The Reserve Bank of India will conduct its mid-term review of the economy where monetary parameters have not changed much but priorities for the economy may have.
In the last two policies -- annual policy in April and quarterly review in June, the concern for the RBI was to check the unhealthy credit growth, prevent potential asset prices bubble and curb imported inflation.
The scenario in this quarter is a bit different as the growth is broadbased and healthy. Inflation is rising but not on account of international crude prices, which have figured below $60 per barrel from highs of $76-78 a barrel.
Essential commodities, which are pushing up inflation are more supply driven than demand, thus invite less monetary action. The government has projected growth rate of 10 per cent for the terminal year of the five year plan period -- 2011-2012. The RBI also may increase its growth rate for the plan period from 8.5 per cent to 8.9 per cent.
Since the sensitive sectors contribute only 14-15 per cent in total credit component, productive sectors comprise the rest. Services sector, contributing to 60 per cent of the economy, is primarily driven by productive services sector that has impulses for the two other two components- agriculture and manufacturing.
Credit has been quite robust and is growing at an average rate of 29-30 per cent. However, if the assumption that the prudential measures taken to curb the growth in sensitive sectors will show results with a lag is true, the RBI has reasons to be happy.
The credit growth since April 2006 has come down in absolute terms in a fortnight ended October 13 by RS 11,014 crore for the first time.
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caveat is that the data has to be observed for a longer period; otherwise it could be interpreted as roll over of short term loans given by banks as part of window dressing for quarter end.="inline-block" id="div_arti_inline_advt">
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