On the downside, however, broad money supply (M2) grew by 19.3 percent during FY07, exceeding the annual target by 5.8 percentage points. Slippages in money supply growth largely stemmed from an expansion in NFA due to the higher than expected foreign exchange inflows. Equally stressful was the impact of Government borrowings from the central bank during the course of the year.
The pressure from the fiscal account was due to mismatch in its external budgetary inflows and expenditures. With the privatization inflows and the receipts from a sovereign debt offering at end-FY07, the Government managed to end the year with retirement of central bank borrowings, on the margin.