The RBI's monthly bulletin, released on Tuesday, anticipates a renewed surge in capital expenditure by the corporate sector, poised to drive the next phase of growth in the Indian economy. It forecasts a GDP growth rate of 7 percent for the fourth quarter of the current fiscal year, ending on March 31, 2024.
According to the bulletin, the Indian economy continues to maintain the momentum achieved in the first half of the fiscal year 2023-24, as evidenced by various high-frequency indicators. Consumer confidence notably strengthened in January 2024, particularly buoyed by optimism surrounding the overall economic situation and employment conditions, as revealed by the latest household survey conducted by the RBI.
The bulletin highlights strong business optimism indicated by various enterprise surveys. Moreover, high-frequency indicators point towards sustained robust demand conditions in the economy as of January 2024. E-way bills witnessed a growth of 13.2 percent in December 2023, while toll collections expanded by 15.5 percent year-on-year in January 2024, albeit moderating from the previous month's record levels.
In the automobile sector, sales surged by 23.3 percent year-on-year in January, with notable double-digit growth in two-wheeler sales. Retail tractor sales reached a seven-month high with a growth rate of 21.2 percent year-on-year in January 2024. Strong year-on-year growth was also observed in vehicle registrations.
Regarding the agriculture sector, the bulletin notes that the rabi crop acreage for the fiscal year 2023-24 slightly surpassed that of the previous year, standing at 709.3 lakh hectares, marking a 5.2 percent increase compared to the normal acreage. Although rice and pulses saw a decline, the area under all major crops remained higher year-on-year. Wheat, which constitutes 47 percent of the rabi full-season normal area, witnessed a 0.7 percent year-on-year increase in sown area.
On the downside, the bulletin acknowledges disruptions in global trade flows and increased transportation costs due to the ongoing Red Sea conflict, leading to supply chain pressures in recent months. However, it notes that the likelihood of stronger-than-expected global economic growth in 2024 has improved, with risks broadly balanced.
Regarding inflation, the bulletin mentions a moderation in consumer price inflation in January 2024, following spikes in November and December. Core inflation, meanwhile, stands at its lowest level since October 2019. With stable and low inflation at 4 percent considered crucial for sustaining economic growth, CPI inflation is projected at 4.5 percent for the fiscal year 2024-25.
Despite being lower than the estimated average for 2023-24, the Monetary Policy Committee (MPC) expressed concern over significant and repetitive food price shocks hindering the disinflationary trend driven by the steady easing of core inflation. Geopolitical events, supply chain disruptions, and volatility in international financial markets and commodity prices pose upside risks.
The MPC emphasized the importance of maintaining a disinflationary monetary policy to anchor inflation expectations and align inflation outcomes with the target while supporting economic growth.
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