Cheery quarter ahead: RBI

The Reserve Bank of India's (RBI) latest industry outlook survey, released today as a part of the central bank's first-quarter review of macroeconomic and monetary developments, ahead of its monetary policy review, suggested a further improvement in the overall business environment, including profit margins, during July-September 2006.

Painting a bullish picture of the economy, the RBI said its survey respondents expected the financial situation to show an improvement during July-September, amid corporates increasingly availing of working capital finance.

The central bank said industry production maintained its momentum during April-May 2006, with a growth figure of 9.8 per cent. The manufacturing sector, with double-digit growth of 10.9 per cent, remained the key driver of industrial activity, contributing almost 92.5 per cent of growth in the industry.

The buoyancy in manufacturing and services sectors, and the positive business confidence suggested that the recent growth momentum in the Indian economy was likely to be maintained in 2006-07. The RBI has projected a GDP growth rate of 7.5-8.0 per cent for 2006-07.

The buoyancy is reflected in the growth in bank credit to the commercial sector. The growth of 32.9 per cent in credit during 2006-07 (up to July 7, 2006) was on a base as high as 31 per cent a year earlier.

On inflation, the RBI said pre-emptive monetary and fiscal measures had helped in containing inflationary expectations in the April-June quarter.

"Inflation movements continued to be driven by supply shocks in the first quarter of 2006-07," it said.

In a surprise move, the central bank had raised its key short-term interest rate by 25 basis points to 5.75 per cent on June 8.