India's real GDP grew at 7.9 per cent during the first quarter of 2008-09 (April-June) as compared with 9.2 per cent during the corresponding quarter of 2007-08, according to the estimates released by the Central Statistical Organisation (CSO) in August. The deceleration in growth was spread across all the three sectors, viz., agriculture and allied activities, industry as well as services, the Reserve Bank of India said in its mid-term review of the economy.

The cumulative rainfall during the south-west monsoon season 2008 (June-September) was near normal, with rainfall over the entire country being two per cent below normal as against five per cent above normal during the corresponding period of the previous year.

According to the first advance estimates, the kharif foodgrains production during 2008-09 was placed at 115.3 million tonnes as compared with that of 121.0 million tonnes during 2007-08 (fourth advance estimates).

The index of industrial production during April-August 2008-09 recorded year-on-year expansion of 4.9 per cent as compared with 10.0 per cent during April-August 2007-08. The manufacturing sector recorded growth of 5.2 per cent during April-August 2008-09 (10.6 per cent during April-August 2007-08) and the electricity sector recorded growth of 2.3 per cent (8.3 per cent during April-August 2007-08), the RBI noted.

The infrastructure sector recorded growth of 3.4 per cent during April-August 2008-09 (7.1 per cent during April-August 2007-08), reflecting deceleration in all the sectors except coal.

Available information on the leading indicators of services sector activity during 2008-09 so far suggest healthy growth in respect of some indicators such as railway revenue earning freight traffic, commercial vehicle production, telephone connections and export cargo handled by civil aviation as compared with the corresponding period of 2007-08.

On the other hand, growth decelerated in respect of cargo handled at major ports and other indicators of civil aviation excluding export cargo. Some deceleration was also observed in tourist arrivals and production of cement and steel.

Meanwhile, the gross fiscal deficit and revenue deficit finances for 2008-09 (April-August) were higher than a year ago. Revenue deficit was 177.4 per cent of budget estimates for 2008-09 as compared with 74.9 per cent (122.9 per cent, net of transfer of profit on sale of the Reserve Bank's stake in SBI to the central government) a year ago.

GFD during the same period was 87.7 per cent of the budget estimates as compared with 68.5 per cent in April-August 2007. Tax revenue rose by 26.2 per cent over that during April-August 2007. Aggregate expenditure (adjusted for acquisition cost of Reserve Bank's stake in SBI) increased mainly on account of sharp increase in revenue expenditure, particularly food and fertiliser subsidies, pension and rural development.

Gross and net market borrowings (dated securities and 364-day Treasury Bills) during 2008-09 (up to October 22, 2008) amounted to Rs.1,27,872 crore and Rs.64,808 crore, respectively, accounting for 72.8 per cent and 65.5 per cent of the estimated market borrowings for the year. During the corresponding period of the previous year, gross and net borrowings accounted for 66.5 per cent and 68.1 per cent, respectively, of the estimated market borrowings for the year.

During 2008-09 (up to 18 October 2008), the central government took recourse to ways and means advances (WMA) for 16 days as compared with 91 days during the corresponding period of 2007-08. As on 18 October 2008, the central government maintained a surplus cash balance of Rs31,349 crore with the Reserve Bank.

During 2008-09 (up to 22 October 2008), 11 state governments and the union territory of Puducherry raised a total amount of Rs22,196 crore (35.4 per cent of gross allocation) through auctions with cut-off yields in the range 7.97-9.90 per cent as compared with Rs20,362 crore by 19 state governments (cut-off yields in the range 8.00-8.90 per cent) during the corresponding period of the previous year.

The average daily utilisation of WMA and overdraft by the States during April-September 2008 was Rs243 crore as compared with Rs986 crore during the corresponding period of 2007-08.

The average daily investments by the states in treasury bills (14-day intermediate treasury bills and auction treasury bills) during April-September 2008 amounted to Rs82,382 crore as compared with Rs72,805 crore during the corresponding period of 2007-08.

Growth in broad money (M3), year-on-year (y-o-y), moderated to 20.3 per cent (Rs7,29,338 crore) of 10 October 2008 as compared with 21.9 per cent (Rs6,43,963 crore) a year ago.

Aggregate deposits of banks, y-o-y, increased by 20.4 per cent (Rs6,28,140 crore) of 10 October 10, 2008 as compared with 23.5 per cent (Rs. 5,85,253 crore) a year ago.

Growth in bank credit continued to expand at a strong pace. Non-food credit by scheduled commercial banks (SCBs) increased by 29.3 per cent (Rs5,80,060 crore), y-o-y, as of 10 October 2008 as compared with 23.3 per cent (Rs3,74,054 crore) a year ago. The higher credit growth relative to the deposit growth resulted in an increase in the incremental credit deposit ratio (y-o-y) of SCBs to 96.2 per cent as of 10 October 2008 from 66.8 per cent a year ago. During the financial year 2008-09 ( up to 10 October 2008), non-food credit expanded by 10.4 per cent (Rs2,40,995 crore) as compared with 5.0 per cent (Rs93,781 crore) during the corresponding period of the previous year.

Disaggregated sectoral data available up to 29 August 2008 showed that about 45 per cent (Rs2,18,246 crore) of incremental non-food credit (y-o-y) was absorbed by industry as compared with 40 per cent (Rs1,43,614 crore) in the corresponding period of the previous year.

The agricultural sector absorbed around 8 per cent (Rs40,913 crore) of the incremental non-food bank credit expansion as compared with 13 per cent (Rs44,360 crore) in the corresponding period of the previous year.

Personal loans accounted for nearly 17 per cent (Rs81,729 crore) of incremental non-food credit; within personal loans, the share of incremental housing loans was at 40 per cent (Rs32,792 crore).

Reserve money growth at 17.6 per cent, y-o-y, as of 17 October 2008 was lower than that of 24.4 per cent a year ago.

Headline inflation has remained firm in major economies during 2008-09 so far. However, there are signs of moderation in inflationary pressures reflecting marked decline in prices of food, fuel and other commodities, as well as augmentation of downward risks to growth from the intensification of global financial market crisis.

The monetary policy responses of different countries, which were initially somewhat independent in view of inflation concerns, became more coordinated in terms of simultaneous easing of monetary conditions during the period July-October 2008 in view of the increasing downside risks to growth and the consequent diminishing upside risks to price stability, the RBI release added.