The Telegraph
Since 1st March, 1999
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Super six signal on RBI radar

Mumbai, July 25: The Reserve Bank of India (RBI) today painted a bright picture of the economy this fiscal, saying agriculture, industry and services were shaping up well enough to deliver growth rates of 6 to 7.2 per cent.

The upbeat forecasts, which have been buttressed by strong business confidence numbers from key sectors, came a day before the central bankís quarterly review of the annual policy statement, the first such assessment ever.

Growth in the annual policy statement presented in April this year was 7 per cent but the RBI said forecasts made by various agencies prompted a revision to 6 to 7.2 per cent.

Todayís report, called Macroeconomic and Monetary Developments First Quarter Review 2005-06, cites a recent Reserve Bank industrial outlook survey which suggests an improvement in the overall business situation, production, order books, employment, exports, imports, selling prices and profit margins in the July-September period compared with the April-June quarter.

Several business confidence surveys have suggested that industrial activity will remain buoyant and the outlook positive. One of them is National Council of Applied Economic Research (NCAER), whose business confidence index (BCI) released today shows an increase for April-June, the third straight quarter of gains. The index also predicts a greater optimism among firms for April-September over the half-yearly figure for 2004-05.

The RBIís own survey puts the business confidence index for July-September at 119.6. This is lower, but by a modest 1.1 percentage point over the previous quarter.

The assessment about the overall business situation for the first quarter showed a decline in confidence over January-March 2005, though it was almost unchanged from the level recorded in the corresponding quarter a year ago.

About two-thirds of the companies RBI surveyed are planning investments in fixed capital in 2005-06 that are higher than those made last year. Respondents, however, projected a slide in capacity utilisation in the July-September quarter as an increasingly large number of companies expect a spurt in the cost of raw materials.

The report clears the cloud on monsoon, saying rains recorded between June 1 and 13 were 1 per cent above normal; it was 10 cent below normal a year ago. This should go a long way in boosting agriculture and allied activities.

On inflation, the RBI said supply-side pressures, especially high oil prices, dominated the first quarter. The build-up was the strongest in April, but the pace dropped in May and June.

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