The economy continued to maintain strong growth momentum during the first quarter of 2007-08, underpinned by sustained performances of the manufacturing and services sectors, the Reserve Bank of India (RBI), in its document, ?Macroeconomic and Monetary Developments: Mid-Term Review 2007-08?, said on Monday.
However, two factors of concern were the consumer price inflation and the deceleration in the infrastructure sector. Consumer price inflation (CPI) remained firm during the second quarter of 2007-08 and continued to be above the wholesale price index (WPI) inflation, thereby reflecting the impact of higher food prices.
The April-August 2007 period witnessed a deceleration in infrastructure growth rates at 6.6% as against the 8.3% seen a year ago. Barring the electricity sector the remaining five core infrastructure industries registered a deceleration.
The WPI eased from 4.4% by June 2007 to 3.1% by October 13, 2007, partly due to base effects and negative contribution from fuel prices. Various measures of CPI inflation were placed in the range of 5.7-7.9% during August/September this year as against the June level of 5.7-7.8%, and 6.7-9.5% in March.
Quoting the estimates of the Central Statistical Organisation (CSO) in August 2007, the report puts the real GDP growth at 9.3% during the first quarter of 2007-08 as compared with 9.6% of the same period in 2006-07. During April-August 2007, the index of industrial production (IIP) rose by 9.8% as compared with a growth of 11% recorded during the corresponding period of the previous year. Manufacturing sector grew 10.3% in April-August 2007 on top of 12.2% during April-August 2006.
The services sector continued to record double-digit growth of 10.6% in April-June 2007. Leading indicators of service sector activity for April-August 2007 show that cargo handled at major ports and import cargo handled by civil aviation witnessed strong growth. Growth rates in commercial vehicle production, new cell phone connections, passengers handled by civil aviation and steel moderated during 2007-08 (April-August), albeit over a high base.
Monsoon above normal
The cumulative rainfall during the South-West monsoon season 2007 (June to September) was 5% above normal as compared with one per cent below normal during the corresponding period of the previous year. The area coverage of kharif crops has increased during 2007-08, as on October 12, 2007, with reported sown area of 104.7% per cent of the normal, which was about 3.1% higher than the previous year.