The latest RBI Bulletin underscores the sustained momentum of the Indian economy, as indicated by robust high-frequency indicators from the first half of the fiscal year 2023-24.
According to the latest RBI Bulletin, a forthcoming wave of capital expenditure by the corporate sector is poised to propel the next phase of economic growth, with emphasis placed on the foundational role of stable and low inflation, pegged at 4%.
Recent analysis in the Reserve Bank’s February Bulletin suggests a brighter outlook for global economic growth in 2024, indicating a likelihood of stronger-than-expected expansion. The report emphasizes a balanced assessment of risks in the global economic landscape.
The Indian economy continues to sustain the momentum achieved in the first half of 2023-24, going by high frequency indicators, it said. “Expectations of a fresh round of capex by the corporate sector is likely to fuel the next leg of growth,” said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra. Overall, investment intentions of the private corporate sector have been positive this year so far. Total cost of projects, for which loans were sanctioned by major banks/all-India financial institutions (FIs) stood at ₹2.4 lakh crore during April-December 2023, which was 23 per cent higher than that in the corresponding period last year.
“Funds raised through external commercial borrowings (ECBs) for capital expenditure (capex) and initial public offerings (IPOs) remained strong during the second and third quarters of the current financial year, although slightly below the levels seen in Q1 of 2023-24.
The Reserve Bank of India (RBI) has forecasted a GDP growth rate of 7% for the upcoming fiscal year.
In terms of inflation, the article highlighted that consumer price index (CPI) based retail inflation showed a decline from its November-December peaks in the January 2024 reading, while core inflation reached its lowest level since October 2019.
The authors emphasized the importance of stable and low inflation at 4%, stating that it lays the foundation for sustaining economic growth.
Furthermore, the RBI has projected CPI inflation to be at 4.5% for the year 2024-25.”
“The RBI’s Monetary Policy Committee (MPC) has expressed concern over persistent food price shocks hindering the disinflationary trend, despite steady easing of core inflation. Geopolitical events affecting supply chains, volatility in international financial markets, and commodity price fluctuations are identified as potential upside risks.
Earlier this month, the MPC reiterated the need for a disinflationary monetary policy to anchor inflation expectations and align inflation outcomes with the target, while also providing support for growth.
The Reserve Bank clarified that the views expressed in the Bulletin article are those of the authors and do not necessarily reflect the views of the Reserve Bank of India.”