The acceleration in growth during 2006-07 is driven by continued momentum in the services and manufacturing sectors, growth of which are expected to be in double-digit figures, the RBI said in its macro-economic and monetary developments review-2006-07 on Monday.
Agriculture and allied activities growth, however, slowed down from 6 per cent in 2005-06 to 2.7 per cent in 2006-07.
The uneven and delayed rainfall during the south west monsoon season led to a reduction of 1.9 per cent in the area of coverage in the kharif crops in 2006 season, mainly in the production of rice, coarse cereals and oilseeds.
But favourable soil moisture conditions and remunerative open market and support prices led to an increase of 2.1 per cent in the area sown under rabi crops, the RBI said.
As a result, food grain production is likely to 211.8 million tonnes, an increase of 1.5 per cent over the previous year.
The shortfall in the case of rice and coarse cereals would be offset by higher production of wheat and pulses, it said. Among the non-food grain, sugarcane and cotton are expected to scale new peaks in 2006-07. The production of oilseeds is, however, expected to be lower on account of decline in acreage.
Industrial production continued its growth momentum, accelerating to 11.1 per cent last fiscal as against 8.1 per cent in 2005-06.
Growth in infrastructure sector increased to 8.3 per cent during April-February 2006-07 and the services sector recorded a double-digit growth of 10.8 per cent during the period.
The significant development is the increase in gross domestic savings, which increased to 32.4 per cent in 2005-06 as compared to 31.4 per cent in 2004-05.
Corporate savings has nearly doubled between 2002-03 and 2005-06 on the back of strong growth in profitability.
While the overall savings rate increased by 1.3 per cent in 2005-06, the overall investment rate increased by 2.3 per cent to 33.8 per cent reflecting the increase in current account deficit relating to GDP.
Business confidence surveys conducted by various agencies presented a mixed short-term outlook of the economy. The RBI's latest industrial outlook survey show that the business expectation index declined by 1 per cent.
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