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Economy watch

February 18, 2008

Industrial growth

 Status: 7.6 per cent in December

Impact: Industrial growth is plunging. The bad news for India is that the government’s focus on inflation over growth and the impending slowdown in the US economy will hurt the entire economy and place a question mark over the India growth story.

Money supply (M3)

 Status: 22.5 per cent in January 2008.

Impact: Money supply growth as exceeded the RBI-projected rate of 17-17.5 per cent. This indicates excess liquidity In the system By Way Of Buoyancy In Ba Bank deposits and foreign inflows. A slowdown in credit offtake has also contributed to this. The higher M3 growth offers enough room for banks to reduce deposit as well as lending rates over the medium term.

Compiled by Anand Adhikari

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