Private Consumption Drives India's Economy Recovery
Mumbai, November 25 (News Agency Alayaran): In a statement provided by the Reserve Bank of India (RBI), private consumption has kicked in again to drive domestic demand, marking a significant relief after a slowdown witnessed in the second quarter of this financial year.
The RBI article, titled "State of the Economy", attributed the resilience of the country's economy to festival-related spending and a recovering agricultural sector. However, it emphasized that bringing down inflation is crucial to help India meet its growth potential.
Deputy Governor Michael Patra and other central bank officials have prepared the report, which highlights the importance of private consumption in driving real activity in the third quarter, especially with festival spending helping to light up market activities.
E-commerce companies are witnessing a surge in business during the festive season, particularly in rural India, where the increase in kharif output and optimism around rabi production has fueled interest. Furthermore, direct-to-consumer brands are scrambling for funds to expand their operations and increase sales through quick-commerce platforms.
Retailers have reported a pick-up in sales growth relative to the previous quarter, with e-two wheelers making a significant splash during Diwali, albeit with higher prices across various sectors including luxury cars.
The article also noted that new cities are emerging across the country, with the urban population expected to surge fourfold by 2025, boosting urban demand.
However, the RBI warned that controlling inflation remains crucial to India reconnecting with its growth potential. The Consumer Price Index (CPI) accelerated to a 14-month high of 6.21% in October, with core inflation on the rise and spillover effects seen due to increased food prices.
The article urged caution against complacency, citing the need to monitor hardening input costs across goods and services. It warned that unchecked inflation can undermine the prospects of the real economy and impact corporates' earnings and capex.