Real GDP growth for fiscal 2006-07 registered a higher-than-estimated level of 9.6% but inflation remained a concern and posted a higher-than-targeted (5.5%) 5.9%, the Survey noted.
The Survey said though the annual policy statement for 2006-07 had placed GDP between 7.5% and 8%, the actual performance for the year was much higher.
Broad money supply or M3, comprising currency with public, deposits with banks and other deposits with Reserve Bank of India (RBI), that were expected to expand 15% grew 21.3% by the year-end. Non-food credit was at 28.4%, against the original assumption of 20% at the beginning of the fiscal.
Despite the hardening trend in interest rates and the surge in inflation during the year under review, the industrial sector was buoyant and led to the surge in non-food credit.
The high capital inflows also pushed up RBIs net foreign exchange assets (NFAs), leading to a surge in liquidity and an upward revision of repo rates to 7.75%. For the current year till December 2007, the spurt in capital inflows saw an increase in liquidity that got absorbed under the market stabilisation scheme (MSS) taking the outstanding balances to Rs 1,59, 717 crore. The sterilisation entailed a cost to the exchequer by way of interest.
The budgetary provision for this was increased to Rs 8,200 crore from the previous year.
The continuous surge in capital inflows during the current fiscal has made the government increase the MSS limit periodically, ceiling of which was fixed at Rs 250,000 crore as of November 2007.
Time deposits with banks during 2007-08 (up to January 4) grew 16.7% compared to 14.8% in the corresponding period of the previous year.
During 2007-08 (till January 2008), public sector banks reduced deposit rates particularly for short- term maturities up to a year by 25 basis points. However, their rates were 50-75 bps above levels of March 2007. The rates for one year above were between 8% and 9.25% in January this year.
The benchmark prime lending rates (BPLR) of state commercial banks hardened by 100-250 bps but actual lending was below BPLR. The BPLR of PSBs and private sector banks increased from 12.25%-12.75% and 12.00-16.50%, respectively to 12.5%-13.5% and 13-16.5%, respectively in January 2008.
Real yields on treasury bills have been on the rise since the beginning of fiscal 2008 except for a shirt dip in July 2007.
As on January 4, 2008, the real yield on 91-day and 364-day treasury bills were 3.11% and 3.46% respectively, the Survey said.