The RBI had no choice

The total flow of resources to the commercial sector from banks and non-banks during 2008-09...

Fund flow to commercial sector down

The total flow of resources to the commercial sector from banks and non-banks during 2008-09 so far up to February 13,2009 at Rs 4,98,136 crore was lower than Rs 6,08,351 crore during the corresponding period of the last year.

Credit growth is decelerating

The year-on-year non-food bank credit growth decelerated to 24.3 per cent as on December 19,2008 as credit expansion during the period between October 10,2008 and December 19,2008 at Rs 30,889 crore was much lower as compared with Rs 1,05,774 crore during the same period of the previous year. It decelerated further to 19.7 per cent y-o-y as on February 13,2009 as compared with 22.7 per cent as on February 15,2008. Credit expansion during the period between December 19,2008 and February 13,2009 at Rs 8,091 crore was sharply lower than that of Rs. 86,978 crore in the corresponding period of the last year. Remember,non-food credit growth reached a peak of 29.4 per cent Rs 5,82,344 crore on a year-on-year basis as on October 10,2008 as compared with 23.3 per cent Rs 3,74,054 crore as on October 12,2007.

Exports growth in reverse gear

Exports registered negative growth for the four recent consecutive months,October 2008-January 2009. Overall exports growth during 2008-09 April-January at 13.2 per cent was significantly lower than 24.2 per cent during the same period of the last year.

Industrial,GDP growth down

The index of industrial production IIP registered a negative growth of 2.0 per cent during December 2008,with the manufacturing sector returning a negative growth of 2.5 per cent. Real GDP growth in the third quarter of 2008-09 September-December 2008 has been placed at 5.3 per cent. The services sector,which has been the main engine of growth during the last several years,has also been slowing down.

Global situation worsening

Since the release of the RBIs third quarter review on January 27,the global financial and economic conditions have further deteriorated as revealed by the latest available information. The US real GDP contracted sharply at an annualised rate of 6.2 per cent in the fourth quarter of 2008 and the unemployment rate in the US has moved up to 7.6 per cent. The real GDP in the euro area also declined by 1.5 per cent in the fourth quarter of 2008. Reflecting deteriorating global demand,Japanese exports fell by 45.7 per cent y-o-y in January 2009. The Japanese economy also contracted sharply by 3.3 per cent in the fourth quarter of 2008. The fourth quarter real GDP numbers of several advanced economies have turned out to be worse than expected.