Mumbai. The second quarter of the current financial year 2024-25 has started with signs of growth in the economy. However, inflation in food items remains a matter of concern. The Reserve Bank of India (RBI) has said this in the July bulletin released on Thursday.
An article titled ‘State of the Economy’ published in the RBI bulletin also said that improving agricultural scenario and spending in villages have proved to be the main reasons for boosting demand.
It said that the Consumer Price Index based inflation has increased in June 2024 after remaining soft for three consecutive months. The reason for this is the widespread rise in vegetable prices. It is noteworthy that due to the increase in the prices of vegetables and other food products, retail inflation rose to a four-month high of 5.08 percent in June. In the previous month of May, it was at 4.8 percent.
The article, written by a team led by RBI Deputy Governor Michael Debabrata Patra, said, “It has been argued that the rise in the price of food items is temporary, but the experience of the last one year does not prove this. This is not a short-term but a long-term shock to the price level.”
The article said, “It is clear that food prices accelerated headline (total) inflation and had an adverse effect on the inflation expectations of families. This did not make much of the benefits of the reduction in core and fuel inflation through monetary policy and supply management.” Given the greater uncertainty about inflation, it is wise to remain on the path of bringing inflation to the target of four percent.
The central bank has clarified that the views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India.
The detailed article on the state of the economy said that there was a surplus position on the cash front in early June 2024. But the cash position turned into a deficit in the second half of the month due to payments related to advance tax and goods and services tax (GST) amid sluggish government spending. However, from June 28, it again came into a surplus position.
It said that gross foreign direct investment (FDI) increased to $15.2 billion on an annual basis during April-May, 2024. It was $12.3 billion in the same period a year ago. More than 80 percent of gross FDI came in sectors such as manufacturing, financial services, computer services, power and other energy. Major source countries include Mauritius, Singapore, Netherlands, USA and Cyprus. Their share in total FDI is more than 80 percent. Net FDI more than doubled to $7.1 billion in April-May this year from $3.4 billion in the same period a year ago. The reason for this is the high gross FDI.
The demand situation improved due to increased expenditure in villages
The second quarter (June-August) of the current financial year 2024-25 has started with signs of growth in the economy. The demand situation improved due to improvement in spending in the rural sector. The Reserve Bank of India (RBI) said this in its bulletin on Thursday. An article titled ‘State of the Economy’ published in the RBI bulletin said that global economic activity is strengthening in developed economies and emerging market economies (EMEs). Also, global trade in goods and services is gaining momentum.
The article said, “The second quarter of 2024-25 in India has started with signs of growth in the economy.” Improvement in the agricultural scenario and rural expenditure have proved to be the main points in increasing demand. It said that after three consecutive months of softness, the Consumer Price Index based inflation has increased in June 2024. The main reason for this is the increase in the prices of vegetables.
It is noteworthy that retail inflation rose to a four-month high of 5.08 percent in June due to rising prices of vegetables and other food products. In the previous month of May, this retail inflation was at 4.8 percent. However, the central bank clarified that the views expressed in the bulletin are those of the authors and do not represent the views of the Reserve Bank of India.