Mid-term review of monetary and credit policy

REAL GDP growth in 2000-01 revised downwards to the range of 6-6.5 per cent against the projection of 6.5-7 per cent indicated in the April policy statement.

On the whole, as of now, the rate of inflation for the year is likely to be close to the average of the last two years.

The growth of money supply in the current financial year up to September 22 was 6.6 per cent against 6.8 per cent observed in the same period last year. On an annual basis (September 22, 2000 over September 24, 1999), M3 growth was lower at 13.6 per cent than 16.3 per cent observed in the previous corresponding period.

Aggregate deposits so far of scheduled commercial banks in the this fiscal increased by Rs 59,603 crore (7.3 per cent) compared to Rs 51,680 crore (7.2 per cent) in the same period last year.

Assuming that the strong deposit accretion continues, the increase in aggregate deposits this year will be Rs 1,25,000 crore as envisaged in the April policy statement.

So far, the monetary expansion in 2000-01 is in the expected trajectory as indicated in the April policy statement, and the projected growth in M3 for 2000-01 is likely to remain around 15 per cent.

There has been significant pick up in the bank credit and other flows to the commercial sector from the banking system this year. Scheduled commercial banks' credit expanded by Rs 30,867 crore (7.1 per cent) up to September 22 against an increase of Rs 11,821 crore (3.2 per cent) the previous year. Food credit rose by Rs 6,398 crore against Rs 3,716 crore the previous year. Non-food bank credit increased by Rs 24,469 crore (6 per cent) against an increase of Rs 8,105 crore (2.3 per cent) the previous year. Total resource flow to the commercial sector, including capital issues, GDRs and borrowings from financial institutions, went up by Rs 58,838 crore compared to Rs 34,235 crore the previous year.

(Edited extracts from the RBI's mid-term review of the monetary and credit policy.)