The fiscal year 2024-25 entered the second quarter—July to September—with an overtone of acceleration in the Indian economy, impelled by positive developments in agriculture and increased spending in rural areas, according to the latest RBI monthly bulletin, released recently. It says there that there is stronger economic activity shown in the rural areas in comparison to the urban centers; the rural-urban divide has, therefore, narrowed, going by the latest monthly per capita consumption expenditure MPCE survey carried out by the NSSO.
It further enumerates some of the key reasons behind this enhanced spending power of rural households, which "include increase in fiscal transfers, revision in wage rates under programmes such as MGNREGS, and increase in remittances on account of migration to urban areas". Spending pattern in rural areas has undergone a change; now expenditure on conveyance, medical services, and consumer services has surpassed that on cereals, the survey data shows. These trends foster optimism, the report says, of rural India closing the gap with the urban areas and moving toward catching up.
The rural recovery is rubbing off on FMCG companies and leading to earnings upgrades and better stock valuations. This pickup is reflected in the rising volume growth as the inflationary pressures are slowly loosening. Manufacturing momentum is also picking up with the PMI crossing its long-term average in June, driven by strong new order growth.
Manufacturing shall remain at center-stage in the quest for higher economic growth, with active effort at hand in raising its present share of 20-25 percent in GDP to a global manufacturing hub. The growth shall generate jobs in these strategically important industries, like electronics, pharma, textiles, and automobiles that would work towards making Indian products competitive in world markets.
It has taken cognizance of the fact that global economic activity is gaining in both advanced and emerging economies with merchandise and services trade posting an upswing that would help India's export prospects. After exports touched $780 billion in 2023-24 and recorded a growth of 10.2 per cent in the first quarter of 2024-25, quite easily, exports of over $800 billion will be achieved by India in the current fiscal year.
The point that the RBI bulletin picks out is precisely the positive path that had charted with an Indian economy being propelled by rural resilience, manufacturing growth, and supportive global economic conditions, all of which will set the scene for sustained economic expansion and improved export performance in the months ahead.
Read also | LIC Shares Skyrocket by Almost 80% Over the Past Year
Read also | FICCI Report: FY25 GDP Growth Projected at 7%, Emphasis on Tax Reforms and Job Creation
