The Reserve Bank of India has said that there is optimism about India’s economic take-off globally and recent indicators point to a rising demand.
“There is a growing optimism that India is on the cusp of a long-awaited economic take-off. Recent indicators are pointing to a quickening of the momentum of aggregate demand. Non-food spending is being pushed up by the green shoots of rural spending recovery. A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway,” the State of the Economy article in the RBI bulletin said.
The world lauds
While revising India’s GDP growth upwards by close to 2 percentage points for 2023-24, the IMF’s April 2024 World Economic Outlook (WEO) alludes to the robustness of growth expected in 2024 and 2025 as “reflecting continuing strength in domestic demand and a rising working-age population”, it said.
The OECD’s May 2024 Economic Outlook points to strong momentum in India in recent monthly indicators and expects “strong investment and improving business confidence in India …to sustain real GDP growth”, the RBI article said.
“There is considerable appreciation about the dramatic reduction in poverty. The World Bank estimates that at the height of the pandemic in 2021, only 12.9 per cent of the population lived on US$ 2.15 a day – the global benchmark for extreme poverty. More recent estimates show that extreme deprivation, once considered synonymous with India, is set to become extinct,” it said.
There is worldwide focus on the transformation of the physical infrastructure, including highways, ports and airports. India’s power sector has attained 100 per cent electrification and has been integrated in a single grid across the country, it said, adding that daily power availability has increased to 20 hours in rural areas and 23.5 hours in urban areas. Aggregate technical and commercial losses have narrowed considerably. There has been a leap in renewable energy capacity creation, with India becoming the world’s third largest renewable energy producer.
Digital leap
It said that India has attained world leadership in leveraging the digital public infrastructure for payment efficiency, financial inclusion and direct benefit transfers.
“Currently, India boasts the highest number of digital transactions, fuelled by a massive internet user base. Broadband connectivity has also seen a significant leap, reaching over 93 per cent of our villages. The Bharat Net project will connect all villages through high-speed internet. Digital platforms like the Open Network for Digital Commerce (ONDC) are empowering small businesses by providing a larger marketplace. India’s digital public infrastructure – the India Stack – is boosting productivity, efficiency and generating employment, besides enabling better targeting of fiscal transfers,” the RBI article said.
Recent indicators are pointing to a quickening of the momentum of aggregate demand. In the personal consumption space, Nielsen IQ data indicate that a welcome pivot is underway that will boost this category of spending. For the first time in at least two years, rural demand for fast moving consumer goods (FMCG) has outpaced urban markets – in the quarter just gone by, FMCG volume growth of 6.5 per cent was driven by rural growth of 7.6 per cent relative to urban growth of 5.7 per cent on the back of robust demand for home and personal care products.
