Mumbai. Due to increasing expectations about business and increased consumption demand during the current festivals, encouraging signs are being seen in private investment. Overall, the country’s growth outlook is being supported by the domestic ‘engine’ that drives growth. This has been said in the October bulletin of the Reserve Bank of India (RBI) released on Monday.
The article on ‘State of the Economy’ published in the bulletin states that the aggregate demand in the country is all set to overcome the temporary slowdown seen in the second quarter of 2024-25. The reason for this is the increase in festive demand and improvement in consumer confidence.
Moreover, rural demand is expected to get a boost with the improving agricultural outlook.
The article says, “Signs of pick-up in consumption demand and growing optimism about business should accelerate private investment.” With strong balance sheets, the financial sector is equipped with resources and ready for investment. Along with this, the government is continuously emphasizing on capital expenditure. Overall, the investment outlook appears bright. The article written by a team led by RBI Deputy Governor Michael Debabrata Patra said, “The global economy remained strong in the first half of 2024. Domestic spending was supported by the decline in inflation.
The article said that amid the easing of monetary policy, stable pace of growth is becoming an important topic in most economies.
The bulletin said, “Despite ongoing global tensions, India’s growth outlook is supported by a strong domestic engine.” However, some important figures have seen a softening in the second quarter of 2024-25. This is partly the result of factors such as unusually heavy rainfall in August and September.
The article said, “In terms of key indicators, private investment is showing some encouraging signs, while consumption expenditure is seeing an increase amid festivals.” Recent data shows that the number of credit card transactions has slowed down. The reason for this is that financial institutions are exercising caution in view of the risks associated with loans considered unsecured. According to the authors, the initial squeeze in the microfinance sector, which provides small amounts of credit, appears to have been driven by lending rather than by demand from borrowers.
Self-regulatory organization Microfinance Institutions Network (MFIN) has called for a cautious approach to mitigate asset quality challenges. This includes limiting the loan repayment obligations of the borrower to 50 percent of the household income.
The article said credit bureau data indicates that retail credit growth has also slowed as banks have reduced personal lending. It also said that despite some slowdown in credit growth in the banking sector, deposit rates are expected to remain high. The central bank has said that the views expressed in the bulletin article are those of the authors and the Reserve Bank has nothing to do with it.