News: RBI’s counting on a surge in growth
(TNN 30/01/2007) Mumbai - The Reserve Bank of India (RBI) is expecting a surge in economic activity, with the level of business optimism touching an all-time high. However, most respondents from the private corporate sector expect higher increase in prices of both inputs and outputs in its industrial outlook survey.
According to an RBI’s survey on business outlook, 53.7% of the corporates expect an overall improvement in business environment as against 51.8% in the previous quarter and 49.8% in the same period a year ago. Bond dealers see the report as a negative for interest rates. Bond prices fell late evening following the publication of the report.
Based on its survey, the central bank has noted, “Economic activity is likely to remain buoyant in the near term. Thus, the ongoing momentum in economic growth is likely to remain robust in the remaining period of 2006-07.”
The index is calculated by surveying 1,000-odd corporates, through which RBI has arrived at `net response’. Net response is measured as the percentage share differential between the companies reporting `optimistic’ (positive) and `pessimistic’ (negative) responses. Higher `net response’ indicates higher level of confidence and vice versa.
Among the major parameters for the surveyed by RBI include overall business situation, production, order books, capacity utilisation, employment, and profit margins over the previous quarter. The financial situation is expected to improve, as the higher working capital finance requirement is also expected to be met by improvement in the availability of finance.
Expectations of increase in selling prices, exports and imports have, however, moderated vis-a-vis the previous quarter. Wholesale price inflation (WPI) was 6% as on January 13, 2007 compared to 4.1% at end-March 2006.
Pre-emptive monetary and fiscal measures, along with the moderation in fuel prices, could have helped to some extent in containing inflationary expectations, although underlying inflationary pressures remain, according to RBI. Measures of consumer price inflation remain at elevated levels, mainly reflecting the impact of food prices.
Banks have seen a marginal slowdown in overall loan growth in non-food credit and retail loans. Annual growth (year-on-year) growth rate in housing loans as on October 27 was 32.3% as against 54.3% in June. While real estate loans rose Y-o-Y 83.9% as against 102.4% in June.
RBI has noted that about 34% of incremental non-food credit was absorbed by industry, 12% by agriculture, 15% by loans to the housing sector and another 11% by `other retail loans’. Loans to commercial real estate, which increased by 84%, Y-o-Y, absorbed 5% of incremental non-food credit.
Deposits growth continued to be higher than last years levels which is reflective of Section 80C benefits of the Income Tax Act benefits extended to bank deposits.
According to an RBI’s survey on business outlook, 53.7% of the corporates expect an overall improvement in business environment as against 51.8% in the previous quarter and 49.8% in the same period a year ago. Bond dealers see the report as a negative for interest rates. Bond prices fell late evening following the publication of the report.
Based on its survey, the central bank has noted, “Economic activity is likely to remain buoyant in the near term. Thus, the ongoing momentum in economic growth is likely to remain robust in the remaining period of 2006-07.”
The index is calculated by surveying 1,000-odd corporates, through which RBI has arrived at `net response’. Net response is measured as the percentage share differential between the companies reporting `optimistic’ (positive) and `pessimistic’ (negative) responses. Higher `net response’ indicates higher level of confidence and vice versa.
Among the major parameters for the surveyed by RBI include overall business situation, production, order books, capacity utilisation, employment, and profit margins over the previous quarter. The financial situation is expected to improve, as the higher working capital finance requirement is also expected to be met by improvement in the availability of finance.
Expectations of increase in selling prices, exports and imports have, however, moderated vis-a-vis the previous quarter. Wholesale price inflation (WPI) was 6% as on January 13, 2007 compared to 4.1% at end-March 2006.
Pre-emptive monetary and fiscal measures, along with the moderation in fuel prices, could have helped to some extent in containing inflationary expectations, although underlying inflationary pressures remain, according to RBI. Measures of consumer price inflation remain at elevated levels, mainly reflecting the impact of food prices.
Banks have seen a marginal slowdown in overall loan growth in non-food credit and retail loans. Annual growth (year-on-year) growth rate in housing loans as on October 27 was 32.3% as against 54.3% in June. While real estate loans rose Y-o-Y 83.9% as against 102.4% in June.
RBI has noted that about 34% of incremental non-food credit was absorbed by industry, 12% by agriculture, 15% by loans to the housing sector and another 11% by `other retail loans’. Loans to commercial real estate, which increased by 84%, Y-o-Y, absorbed 5% of incremental non-food credit.
Deposits growth continued to be higher than last years levels which is reflective of Section 80C benefits of the Income Tax Act benefits extended to bank deposits.
posted by InCar Group Press Room at 14:45
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