RBI survey lowers GDP growth forecast to 5.7%

RBI survey lowers GDP growth forecast to 5.7%
The Hindu Business Line, April 21, 2009, Page 6

Overall sentiment for all industries, except textiles, positive.

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Personal loans grew at just 8.5 per cent in the last one year compared with 13 per cent growth registered in the previous year.
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Our Bureau, Mumbai

The median forecast of real GDP growth, according to the Reserve Bank of India’s latest professional forecasters’ survey, for 2009-2010 has been revised downwards to 5.7 per cent from 6 per cent.

The central bank, in its report on the Macroeconomic and Monetary Developments in 2008-2009, said that the various surveys of economic activity point towards prevalence of less-than-optimistic sentiment for the outlook of the economy in the coming months.

Between the sixth round survey conducted in December 2008 and seventh round survey in March 2009, median forecast of real GDP growth for 2008-09 was revised downwards to 6.6 per cent from 6.8 per cent.

According to the report, for the April-June 2009 quarter, the overall net sentiment for all industries, except textiles, is positive. Moderate growth is expected across the various companies in the first quarter. However, the expectations are less optimistic for smaller companies compared with their bigger counterparts.

Inflation

On the inflation front, the report underscored the fact that unlike the wholesale price index based inflation, consumer price index based inflation in India remains high, with recent evidence of very slight moderation. “The transmission process of lower inflation at the wholesale level to inflation at the retail level has emerged as an important issue in the conduct of RBI’s monetary policy,” the report said.

The WPI-based inflation eased to 0.18 per cent for the week ended April 4 from 0.26 per cent for the previous week. Various measures of consumer price inflation, though started declining, still remained high in the range of 9.6-10.8 per cent during January/ February 2009.

The higher level of consumer price inflation (CPI) as compared with WPI inflation , in recent months, could be attributed to higher prices of food articles, which have higher weight in CPI.

Scheduled commercial banks (SCBs’) investment in statutory liquidity ratio (SLR) securities as a per cent of their net demand and time liabilities (NDTL) increased at end-March 2009 to 28.1 per cent, from 27.8 per cent a year ago.

However, adjusted for Liquidity Adjustment Facility collateral securities on an outstanding basis, SCBs holding of SLR securities amounted to Rs 11,10,156 crore or 26.7 per cent of NDTL at end-March 2009 – implying an excess of Rs 1,13,817 crore or 2.7 per cent of NDTL over the prescribed SLR of 24 per cent of NDTL.

The lower expansion in credit relative to the expansion in deposits resulted in a decline in the incremental credit-deposit ratio (y-o-y) of SCBs to 64.4 per cent at March-end 2009 from 73.6 per cent a year ago.

Personal loans

Our Chennai Bureau reports: The latest confirmation of a slowdown in the personal loans segment comes from the Statement on Macroeconomic and Monetary Developments put out by the Reserve Bank of India. Personal loans (inclusive of housing, credit cards, educational loans, consumer durable loans etc.) at Rs 5,55,392 crore account for about 22 per cent of the total loans outstanding as of end February 2009. Personal loans grew at just 8.5 per cent in the last one year compared with 13 per cent growth registered in the previous year.

Loans for housing, which constitute about half the personal loan segment, were at Rs 272,376 crore. They grew at just 7.5 per cent last year compared with 13 per cent in the previous year (2007-08) and 26 per cent in the year 2006-07. Credit card outstandings also grew at a mere 8 per cent compared to about 51 per cent in 2007-08 and 46 per cent in 2006-07.

Despite oft-repeated complaints that the real estate sector was credit starved, statistics provided by the RBI show that real-estate loans grew 61.4 per cent last year to Rs 9,0765 crore compared with a 27 per cent growth in 2007-08.

Similarly, loans to NBFCs also grew by 42 per cent during the last year to Rs 90,521 crore.