the Reserve Bank of India (RBI) said that household consumption is poised to grow faster in the second half of the fiscal as headline inflation eases, with a revival of rural demand already taking hold.
The central bank in its latest monthly bulletin released on September 20 said food price volatility remains a contingent risk even as the overall retail inflation has remained below the target of 4 percent for the second consecutive month in August.
The September Bulletin also said that global economic activity is slowing down while the pace of disinflation remains sluggish, provoking caution among monetary policy authorities.
"Consumer price index inflation came in below the Reserve Bank's target for the second consecutive month in August, although in light of the recent experience, food price volatility remains a contingent risk," said an article on 'State of the Economy' in the Bulletin.
The article authored by a team lead by RBI Deputy Governor Michael Debabrata Patra further said in India, domestic drivers – private consumption and gross fixed investment – were robust and net exports remained sequentially positive in their support to gross domestic product (GDP) growth in the April-June period of this financial year.
The underperformance of agriculture was compensated for by a buoyant manufacturing sector and resilient services.
The RBI’s monetary policy committee is committed to keeping inflation within a range of 4 percent, with a margin of plus or minus 2 percent. This means the central bank must navigate external pressures while maintaining its inflation-fighting strategy.
So far, the inflation trajectory remains within the RBI’s projections, with CPI or retail inflation at 3.6 percent in August.
Reserve Bank of India Governor Shaktikanta Das, in the August Monetary Policy Committee (MPC) meeting projected real GDP growth rate for 2024-25 to be 7.2 percent. He had, in the first MPC announcements after the Lok Sabha elections 2024 in June projected real GDP for 2024-25 to be 7.2 percent.
RBI projected real GDP for 2024-25 Q1 at 7.1 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent. It is slightly altered from the previous projections of 7.3 per cent, 7.2 per cent, 7.3 per cent, and 7.2 per cent for the four consecutive quarters for this year. Das said that the Q1 projection has been slightly moderated from the June projections due to "updated information on certain high frequency indicators which show lower than anticipated corporate profitability, general government expenditure and core industries output".