Mumbai, July 25: The RBI today reaffirmed its growth forecast for the economy at 7.5-8 per cent and said the prospects of sustaining the growth momentum are favourable for now.

The premise of strong growth is based on an assessment of many sectoral trends. The corporate sector is in good health, thriving on greater investment activity, a strong order book and higher capacity utilisation. While exports are in fine fettle and inflation has stabilised, the banking system has sufficient liquidity to meet the strong demand for credit.

“There are several positive factors in domestic developments during 2006-07 so far which support an optimistic near-term outlook for the Indian economy,” the RBI said.

In its report of the economy in the first quarter, released yesterday, the RBI was concerned over the impact of less-than average rainfall on agriculture. The cumulative rainfall between June 1 and July 12 this year was less than 10 per cent below normal compared with last year when the rainfall was one per cent above normal.

However, RBI governor Y.V. Reddy today said the revival of monsoons should mitigate the impact of early adversities on the kharif output. The First Quarter Review of Annual Monetary Policy for 2006-07 said that though the South-West Monsoon commenced a week in advance, its progress stalled in the subsequent fortnight that delayed sowing in some parts of the country.