Mumbai: Despite geopolitical tensions, India’s growth outlook is supported by robust domestic engines. While some high-frequency indicators have shown a slackening of momentum in the second quarter of 2024-25 partly attributable to idiosyncratic factors like unusually heavy rains in August and September, the slowdown is temporary, said the Reserve Bank of India (RBI) October Bulletin released on Monday.
“In India, aggregate demand is poised to shrug off the temporary slowdown in momentum in the second quarter of 2024-25 as festival demand picks up pace and consumer confidence improves,” the ‘State of the Economy’ article published by a team of economists led by RBI deputy governor Michael Debabrata Patra in the Bulletin.
According to Patra, consumer spending is expected to be about 25 per cent higher than during Dussehra- Diwali last year,” the article said.
Domestic manufacturing PMI slowed to an eight-month low in September, while services PMI eased to a 10-month low, latest data showed.
India's overall growth slowed to 6.7 per cent in the June quarter but the country remains among the fastest growing major economies globally.
The article said that rural demand is expected to get a boost from the improved agricultural outlook. Private investment should pick up steam in response to signs of a pick-up in consumption demand and rising business optimism. With the financial sector ready to intermediate resources for productive investment, buffered by healthy balance sheets, and the government’s continued thrust on capex, the investment outlook appears bright, said the article.
After remaining below target for two consecutive months, inflation surged in September, as an adverse statistical base effect was compounded by a resurgence in food price momentum, it said.
Another article titled RBI’s ‘Monetary Policy Transmission in India: The Recent Experience’ authored by Michael Debabrata Patra, Indranil Bhattacharyya, Joice John, and Avnish Kumar pointed out that policy rate tightening could anchor inflation expectations, reducing aggregate demand and headline inflation by 160 basis points each till Q2 of 2024-25.
