Reserve Bank of India in its monthly bulletin said that India’s growth trajectory is poised to lift in the second half of 2024-25, driven mainly by resilient domestic private consumption demand.
“India’s growth trajectory is poised to lift in the second half of 2024-25, driven mainly by resilient domestic private consumption demand. Supported by record level foodgrains production, rural demand, in particular, is gaining momentum,” said the RBI in the bulletin.
Additionally, RBI further explained that sustained government spending on infrastructure is expected to further stimulate economic activity and investment. However, global headwinds pose risks to the evolving outlook for growth and inflation, said the RBI.
The RBI said that expectations around India’s resilient growth trajectory going forward are also coalescing with a more sustainable underpinnings in view of positive climate action, with increased policy focus on renewable energy, electric vehicles (EVs), green hydrogen, and steps towards institutionalizing the carbon market.
Recently, adding to the worries of RBI, India’s economy grew at its slowest pace in almost two years, dampening the outlook for the full year. Gross domestic product grew 5.4% in the three months to September from a year earlier, the Statistics Ministry said in a statement. That’s the worst reading since the fourth quarter of 2022 and much lower than the central bank’s projection of 7% for the period.
India’s inflation woes:
India’s inflation in November was well over the RBI’s medium-term target of 4%.
If inflation is allowed to run unchecked, it can undermine the prospects of the real economy, especially industry and exports, the RBI said.
However, the usual winter easing of food prices is setting in and the prospects of private consumption and exports accelerating are getting brighter, it said in the bulletin.
The RBI’s Monetary Policy Committee kept its key interest rate unchanged earlier this month citing inflationary concerns. But it cut banks’ cash reserve ratio for the first time in over four years, effectively easing monetary conditions as economic growth slowed.
High prices are the cause for demand slowdown in India, and aligning inflation to the central bank’s 4% target is key to ensuring sustained economic growth, minutes of the RBI’s latest policy meeting showed.
Relief after poor Q2 results?
The Indian economy is recovering from the slowdown in momentum witnessed in the September quarter, driven by strong festival activity and a sustained upswing in rural demand, according to a Reserve Bank of India (RBI) bulletin released on Tuesday. An article on the ‘State of the Economy’ in the December Bulletin noted that the global economy continues to exhibit resilience with steady growth and moderating inflation.
“High frequency indicators (HFIs) for the third quarter of 2024-25 indicate that the Indian economy is recovering from the slowdown in momentum witnessed in Q2, driven by strong festival activity and a sustained upswing in rural demand,” it said.
The prospects for agriculture and hence rural consumption are looking up with brisk expansion of rabi sowing, said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra.
Disclaimer: Moneywealth Research provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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