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Lower credit offtake by industry pulled down M3 growth

The Economic Survey on Tuesday expressed concern over slow credit offtake by industry, but said higher investment by banks in government papers contributed to the money supply (M3) growth at 14.4 per cent till January 11, 2002, which is lower than 16.6 per cent a year ago.

"Despite softening of interest rates, flow of bank credit to commercial sector this year has been much lower than previous year. The most important source of growth in M3 has been expansion in bank credit to the government by way of investment in G-Secs," the survey said.

The growth in broad money (M3) was 14.4 per cent at Rs 1468.23 billion as on January 11 compared to 16.6 per cent in the year-ago period.

Last year, money supply grew faster on account of the Rs 256.62 billion inflow from India Millennium Deposit floated by State Bank of India.

However, if the IMD were excluded, M3 growth last year would have been 14.3 per cent last year, the survey noted.

Bank credit, both food and non-food, grew at a lower rate of 10.6 per cent to Rs 584.50 billion till January 11, as against 14.3 per cent in the year-ago period.

However, the survey said that banks' investment in the G-secs surged to 19.7 per cent to Rs 705.55 billion from Rs 499.09 billion during the year-ago period.

Currency with public increased by 6.2 per cent to Rs 236.50 billion, while time deposits with banks grew slower by 13.2 per cent to Rs 1,231.22 billion.

Net foreign assets of the banking sector also increased by 13.5 per cent to Rs 337.86 billion.


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