Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
RBI's FY05 annual report: Key excerpts - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 2, 2005

    RBI's FY05 annual report: Key excerpts

    The apex bank, once again, in its annual assessment of the economic performance (summarised in the <>RBI annual report), evinced confidence in the country's inherent growth capabilities and cited 'acceleration in overall economic activity, increasing business confidence, export competitiveness and a pick-up in investment intentions' as the underlying pillars. Following are the key excerpts of the said report.

    Review FY05

    The RBI has acknowledged that the setbacks from an uneven and deficient monsoon and high international crude oil prices in FY05 had tempered the robust resurgence of growth that had been achieved in FY04. Although real GDP growth slowed to 6.9% in FY05 in contrast to the 8.5% growth seen in FY04, the assessment of the overall macroeconomic performance seems positive.

    Manufacturing led IIP: The index of industrial production (IIP) accelerated from 7% during FY04 to 8.2% during FY05, led by the manufacturing sector (9% YoY growth). The upturn in industrial activity was supported by a positive investment climate, business confidence and buoyant external demand. Also, the robust financial performance of corporate India added significant momentum to the economy's growth engine. However, it was the services sector that anchored the growth process during the year, contributing as much as 71% to the real GDP growth in FY05.

    Credit heavy banks: With an incremental credit deposit ratio of 133% in FY05 (50% in FY04), banks enjoyed a high rate of offtake from both retail and corporate segments of their credit book. It is, however, interesting to note that the figures for sectoral deployment of bank credit indicate that the priority sector was the largest recipient of bank credit. This was essentially on account of substantially higher offtakes in the home loans (upto Rs 1 m) segment (driven by fiscal incentives) and credit to SMEs (small and medium enterprises). However, lack of deposit mobilisation and lower investments in G-Secs (which the banks have the option of offloading to raise funds) may create paucity of funds to sustain credit growth going forward.

    Inflation the possible dampener: Although inflation rates at the consumer's level (measured by the Consumer Price Index) remained relatively benign in FY05, the headline inflation (measured by the Wholesale Price Index) continued to surge upwards, driven by lagged adjustments to international prices of coal, petroleum products, iron ore and metals. Albeit the fact that the impact of the same is yet to filter into the CPI (due to the government's generous subsidisation), the narrowing down of the 'gap' remains a possible dampener to the economy's future growth trajectory.

    Preview FY06

    Real sector: Liberalisation of policies in regard to direct investment abroad is expected to encourage consolidation of Indian industries and enable them to reap the benefits of economies of scale and wider reach. This will also impart a high degree of competitiveness to the Indian corporates. However, the apex bank has also pointed out that there are a host of infrastructural bottlenecks that could impinge upon competitiveness and the supply elasticities to meet the emerging global and domestic demand. In this context, it vouched for pass-through of higher international crude oil prices to domestic prices (i.e. de-subsidisation). This will also enable more efficient use of oil in the economy, especially in view of the fact that the rise in international oil prices appears to have a large permanent component.

    Financial sector: Given that the gross fiscal deficit to GDP ratio stands at 4.1% in FY05, the Fiscal Bill target of reducing the deficit to 3.0% of GDP by FY09 appears to be within striking distance. However, with the revenue deficit at 2.6% in FY05, the elimination of the revenue deficit by FY09 seems to be a difficult target.

    External sector: India's merchandise exports have risen at over 20% per annum during FY02 to FY05. This positive development in the external sector provides basis for further rationalisation of tariffs and simplification of customs procedures in line with global practices.

    The apex bank has best summarised the economic outlook for FY06 in the following statement, "Maintaining macroeconomic and financial stability in an environment of sustained high growth of the economy in the future, would critically depend on policies relating to oil prices, diversification of agriculture, improvement in urban infrastructure, determined measures for fiscal consolidation and, above all, on the continuation of the positive investment climate in the country."



    Equitymaster requests your view! Post a comment on "RBI's FY05 annual report: Key excerpts". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms