Hinting at another hike in short-term interest rates, the Reserve Bank on Monday said credit offtake, money growth and inflation were rising in an economy growing at over 9 per cent. Showing higher demand for bank credit, RBI said banks’ non-food credit rose 31.2 per cent to Rs 4,07,735 crore as on January 5 compared to Rs 311,013 crore a year ago. “Broad money growth has remained above the indicative trajectory at Rs 5,17,318 crore (20.4 per cent y-o-y) as on January 5, 2007 as compared with Rs 350,747 crore,” the RBI said in its third quarter review of macroeconomic and monetary developments.RBI will announce its third quarter monetary policy statement on Wednesday. Another worrying issue is headline inflation. Wholesale price index (WPI) rose to 6.0 per cent as on January 13, 2007 from 4.1 per cent at end-March 2006 and 4.2 per cent a year ago. The y-o-y inflation, excluding the fuel group, at 6.6 per cent was above the headline inflation of 6.0 per cent as on January 13.Indicating the high level of prices at the retail level, consumer price inflation (CPI) has remained higher than WPI inflation since November 2005, reflecting the higher order of increase in food prices and higher weight of food items in the CPI. Consumer price inflation for industrial workers was placed at 6.3 per cent in November 2006 while that for urban non-manual employees, agricultural labourers and rural labourers was placed at 6.9 per cent, 8.9 per cent and 8.3 per cent, respectively, in December 2006.An analyst with BNP Paribas says the recent surge in inflation, industrial production (November IIP growth: 14.4 per cent against 4.4 per cent in October) and money supply growth in the economy even after the CRR hike, have led to higher expectations of a rate hike.But RBI says sustained growth of bank credit could be accommodated by acceleration in deposit growth at Rs 4,38,037 crore (up 22.5 per cent) as on January 5, 2007 from Rs 2,85,182 crore (17.2 per cent) a year ago.The central bank said robust performance of the economy continued during the second quarter of 2006-07. According to the Central Statistical Organisation (CSO), real gross domestic product (GDP) growth accelerated to 9.2 per cent in the second quarter from 8.9 per cent in the preceding quarter and 8.4 per cent a year ago led by manufacturing and services.
