Growth Impetus to Continue in 2007-08: RBI
The country’s economic growth drive is maintain its strong pace this fiscal but there is a possibility of inflation emerging as the main hitch peril, said the Reserve Bank of India (RBI). A stable increase in gross domestic calculated savings and investment, demand and supply ration, addition of new facility along with rigorous and resourceful use of existing capacity are the factors that can support the growth chart 2007-08, the annual report for 2006-07 of the apex bank said.
The earlier monetary policy of central bank hooked the GDP growth at 8.5% during this fiscal for India, world’s second fastest growing economy after China. Figures reveal that India recorded an average of 8.6% growth in the last four financial years ending 2006-07 and 9.4% growth in 2007-08.
A lately released annual report said a growing demand is posing bigger strain for hastened development of delivering infrastructure, despite efforts to eliminate supply restraint in the sector. Capacity consumption was particularly prolonged in sectors viz. electricity generation, roads, ports and major airports, the RBI said.
In regards to this, Prime Minister Manmohan Singh announced a $6 billion plan this month to enhance ranch productivity and is in quest of savings to secure the nation’s power and transport network. This will surely keep inflation below the government’s target of 4% and maintain customer demand.
The report also revealed the possibility of shortages in agricultural performance and physical and social infrastructure to curb economic-growth while bearing inflationary weight. Albeit RBI directed to emergence of inflation as the key downside risk to the embryonic macroeconomic viewpoint, it said: “the current gains in bringing down inflation and in soothing price-rise expectations would definitely sustain the present phase of the growth chart.”
Also, the Reserve Bank Governor Yaga Venugopal Reddy has raised the borrowing costs nine times since Oct 2004. The central bank also made an effort to curb record bank lending by lifting the cash of lenders as reserves to a six-year high of 7% of deposits. Finance Minister Palaniappan Chidambaram is also thinking to lower the rate from the averaged 4.96% in the current fiscal year to 4%.
Tags: economic growth, Finance Minister