Mumbai: The manufacturing sector continues to drive the Indian economy, despite its growth having moderated, the reserve bank said in its macroeconomic report presented ahead of the first quarter review of the credit policy.

The Reserve Bank''s first quarter review of the macroeconomic and monetary developments for 2007-08, released yesterday, said the manufacturing sector expanded by 12.7 per cent during the April-may period, emerging as a key driver for 11.7 per cent growth in industrial production.

RBI''s review identified machinery and equipment, food products, basic metal and alloy industries and chemicals and chemical products for having contributed to the manufacturing sector''s strong performance.

The review has also pointed out to growth having moderated in services like mobile telecom connections, tourist inflows, export air cargo, aviation, cement and steel during this fiscal so far.

On the other hand there was a rise in bank deposits, non-food credit off take exports of BPO and IT-enabled services, which helped in sustaining the growth of the sub-sector financing, insurance, real estate and business services, the RBI said.

RBI attributed the higher growth in food products and wood and wood products, partly to the base effect and said that while growth in the mining sector remained subdued, that of the electricity sector was higher than during the same period in the previous year.

The consumer goods sector saw strong growth in April-may this year on the back of acceleration in the growth of non-durables sub-sector which was due to higher production of food products, cigarettes and non-cotton cloth, the RBI said.