The Reserve Bank of India's (RBI) commitment to taming inflation and lowering it closer to the 4% mark is creditable, but its optimism on growth is befuddling.
The RBI has had to pare its gross domestic product (GDP) growth forecast for FY25 by a good 60 basis points to 6.6% after the underwhelming 5.4% year-on-year (y-o-y) growth in Q2. The expected 7% rebound in the second half could be missed given that credit flows to the economy—especially consumer loans—have slowed sharply; consumption by middle-income households in urban India remains weak and a delayed rabi sowing could hurt the rural recovery.
Also, to what extent government spending will pick up is not clear as tax collections are slowing. Even otherwise, the fiscal impulse in the FY25 Budget was not very strong to begin with.
The fact is that private consumption, which is 56% of the GDP, continues to be sluggish having risen by 6% y-o-y in the second quarter on an anaemic base of 2.6%.
This story is from the December 07, 2024 edition of Financial Express Delhi.
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This story is from the December 07, 2024 edition of Financial Express Delhi.
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