Mumbai. With increase in aggregate demand and expenditure on non-food items in villages, the country’s economic growth rate may be 7.5 percent in the first quarter of the current financial year. This has been said in the May Bulletin released on Tuesday by the Reserve Bank of India (RBI).
An article on ‘State of the Economy’ published in the bulletin said that the Indian economy has shown remarkable strength despite global disruptions affecting the supply chain.
It said, “According to the Economic Activity Index (EAI), activity accelerated in April and early estimates suggest that GDP growth in the first quarter of 2024-25 is expected to be around 7.5 percent.” The Economic Activity Index (EAI) was constructed by extracting the general trend of 27 important (high frequency) indicators of economic activity using a ‘Dynamic Factor Model’.
In February, 2020, EAI was kept at 100 while in April, 2020 it was reduced to zero. The reason for this was that the month of April was most affected due to restrictions on movement due to the Covid pandemic. The government will release GDP estimates for the quarter ending March 2024 and provisional estimates of national income for the year 2023-24 on May 31. India’s growth rate was 8.2 percent in the June quarter of 2023-24, 8.1 percent in the September quarter and 8.4 percent in the December quarter.
The article said that ‘high frequency’ indicators such as GST collections, power consumption, freight movement indicate continued momentum in domestic demand conditions in April, 2024. Toll collection increased by 8.6 percent on year-on-year basis in April this year. Vehicle sales increased by 25.4 percent year-on-year in April 2024 due to strong growth in the two-wheeler and three-wheeler segments.
The article written by the team led by Reserve Bank Deputy Governor Michael Debabrata Patra said, “Expectations about this have increased. It has been said that India is on the threshold of taking the much awaited economic flight. Recent indications show that aggregate demand has increased. Has been.” There is an improvement in expenditure in villages due to expenditure on non-food items. Headline (gross) inflation declined marginally in April this year. This is in line with our expectations of a gradual recovery to the target level.
Despite the softening of fuel prices and the core inflation coming down to a historically low level, the prices of vegetables, cereals, pulses, meat and fish in the food category may keep retail inflation high and close to five percent in the near term. This is in line with the estimate of the Monetary Policy Committee (MPC) in April.
It is also worth noting that the growth in volume of FMCG goods was 6.5 percent due to strong demand for household and personal care products. This growth was driven by rural growth of 7.6 percent. Whereas in urban areas the increase was 5.7 percent. Regarding private investment, it has been written in the article that the earnings of listed private manufacturing companies remained the main source of funds in the second half of 2023-24. The financial results of the listed companies announced so far show that the growth in revenue achieved by them on annual and quarterly basis in the January-March quarter of the financial year 2023-24 was the highest.
It is written in the article that there was a slight decline in headline (gross) inflation in April this year. This is in line with our expectations. Despite softening of fuel prices and core inflation coming down to historically low levels, prices of vegetables, cereals, pulses, meat and fish in the food category are likely to keep retail inflation high and near five per cent in the near term. . This is in line with the estimates of the Monetary Policy Committee (MPC) in April. The central bank has clarified that the things written in the bulletin are the views of the authors and do not represent the views of the Reserve Bank of India.