Economy on course for targeted 6-6.5% growth

RESERVE BANK OF INDIA'S REPORT ON CURRENCY AND FINANCE 2003-04

The Reserve Bank of India's Report on Currency and Finance reiterated the growth forecast of 6-6.5 per cent on the back of robust export, increase in bank credit, upturn in industry and satisfactory north west monsoon.

In its October credit policy, the central bank pared the GDP growth estimate from 6.5-7 per cent to 6-6.5 per cent citing uncertain oil prices and deficient monsoon. The currency and finance report is, however, does not reflect the view of the RBI.

The salient feature of the current fiscal has been growth momentum in the industrial sector which was supported by various factors such as an increase in bank credit to industry and buoyancy in services sector, which contributed more than one half of the GDP.

The other contributing factors are growth in information technology, telecommunications and transport sectors and strong foreign tourist inflows.

While monetary policy remains challenging on account of overhang of liquidity and headline inflation, foreign exchange reserves have been comfortable and consistent with the rate of growth, the share of external sector in the economy and the size of risk adjusted capital flows.

The report stated that developments in 2004-05 marks the growing resilience of the Indian economy which continued to be buffeted by external shocks such as monsoon and international oil prices.

While south-east monsoon turned weak and erratic with adverse impact on kharif crop. International oil prices increased sharply during the course of the year touching record highs and crossed $50 a barrel.

Financial markets operated under uncertainty on concerns of timing of monetary tightening in the US and its probable repercussion on the global economy.

Despite all these, the Indian economy exhibited remarkable stability. The strong fundamentals led to rally in stock markets and despite tightening of the non performing assets (NPA) norms through introduction of the 90-day norm for recognition of NPAs, the ratio of NPA-net advances of the scheduled commercial banks witnessed a decline during 2003-04, the report said.