Published 19:20 IST, December 24th 2024
Is India’s Growth Momentum Intact? RBI Monthly Bulletin Sheds Light
The RBI highlighted that high-frequency indicators for the third quarter of 2024-25 point to recovery from the slowdown seen in the second quarter.
India's economic growth is poised to pick up in the second half of the 2024-25 fiscal year, driven by robust domestic private consumption and a continued revival of rural demand, according to the Reserve Bank of India (RBI) in its latest monthly bulletin.
The RBI highlighted that high-frequency indicators for the third quarter of 2024-25 point to recovery from the slowdown seen in the second quarter. The rebound is attributed to strong festival activity and a sustained upswing in rural demand, signaling a return to growth momentum. Additionally, the prospects for agriculture and rural consumption are improving, thanks to a brisk expansion in rabi sowing, the RBI noted.
The central bank’s optimism follows a disappointing GDP growth rate of 5.4 per cent in the July-September quarter, marking the slowest pace in seven quarters. In addition, inflation in November remained well above the RBI’s medium-term target of 4 per cent, putting pressure on the economy. The RBI warned that unchecked inflation could harm the real economy, particularly affecting industry and exports. However, the central bank pointed to the usual winter easing of food prices, which should help curb inflation, and expressed hope that private consumption and exports will accelerate.
Earlier this month, the RBI’s Monetary Policy Committee opted to keep the key interest rate unchanged due to inflationary concerns. However, the central bank made a significant move by cutting banks' cash reserve ratio for the first time in over four years, effectively easing monetary conditions to stimulate growth.
Aligning inflation with the RBI's 4 per cent target remains a key priority to ensure sustained economic growth. High prices continue to dampen demand, and the RBI emphasized that bringing inflation under control is vital for the country’s economic stability. The bulletin also highlighted that continued government infrastructure spending will further stimulate economic activity and investment.
However, global economic challenges present risks to India’s growth and inflation outlook, the RBI warned.
Updated 19:20 IST, December 24th 2024