Wednesday, August 24 2005 15:31 Hrs (IST) - World Time -

New Delhi: The Government today (Aug 24, 2005) painted a rosy picture of the economy, which has shown resilience and performed 'satisfactorily' in the first quarter of 2005-06 despite spiralling global oil price and natural calamities.

In its quarterly review report, the Finance Ministry, however, admitted that higher transfer of funds to states as per the recommendations of 12th Finance Commission, rising subsidy bill and additional funds needed for rural job scheme are likely to 'strain' fiscal situations in coming months.

Asserting that GDP growth would be 6.9 per cent during 2004-05, the report tabled by Finance Minister P Chidambaram in Parliament said, "The economy performed satisfactorily in the first quarter of the current year."

Though delayed monsoons had its impact on Kharif sowing in some parts of the country, it said, "Rainfall till July 20 was normal to excess in 81 per cent of the Met sub-divisions. The comfortable reservoir position augurs well for rabi crop."

The ministry said the industry grew by 10.3 per cent in April-June, with manufacturing logging 11.2 per cent growth.

Though infrastructure posted a lower 5.5 per cent growth during first quarter, it was picking up and grew by 10.2 per cent in June.

Inflation gradually came down from 5,7 percent

Inflation gradually came down from 5.7 per cent in the beginning of the year to 4.1 per cent in June end, it said.

While exports grew by 19.5 per cent imports were up by 38 per cent. Forex reserves were at 132.9 billion dollar in June and rupee showed signs of appreciation against the dollar.

"Equity valuations as measured by Nifty and Sensex, are at all time highs and bank credit grew by Rs 60,959 crore in April-June," it said.

The ministry said, "The concerns arising out of high and volatile level of international crude prices and recent natural calamities notwithstanding, the economy has demonstrated considerable resilience."

While bullish on the economy, the ministry admitted that major challenges lie ahead in management of subsidies and finding resources for funding the Food-for-Work and Employment Guarantee schemes and providing debt relief to states.

"These are likely to strain the fiscal situation in the months to come," it said.

Fiscal Deficit of the centre was relatively higher at Rs 54,517 crore in April-June 2005-06 compared to Rs 41,681 crore in the same period last year.

The deficit was 36.1 per cent of the budgeted Rs 1,51,144 crore. This was relatively higher than 30.3 per cent in the year ago period.

Though Revenue Deficit in absolute terms was higher at Rs 47,311 crore in the first quarter of 2005-06 compared to Rs 46,394 crore in the same period last fiscal, it was relatively lower at 49.6 per cent of the budget estimates.

It was 60.9 per cent of the budget estimate during April-June 2004-05. Reeling out statistics, the report said, "Government's efforts at fiscal consolidation through improved tax administration and expenditure control would continue. Current favourable macro-economic environment of low inflation, low interest rates and wide spread growth momentum were providing an added impetus to the Government in this effort."