There are some lead indications already of new capacity creation in a few industries and a pick-up in investment intentions, said an assessment of the state of the economy by the Reserve Bank of India economists published in its latest monthly bulletin.
Aggregate demand conditions are gathering momentum after some slack in the first quarter of 2024-25. The central bank has projected an economic growth of 7.2 percent in 2024-25. ” Rural consumption spending on the back of growing incomes is beginning to drive volume growth in fast moving consumer goods (FMCG), reflecting strengthening fundamentals.” said a study by RBI deputy governor Michael Patra and his team published in the Bulletin. The views are those of the authors and not of the central bank.
Rural saving is also on the rise as evident in rising number and outstanding amounts of savings bank accounts, the study said The study noted that receding of inflation pressures appear to be the most important metric in rural spending resurgence, driving a catch-up with urban consumption volumes. Headline inflation moderated from its spike in June to 3.5 per cent in July, but this was primarily due to the downward statistical pull of base effects because of which the central bank did revise the policy repo rate and lft it unchnaged at 6.5 percent .
The average rural consumer is getting increasingly price conscious. Reflecting these forces of turnaround, FMCG companies are starting to see green shoots of revival, portending a seismic shift in their markets as price stability sets in and expectations of a better monsoon as well as higher budgetary allocations for the rural economy push up volume growth.
These factors which act as stimuli to demand are expected to reinvigorate the hitherto subdued participation of the private sector in total investment, a key accelerator of overall growth of the economy in view of higher levels of productivity and innovation.The overall business sentiment has improved as reflected in the rising business confidence index of the National Council of Applied Economic Research (NCAER), the study noted.Overseas fund raising by Indian companies is experiencing a revival, driven by international investor interest, improving liquidity conditions and reduced hedging costs.