India’s Economic Growth Set to Rebound as Domestic Demand Strengthens: RBI Bulletin
India's economy is on track for a rebound as domestic demand picks up, signaling resilience in consumption and positive agricultural prospects, according to the Reserve Bank of India (RBI) Monthly Bulletin for January 2025.
Mumbai: India’s economy is on track for a rebound as domestic demand picks up, signaling resilience in consumption and positive agricultural prospects, according to the Reserve Bank of India (RBI) Monthly Bulletin for January 2025.
The bulletin highlights the strengthening of economic activity in the second half of 2024-25, supported by a significant recovery in rural demand and agricultural performance. It notes that high-frequency economic indicators show signs of recovery, reinforcing the country’s GDP growth forecast, which was included in the National Statistical Office’s (NSO) first advance estimates.
Table of Contents
Key Highlights from the RBI Bulletin:
Rural Demand and Agricultural Growth
The report points to a notable rise in rural demand, fueled by positive agricultural outcomes, including a record kharif harvest and robust rabi sowing. The rural economy’s improvement has been a key driver for consumption resilience.
Public Investment in Infrastructure
A revival in public capital expenditure (capex) in infrastructure is expected to spur growth in key sectors, further enhancing India’s economic prospects.
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Private Consumption on the Rise
Private final consumption has emerged as a bright spot in the economy, with sectors like e-commerce and quick-commerce experiencing growth. The middle-class, especially in urban areas, is looking to benefit from reduced food inflation, resulting in higher disposable incomes.
Modest Inflation Easing
Headline inflation eased for the second consecutive month in December, with a notable reduction in food inflation. However, concerns remain about persistently high food prices, which continue to impact the economy.
GDP Growth Forecast for 2024-25
India’s GDP growth is projected at 6.4% for the fiscal year 2024-25, following three years of growth above 7%. While growth has moderated, India remains the fastest-growing major economy globally.
Global Economic Outlook
The RBI bulletin also discusses the global economic scenario, with a divergence in recovery patterns across regions. While global trade is expected to improve, geopolitical risks and protectionist policies could pose challenges to the growth outlook.
Financial Flows and Investment Outlook
The outlook for foreign direct investment (FDI) remains subdued, and portfolio flows exhibit high volatility due to a “home bias” among investors.
The RBI bulletin indicates a cautiously optimistic economic outlook for India in 2025, with growth expected to continue as key sectors recover and infrastructure investments stimulate further expansion.
