“Indian economy is slowly but surely recovering”, says RBI through the may 2024 release of its monthly bulletin
The Reserve Bank of India (RBI) says that the Indian economy is growing but at a slow pace. The comments were made through the May release of the monthly bulletin under the State of the economy section.
The monthly bulletin also says that headline inflation has dropped below 5% in April, first time since November 2022. The RBI had left the repo rate unchanged in its last Monetary Policy meeting and the next meet is scheduled on 6-8 June. Economists have earlier forecasted for RBI to keep the repo rate on hold throughout the year.
The monthly bulletin says that assuming an implied growth of 5.1% in the previous quarter, the economic activity index nowcasts the GDP growth for 1st quarter of 2024-24 at 7.6%.
The manufacturing sector as a whole is predicted to gain from decreasing input cost constraints. Through April to June 2024, the drag from net external demand should lessen, they said, if services exports maintain their recent high profile.
The RBI says that if services exports maintain their recent rise, the drag from net external demand should moderate through the first quarter of the year 2024-24, according to the report.
Economy is slowly but surely recovering
In the State of the Economy chapter of the May bulletin, it is said that the economy is recovering from its post-pandemic and post-war levels, yet low and stable prices are necessary for strengthening the growth. As quoted by RBI Governor Shakti Kanta Das, the central bank remains firm and steadfast in pursuing price stability which best guarantees sustainable growth.
According to the central bank, investment activity is also anticipated to increase as a result of state spending’s emphasis on capital projects and the moderation of commodities prices.
The report also says that the corporate earnings have improved and specifically, the banking and financial earnings have improved due to credit growth. In the State of the Economy section of the report, it is said that on the basis of real GDP projections of 7.8% year-on-year, the country is having a positive momentum after post pandemic and post-war duration. The monthly bulletin also mentions that the GDP growth in the first quarter of 2024-24 is expected to be driven by private consumption.
Projected Inflation to fall to 5.1% in 1st quarter of 2024-24
Concluding the May edition on a positive remark, the monthly report mentions that the projected inflation is expected to fall to 5.1% in the first quarter of 2024-24 as compared to 6.2% projection in the preceding quarter. These projections were made in the April Monetary Policy Statement.
The report says that according to the CPI Inflation print of April, the momentum is decreasing due to the fall in prices of wheat, oils and eggs. The prices of vegetables and fruits are also weathering the summer heat better compared to previous historical records of the season. The core CPI inflation (excluding food and fuel) is also turning softer compared to the persistent increase of the last 10 months.
