New Delhi: According to the Reserve Bank of India’s (RBI) May 2024 Bulletin, India’s economy is likely to sustain its strong growth trajectory, with projections indicating a 7.5 per cent expansion in the first quarter of the current fiscal year 2024-25.
This bullish outlook is underpinned by rising aggregate demand and a resurgence in non-food spending in rural areas, signalling a broadening of the economic recovery.
The RBI’s analysis, based on the Economic Activity Index (EAI) – a composite measure derived from 27 high-frequency indicators – suggests that economic activity rebounded in April 2024, supporting the 7.5 per cent growth estimate for the April-June quarter.
The Indian economy has demonstrated remarkable resilience amid global supply chain disruptions caused by geopolitical tensions.
High-frequency indicators corroborate the sustained momentum in domestic demand conditions during April 2024.
Toll collections rose 8.6 per cent year-on-year, while automobile sales surged 25.4 per cent, driven by robust growth in the two-wheeler and three-wheeler segments, with passenger vehicles recording their highest-ever monthly sales.
Rural consumption, a key driver of India’s economic growth, is witnessing a notable recovery.
For the first time in at least two years, rural demand for fast-moving consumer goods (FMCG) outpaced urban markets in the previous quarter, with FMCG volume growth of 6.5 per cent fuelled by a 7.6 per cent rise in rural demand compared to a 5.7 per cent increase in urban areas.
The RBI’s analysis, authored by a team led by Deputy Governor Michael Debabrata Patra, highlights the growing optimism surrounding India’s economic prospects.
“Recent indicators are pointing to a quickening of the momentum of aggregate demand,” the report states, noting that non-food spending is being driven by the ‘green shoots of rural spending recovery.’
On the inflation front, the RBI acknowledges a modest easing of headline inflation in April 2024, confirming expectations of an uneven and gradual alignment with the central bank’s target.
However, elevated prices for certain food items, such as vegetables, cereals, pulses, meat, and fish, may keep headline inflation closer to 5 per cent in the near term, in line with projections set out in the April Monetary Policy Committee (MPC) resolution.
The RBI emphasises that the views expressed in the Bulletin article are those of the authors and do not necessarily represent the central bank’s official stance.
