Mumbai: India’s economic growth is poised to rebound as domestic demand regains strength reflecting a resilience in consumption, supported by brighter agricultural prospects,” according to the RBI’s monthly bulletin for January.
“There is a conducive quickening of high-frequency indicators of economic activity in the second half of 2024-25, bearing out the implicit pick-up in India’s real GDP growth for this period in the annual first advance estimates of the NSO,” the bulletin states.
It points out that the headline inflation eased for the second successive month in December, although the stickiness in food inflation warrants careful monitoring of second order effects.
“India’s economic growth is poised to rebound as domestic demand regains strength. Rural demand continues to gain momentum, reflecting a resilience in consumption, supported by brighter agricultural prospects,” the bulletin observes.
With agriculture and allied activities turning in a reasonable performance on the back of a record kharif harvest, and with higher rabi sowing, the fortunes of the rural economy have improved, it added.
A revival in public capex on infrastructure is likely to stimulate growth in key sectors.
It states that the first advance estimates for 2024-25 released by the National Statistics Office (NSO) on January 7 confirmed that India continues to be the fastest-growing major economy, although gross domestic product (GDP) growth has moderated to 6.4 per cent from three consecutive years of above 7 per cent growth.
“Private final consumption is the brightening spot in the economy, driven by e-commerce and q-commerce among which it is important to foster competition rather than being restrictive. One way to revive the animal spirts may be to provide a consumption boost,” the bulletin observes.
The demand for household staples has seen a modest rise in the October-December quarter. The middle class is pinning its hopes on relief from food inflation and hence higher disposable incomes, especially the urban segment.
The rural segment is likely to continue to record strong volume growth. In the housing space, the mid-income segment and premiumisation are fuelling demand and leading to overall improvement in market health metrics – another growth gear, it states.
The bulletin also highlights that headline inflation eased for the second-successive month in December, driven by winter easing of prices when the earth offers up a rich bounty of fruits and vegetables. Despite the sequential easing, the level of food inflation continues to remain high, with select key products experiencing high double digits inflation.
It further states that the global economic outlook for 2025 is divergent across countries with some loss of speed in the US; weak-to-modest recoveries in Europe and Japan; more moderate growth profiles in emerging and developing countries alongside a more gradual disinflation relative to advanced economies.
Global trade is expected to improve, with volume expansion somewhat higher in 2025 than in the year gone by, although the persistence of geopolitical risks and the looming threats of a more protectionist environment overcast these expectations with high uncertainty.
The prospects for financial flows are risk laden, with the outlook for foreign direct investment still subdued and with portfolio flows displaying ‘home bias’ and high volatility, the RBI bulletin added.
(IANS)
