India’s growth in the April-June quarter is expected to be driven by private consumption, supported by reviving rural demand, and renewed buoyancy in manufacturing, a Reserve Bank article said on Monday. The global economy is transfixed in the cross-currents of slowing growth and high inflation, and an uneasy calm prevails in the global financial markets as they await clearer signals from policy authorities on banking regulation and supervision, and contours of deposit insurance, it said.
In April and the first half of May 2023, domestic economic conditions have sustained the quickening of momentum seen in the last quarter of 2022-23, said the article on ‘State of the Economy’. Headline inflation eased below 5 per cent in April 2023, for the first time since November 2021. It further said corporate earnings are beating consensus expectations, with banking and financial sectors posting strong revenue performance, aided by robust credit growth.
“GDP growth in the first quarter of 2023-24 is expected to be driven by private consumption, supported by revival in rural demand that is underway on the back of the encouraging developments in both the kharif marketing season of 2022-23 and the rabi marketing season of 2023-24, the sustained buoyancy in services, especially contact-intensive sectors, and moderating inflationary pressures,” it said.
The article has been authored by a team led by RBI Deputy Governor Michael Debabrata Patra. The central bank, however, said the views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India. The article further said retail inflation (consumer price index) print for April 2023 indicates that momentum is turning out to be softer than anticipated on account of a fall in wheat prices, the fifth consecutive monthly decline in prices of oils and fats and the third consecutive monthly decline in the prices of eggs.
The prices of vegetables and fruits are also weathering the summer heat better and their momentum is lower than their historical record for this time of the year, it said. Kerosene prices are on the decline and importantly, core inflation – CPI excluding food and fuel – is treading on softer momentum (seasonally adjusted) relative to the persistent elevation over the past 10 months. Rice prices could see a significant correction if sales from buffer stocks, which are three times larger than the norm, are undertaken.
“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 state of the economy also refers to a report by fDi Intelligence, the article India was the second largest recipient of FDI (USD 26.2 billion) in the semiconductor industry for the year 2022, second only to the US (USD 33.8 billion).”Massive investments in capital-intensive chip FDI projects are underway, in line with the Government of India’s efforts to develop the industry,” it said.