Economy News

‘Q1 growth maintains pace of Q4FY24’

The RBI’s monetary policy statement for June has pegged the first quarter growth at 7.3%, and the entire FY25 growth at 7.2%.

Current high-frequency indicators of economic activity suggest that the real GDP growth in the first quarter of FY25 is broadly maintaining the pace it had achieved in the preceding quarter, according to a bulletin released by the Reserve Bank of India (RBI) on Wednesday. In the fourth quarter of FY24, GDP grew 7.8%. The RBI’s monetary policy statement for June has pegged the first quarter growth at 7.3%, and the entire FY25 growth at 7.2%. The bulletin stated there is increasing evidence that in the post-pandemic years, a “trend upshift” is taking shape, which is shifting India’s growth trajectory from the 2003-19 average of 7% to the 2021-24 average of 8% or even more, powered by “domestic drivers”.

The paper, titled ‘State of the Economy’, said that there has been a “structural break” in the formation of GDP since the pandemic. The first quarter GDP has tended to record some loss of momentum relative to other quarters since the onset of the pandemic. Hence, some moderation in speed relative to the growth of 7.8% in the last quarter of FY24 can be expected in the actual outturn when the National Statistical Office releases its estimate in August, it said.

It mentioned that the prospects for agriculture are brightening with the early onset of the southwest monsoon. “Headline inflation is gradually easing, driven by sustained softening of its core component, although the path of disinflation is interrupted by volatile and elevated food prices,” it said.

On private consumption, the paper said that more recent indicators suggest that it is resuming the role of the main driver of demand and is getting broad-based to include rural consumers. The fast-moving consumer goods sector is gearing up for a strong turnaround on expectations of pick-up in public welfare spending. A drop in walk-in clientele is being compensated for by e-commerce platforms, especially in heatwave conditions, it said.

On investment, the paper said it has maintained steady growth. Some moderation in the more recent period could be on account of transitory uncertainty weighing on investment decisions but “this too shall pass”. “A strong revival in private investment has to become the most important factor driving growth in the years to come, especially as public finances consolidate,” it said

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