The Central Bank also highlighted that the global economy is losing steam and some of the most resilient economies are seeing a slowdown in growth. High frequency indicators suggest further moderation in the near future, it added.
The Reserve Bank of India’s (RBI) monthly bulletin released on Tuesday highlighted the state of the Indian economy and stated that the India can sustain a GDP growth of 8 per cent fuelled by a conducive macroeconomic configuration which can further the country’s growth trajectory. “Over the period FY21-FY24, growth has averaged above 8 per cent; and the underlying fundamentals indicate that this can be sustained and even built upon,” the bulletin highlighted.
The Central Bank also highlighted that the global economy is losing steam and some of the most resilient economies are seeing a slowdown in growth. High frequency indicators suggest further moderation in the near future, it added.
Strong structural demand visibility a big positive
However, amidst all this, India’s real GDP growth reached a six-quarter peak in the third quarter of FY24. Behind this push to the GDP was strong momentum, robust indirect taxes, and reduced subsidies. The RBI added that the strong structural demand visibility and improved corporate and bank balance sheets are expected to fuel growth in the coming periods. “Even as inflation is on the ebb with broadbased softening of core inflation, the repetitive incidence of short amplitude food price pressures deters a swifter fall in headline inflation towards the target of 4 per cent,” the bulletin said.
Talking about the weakening inflation, the RBI said that the “inflation is on the ebb”. The consistent decrease in core inflation would have pushed headline inflation towards the 4 percent target even earlier and more rapidly if not for the recurring instances of minor fluctuations in food prices, it added.
Favouring factors
Pointing out some of the factors favouring macroeconomic and financial stability in India, the RBI highlighted the modest account deficit, resilient external buffers and healthy balance sheets in the financial sector, among other things. “Capital inflows have resumed strongly as investor interest floods back into India. Technology is offering new growth opportunities to seize by becoming more competitive and efficient,” it added. The present time also represents an opportunity to build “world class infrastructure, strong manufacturing bases, a high-quality labour force and global leadership in services to convert these favourable factors into opportunities and strengths over the next few decades,” RBI added.
Resilient labour markets
The RBI gave a shout out the resilient labour markets who continue to exhibit the same, however, there are indications of a slowdown, especially in terms of wage increases. Besies this, some of the emerging market economies (EMEs) are witnessing the unemployment rates inching upwards. Simultaneously, increased labour mobility, advancements in artificial intelligence (AI), and machine learning are enhancing labour productivity and fostering business creation.
Source:financialexpress.com