Mumbai: While the outlook for the global economy is turning fragile,many large emerging market economies such as India is poised for a stronger performance.According to the economic activity index (EAI), activity rebounded in April and early estimates suggest that GDP growth for the first quarter of the current financial year is likely to remain close to 7.5 per cent driven by rising aggregate demand and non-food spending in the rural economy, according to an article on the State of the Indian Economy in the RBI May Bulletin.
“Internationally there is a growing optimism that India is on the cusp of a long-awaited economic takeoff,” said the article, prepared by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra.
Recent indicators are pointing to a quickening of the momentum of aggregate demand. Non-food spending is being pushed up by the green shoots of rural spending recovery. A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway.
The economic activity index (EAI) was constructed by extracting the common trend underlying twenty-seven high-frequency indicators of economic activity, using a Dynamic Factor Model. EAI was scaled to 100 in February 2020 and 0 in April 2020, the worst affected month due to mobility restrictions. The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24.
The article noted that high-frequency indicators point towards sustained momentum in domestic demand conditions in April 2024. Toll collections increased by 8.6 per cent (y-o-y) in April 2024.
Automobile sales increased by 25.4 per cent (y-o-y) in April 2024, led by strong growth in the two-wheelers and three-wheelers segment, while passenger vehicles recorded the highest-ever monthly sales. India’s power sector has attained 100 per cent electrification and has been integrated in a single grid across the country.There has been a leap in renewable energy capacity creation, with India becoming the world’s third largest renewable energy producer. It has attained world leadership in leveraging the digital public infrastructure for payment efficiency, financial inclusion and direct benefit transfers.
Broadband connectivity has also seen a significant leap, reaching over 93 per cent of our villages. The Bharat Net project will connect all villages through high-speed internet. Digital platforms like the Open Network for Digital Commerce (ONDC) are empowering small businesses by providing a larger marketplace.
There is considerable appreciation about the dramatic reduction in poverty. More recent estimates of the World Bank show that extreme deprivation, once considered synonymous with India, is set to become extinct, said the article.
