Rbi Pegs Gdp Growth At 6.8%
The Reserve Bank of India (RBI) has projected a sustained growth momentum in the economy with a gross domestic product (GDP) growth of around 6.8 per cent in 1996-97, but expressed concern over slowdown in industrial and export growth rates, and high nominal and real interest rates.
The RBI has predicted a real GDP growth of 6.8 per cent during 1996-97, as forecast by the Central Statistical Organisation (CSO).
The prospects for the financial year 1996-97 appear to be favourable for sustaining the growth momentum witnessed in the recent year, the RBI said in its `Report on Currency and Finance, 1995-96'.
It, however, adds that economic developments during 1996-97 have raised concerns about slowdown in industrial growth, high interest rates both nominal and real, and decline in export growth.
For economic growth to be sustained at a rate of 7 per cent, the RBI has called for an increase in the savings rate over and above the recent pickup.
The RBI said that the excellent performance of the industrial sector during 1995-96 could not be sustained in the current fiscal (April-September 1996) which was causing concern.
The fall in export growth was also an area of concern, the central bank said. Exports in dollar terms at $24.20 billion rose by only 6.4 per cent during the first nine months of the current financial year compared with a 24.2-per cent rise during the corresponding period of the previous year. The slowdown in exports was partly attributed to general sluggishness in world trade and partly reflective of the fall in prices of tradeables, the RBI said.
However, due to a fall in import growth to 4.4 per cent from 29.3 per cent, the trade deficit during April-December 1996 was lower at $3.24 billion compared with $3.53 billion during the same period in the previous year.
In dollar terms, exports financed 88.2 per cent of imports during the period. This ratio was 86.6 per cent and 90.1 per cent during the corresponding periods of 1995-96 and 1994-95, the Reserve Bank said in its report.
The external payments situation remained under control and the current account deficit was expected to be lower than two per cent of GDP as was originally envisaged, the report said.
The report added that the foreign currency assets of the RBI remain comfortable at around $19.8 billion.
The balance of payments in 1996-97 continues to show signs of sustainability in the external sector, the RBI stated. In 1996-97, up to November 1996, foreign direct investment and portfolio investment flows have been placed higher at $1.4 billion and $2.1 billion respectively as compared with $1.3 billion and $0.99 billion in the corresponding period of 1995-96.
Accretions to non-resident deposits during April-November 1996 amounted to $2.8 billion as against $653 million during April-November 1995.
The apex bank said the country's foreign exchange reserves in the current financial year up to January 31, 1997, increased by $2.28 billion to touch $23.97 billion.
During the current financial year, the budget deficit and monetised deficit remained high up to the middle of August, but the rise in these indicators was contained thereafter, the RBI said.
At the end of December 1996, the budget deficit amounted to Rs 6,839 crore while the monetised deficit was placed at Rs 3,735 crore as compared with Rs 7,064 crore and Rs 11,099 crore in the corresponding period the previous year.
As on January 24, 1997, the budget deficit stood at Rs 13,755 crore and the net RBI credit at Rs 6,020 crore.
The monetary expansion in the current fiscal up to January 17 has been higher: broad money increased by 10.6 per cent compared with 8.2 per cent in the corresponding period in 1995-96; reserve money on the other hand declined by 2.5 per cent during the current year up to January 24 as against a rise of 8.4 per cent in the comparable period of 1995-96.
The decline followed the easy liquidity conditions prevailing after the reduction in CRR effected the second half of the current fiscal.
The lowering of the reserve requirements coupled with the sharp accretion to time deposits pushed up the average board money multiplier from 3.1 as on March 31, 1996, to 3.52 on January 17 this year.