RBI optimistic about maintaining current growth in 2006-07

Mumbai, Apr 17 (UNI) The Reserve Bank of India (RBI) today said that the recent growth momentum in the Indian economy is likely to be maintained in the current fiscal year of 2006-07, following continuous buoyancy in manufacturing and services sectors and positive business confidence and expectations.

Releasing the document on ''Macro-economic And Monetary Development for the Year 2005-06'', the RBI observed that the Indian economy exuded a strong performance with the real GDP growth at 8.1 per cent in 2005-06 led by sustained growth in the industry and services sectors. This was comparable to the GDP growth rate of 7.5 per cent in 2004 and 2005.

During the year, the manufacturing sector recorded a growth of nine per cent on top of 8.9 per cent growth a year ago while industrial production recorded a growth of eight per cent as compared to 8.2 per cent in the corresponding period of the previous year.

Growth in the services sector accelerated to 9.9 per cent from 9.7 per cent in the April-December 2004 period benefiting from robust growth in major sub-sectors such as trade, hotels, transport, communication, insurance, real estate and the financial sector.

While the headline inflation and the inflationery expectation remained well-contained in 2005-06, there was continued dominance of supply-side factors as the YoY wholesale price inflation was 3.5 per cent on April 1, 2006, as compared to 5.7 per cent a year ago.

The financial market, RBI said, remained orderly during the year even as interest rates edged up across the spectrum. There was also some tightness in liquidity conditions during the last four months of 2005-06, reflecting the part-impact of redemption of USD 7.1 billion on account of India Millennium Deposits (IMDs).

While money supply expanded by 16.2 per cent on a YoY basis as compared to 13.9 per cent a year ago, the banks' non-food credit registered a growth of 30.8 per cent as on March 31, 2006 on top of 20.8 per cent a year ago.

During the year, India's exports continued to maintain the momentum of high growth for the fourth year in succcession registering a strong growth of 24.7 per cent on top of 26.4 per cent growth a year ago.

Imports of petroleum oil and lubricants increased by 46.8 per cent in 2005-06 reflecting the impact of sharp increase in international crude oil prices. Non-oil imports posted a growth of 25.6 per cent during the year as compared to 33.3 per cent a year ago.

Trade deficit increased by 52.7 per cent over the previous year to USD 39.6 billion. The country's total external debt declined by USD 4 billion (3.3 per cent) during April-December 2005 to USD 119.2 billion at end-December 2005, reflecting the redemption of IMDs.

As per the RBI record, in 2005-06, the gross and net market borrowing of the Centre amounted to 97.3 per cent and 94.3 per cent of the budget estimate as compared to 70.6 per cent and 51 per cent respectively a year ago. During the year, the state raised Rs.

21,729-crore, 84 per cent of the gross allocation.

During the current fiscal, the net market borrowing is budgeted to increase from Rs. 1,01,082-crore to Rs. 1,13,778-crore inclusive of repayment of Rs. 65,939-crore gross market borrowing placed at Rs.

1,79,716-crore for the year.

The total expenditure is budgeted to increase by 8.10 per cent as against a reduction of 39.6 per cent in 2005-06.

UNI GC PP AG1654