According to a Reserve Bank article published on Monday, India's growth in the April-June quarter is anticipated to be led by private consumption, bolstered by revived rural demand and resurgent manufacturing.
According to the report, the global economy is enmeshed in the countercurrents of slowing growth and rising inflation, and the financial markets throughout the world are in a state of uncomfortable quiet as they wait for clearer cues from policymakers about banking regulation and supervision as well as the specifics of deposit insurance.
According to the 'State of the Economy' article, domestic economic circumstances continued to pick up speed during the fourth quarter of 2022–2023 in April and the first part of May 2023.
In April 2023, headline inflation fell below 5% for the first time since November 2021. Additionally, it said that corporate results were above consensus projections, with the banking and financial sectors reporting significant revenue growth, supported by strong credit expansion.
“Private consumption is expected to be the primary driver of GDP growth in the first quarter of 2023–2024, with support from a recovery in rural demand that is already under way as a result of encouraging developments in both the kharif marketing season of 2022–2023 and the rabi marketing season of 2023–24, the sustained buoyancy in services, especially contact-intensive sectors, and moderating inflationary pressures, the report stated.
A group lead by RBI Deputy Governor Michael Debabrata Patra wrote the piece.
The Reserve Bank of India, however, said that the opinions expressed in the essay are those of the writers and do not necessarily reflect those of the institution.
According to the article, the retail inflation (consumer price index) print for April 2023 shows that momentum is weaker than expected due to a drop in wheat prices, a drop in oil and fat prices for the fifth consecutive month, and a drop in egg prices for the third consecutive month.
According to the report, prices of fruits and vegetables are also surviving the summer heat better and are moving less quickly than in the past at this time of year.
Kerosene prices are falling, and more significantly, core inflation—CPI excluding food and fuel—is walking on slower speed in comparison to the steady ascent during the previous 10 months. If sales from buffer supplies, which are three times bigger than the average, are made, rice prices might see a major fall.
“The pass-through of wholesale price movements – in deflation in April – could also contribute to the softening of retail inflation going forward,” the authors said.
The article on the status of the economy also mentions a research by fDi Intelligence, according to which the US (USD 33.8 billion) and India (USD 26.2 billion) were the two countries that received the most foreign direct investment (FDI) in the semiconductor sector in 2022.
In keeping with the government of India's attempts to promote the sector, “massive investments in capital-intensive chip FDI projects are underway,” it stated.
