Demand conditions in economy gathering momentum, says RBI
By : Falaknaaz Syed
Update: 2024-08-19 16:15 GMT
Mumbai: The demand conditions in the economy are gathering momentum after some slack in the first quarter of 2024-25, the Reserve Bank of India (RBI) observed in its monthly bulletin of August 2024. Rural consumption spending on the back of growing incomes is beginning to drive volume growth in fast moving consumer goods (FMCG), reflecting strengthening fundamentals. Rural saving is also on the rise as evident in rising numbers and outstanding amounts of savings bank accounts. “Receding of inflation pressures appears to be the most important metric in rural spending resurgence, driving a catch up with urban consumption volumes,” said the central bank.
The average rural consumer is getting increasingly price conscious. “Reflecting these forces of turnaround, FMCG companies are starting to see green shoots of revival, portending a seismic shift in their markets as price stability sets in and expectations of a better monsoon as well as higher budgetary allocations for the rural economy push up volume growth.
The Consumer Price Index (CPI) inflation dropped to 3.54 per cent in July 2024, marking its lowest point in nearly five years.
The RBI further mentioned that the signs of revival will stimulate the participation of the private sector in total investment.
Overall business sentiment has also shown an improvement, as reflected in the rising business confidence index of the National Council of Applied Economic Research (NCAER), with an increase in the share of polled firms expecting overall economic conditions to improve in the next six months.
As per the high-frequency indicators, the demand conditions remained firm in July 2024, with e-way bills recording a growth of 19.2 per cent YoY. The toll collections increased by 9.4 per cent YoY in July 2024. The automobile sales recorded a growth of 9.5 per cent YoY in July 2024, led by the two-wheeler segment. Domestic tractor sales registered a modest rise in July, while the vehicle registrations recorded robust double-digit growth, driven by both transport and non-transport segments.