Mumbai: High-frequency indicators point to a broad-based gaining of growth momentum, while moderating inflation bolsters macroeconomic fundamentals, the ‘state of the economy’ report published by RBI said.
Higher year-on-year growth in air cargo, railway freight and construction indicators of steel consumption and cement production validated the uptick. Tractor sales is the only indicator that is still in the negative. “Growth is expected to gain momentum through the rest of the year, especially from the impetus of festival spending,” the report said.
“The festival season is all set to light up e-commerce sales volumes. Entry-level prices of electronics are poised to fall in spite of the focus on ‘premiumisation’. Consumer confidence is upbeat on online shopping, with wider choices, competitive pricing and the convenience of easy returns and exchanges lifting up the online shopping experience,” the report said.
The growth of e-commerce has resulted in pan-India demand for warehousing outgrowing supply by an estimated 1.4 times, with an average growth of 10%. “Rural consumers also appear to be ready to join the party: there is a revival in demand for FMCG after the September showers, despite an uptick in freight and packaging costs. With kharif sowing acreage exceeding last year’s coverage, joblessness in rural areas fell in September,” the report said.
Meanwhile, inflation moderated to 5% in September from 6.8% in August due to a sharp correction in vegetable prices and a softening of inflation in other food groups. The report said that near-term inflation is expected to improve on the back of a continued decline in vegetable prices.
“The future trajectory will be conditioned by a number of factors like lower area sown under pulses, dip in reservoir levels, El Nino conditions and volatile global energy & food prices. According to RBI’s enterprise surveys, manufacturing firms expect higher input cost pressures but marginally lower growth in selling prices in Q3 compared to the previous quarter,” the report said.
“Households’ median inflation expectations declined by 90 basis points (bps) and 40 bps over three months and one-year horizons, respectively, to revert to single digits since the onset of the pandemic,” the report said. The report authored by RBI staff, including deputy governor Michael Patra, has made detailed observations on the impact of e-commerce sales.
On residential real estate, it said markets are experiencing a robust growth trend, reaching a six-year high despite rising mortgage rates and property prices. However, this growth is primarily concentrated in mid-income and premium segments, while affordable housing is declining. Credit upgrades continue to outstrip downgrades in the corporate sector, notably in infrastructure, automotive, and cement companies.
