Imbalance in financial sectors can increase risk

Reserve Bank Governor Y V Reddy today said an imbalance in the growth of financial sector and real economic sectors such as agriculture and industries could lead to bubbles and possibly increase risk in the economy.

"Without the real sector development in terms of physical infrastructure and improvement in supply elasticities, the financial sector can even misallocate resources, potentially generate bubbles and possibly amplify the risks," Reddy said at a conference here.

While financial sector is the money-issuing part of the economy, the real sector, which comprises of agriculture, industries and non-financial services, is the money-holding segment that produces goods and services.

Read more at The Economic Times

Lehman sees GDP growth at 10% in '07-08

India's economic growth rate will touch nearly 10 per cent in the next fiscal year ending in March 2008, driven by robust investments and exports, a senior Lehman Brothers economist said.

"You have got rising incomes, very strong credit growth still, positive wealth and confidence effects from the high asset prices, that is countering what is happening on the monetary policy front," Rob Subbaraman, Lehman's chief economist for Asia, excluding Japan, said in an interview this week.

The US investment bank forecasts the Indian economy to grow at 9.9 per cent in the fiscal year that starts on April 1.

Subbaraman said expansion would be boosted by manufacturing.

Data on Monday showed industrial production rose an annual 10.9 per cent in January and manufacturing, which represents more than three-quarters of industrial output, grew 11.6 per cent.

Read more at Financial Express