

Replying to a volley of questions on the pressures on Indian economy due to international financial crisis, Singh said that though capital outflows were putting pressure on the liquidity and the rupee, Indian banking system was not affected as much as elsewhere. "Economy will grow by 7.5-8 per cent this fiscal," he exuded confidence and debunked any fears of recession.

Earlier, as fears over the impact of the global financial crisis on the Indian economy escalated, the key Indian equities index closed with one of its steepest losses in recent months, with interventions by the government, the central bank and the markets watchdog having little impact to lift the battered sentiments.

The sensitive index (Sensex) of the Bombay Stock Exchange, which at one point was down 1,088.60 points, made a marginal recovery to end at 10,527.85 points - but still down 800.51 points, or 7.07 percent, over the previous close. The situation was no different at the National Stock Exchange (NSE) where the broader S&P CNX Nifty index was down 6.65 percent at 3,279.95 points, over the previous close at 3,513.65 points.

The Sensex partially recovered by mid session to trade at 10,726.06 points after suffering massive losses in early trade on reports of inflation declining and the Finance Minister P Chidambaram's soothing comments. The Finance Minister said that the main problem is liquidity and the government would do everything to tackle it.

"I have asked the group (committee) to begin work immediately, visit Mumbai and summit the interim report within a week," he said in a statement. Chidambaram, whose statement was read by Finance Secretary Arun Ramanathan, said that World Bank has already stated that India was in a better position to weather the global storm. (PTI)