| |
 |
|
 |
| |
|
*articles :
|
FALTERING MONSOON, HIGH FISCAL DEFICIT &DECLINING EXPORTS-RISK FACTORS: RBI |
|
RBI governor expressed concern over risk factors in the economy, especially in the farm sector, given the uncertainty over the monsoon. Performance of farm sector could have a spill over effect on the industrial sector as well. Exports have not picked up, recording a slowdown for the last eight months. Though exports form only 15 per cent of the GDP, it could pose risks to the economic revival. RBI said. |
Warning that the large fiscal deficit, now pegged by the government at 6.8 per cent of GDP, if continued beyond the recovery period, can crowd out private investment and trigger inflationary pressures, RBI said, adding that the Government will need to return to the path of fiscal consolidation. "This requires a roadmap and focus on quality of fiscal adjustment even while pursuing quantitative targets." There are some negative signs like delayed and deficient monsoon, food price inflation, rebound in global commodity prices, continuing weak external demand and high fiscal deficit. RBI expects inflation to scale up to around five per cent by March 2010. |
Govt. Expenditure driving Growth : |
The Indian economy grew by6.7 per cent in 2008-09, lower than the growth of 9.0 per cent in 2007-08. The deceleration in GDP growth was particularly pronounced during the second half of 2008-09, largely due to the adverse impact of the global economic crisis. However, sharp increase in government consumption in the second half of the year, resulting from the Sixth Pay Commission payouts and fiscal stimulus measures, helped in GDP growth. Share in GDP (%)
|
The contribution of government final consumption expenditure to GDP growth expanded four-fold from 8.0 per cent in 2007-08 to 32.5 per cent in 2008-09, while the share of private final consumption expenditure nearly halved from 53.8 per cent to 27.0 per cent during the same period. |
Contribution of Demand Components to GDP Growth
| Item |
Share in GDP
Growth (%) |
| 2007-08 |
2008-09 |
| Private Final Consumption Expenditure |
53.8 |
27.0 |
| Government Final Consumption Expenditure |
8.0 |
32.5 |
| Gross Fixed Capital Formation |
43.6 |
42.5 |
| Net Exports |
(-)14.0 |
(-) 29.5 |
|
Agriculture : ’The agriculture sector, which recorded an average annual growth rate of 4.9 per cent during 2003-08, expanded only by 1.6 per cent during 2008-09. In 2008-09, foodgrains production was 233.9 million tonnes, up from 230.8 million tonnes last year. This was also an all-time high. Allied activities – horticulture, floriculture, forestry, livestock and fisheries – which account for a substantial share in agriculture remained buoyant. However, the production of commercial crops such as major oilseeds, cotton, jute and sugarcane was lower. Looking ahead to the current year, the progress of the south-west monsoon has been slow and halting. By July 22, 2009, monsoon rainfall was 19 per cent below normal in the country as a whole. At a disaggregated level, rainfall was deficient/scanty in 19 of the 36 meteorological sub-divisions. While kharif sowing has picked up in July, the delayed monsoon can impact agricultural output. Although the share of agriculture and allied activities in GDP has declined over the years and is currently at 17.5 per cent, good agricultural performance is critical not only because it employs over 55 per cent of the labour force but also for ensuring stability in food prices’ |
Credit Flow : |
Despite RBI’s repeated warning notes, credit flow to commercial real estate has increased on a year-on-year basis to 52 per cent, as against 37.7 per cent up to May 23, 2008. Lending to industry with incremental flow remained largely unchanged at Rs 181,848 crore during the year up to May 22, as against Rs 182,857 crore a year ago. Agricultural sector was given 16.9 per cent of the incremental non-food bank credit as compared to 10.1 per cent a year ago. The share of personal loans fell from over 17 per cent of the incremental non-food credit to 7.6 per as on May 22. |
Private banks' credit growth very low : |
Credit outstanding for private banks was Rs 5,08,707 crore as of July 3, 2009, a meagre 4.2 per cent rise over the corresponding date last year. Foreign banks did even worse with total outstanding credit shrinking 7.1 per cent on a y-o-y basis to Rs 1,58,971 crore. This compares with a 22.3 per cent y-o-y growth in credit for private banks and 33.3 per cent increase for foreign banks as of July 4, 2008. In contrast, credit extended by public sector banks increased 22 per cent to a total outstanding amount of Rs 20,63,202 crore. |
Highlights of quarterly review of RBI’s annual monetary policy
|
Following are the highlights of the first quarterly review of RBI’s annual monetary policy. |
| * Key short-term rates, ratios unchanged |
| * Repo rate at 4.75 pc, reverse repo 3.25 pc |
| * Bank rate at 6 pc, CRR 5 pc |
| * Growth pegged at 6 pc with upward bias for 2009-10 |
| * WPI to be negative for a few more months |
| * Inflation seen at 5 pc by fiscal-end |
| * Enough liquidity in the system |
| * Fiscal deficit remain a challenge |
| * Large borrowings can crowd out private investment |
| * Need to push financial sector, governance reforms |
|
|
|
 |
 |
 |
|
|
|
|
