The Reserve Bank of India’s Monthly bulletin, which was published on Tuesday, May 21, 2024, states that there is growing international optimism that India is about to experience a much-needed economic boom. The rate of rising aggregate demand and the recovery of rural expenditure serve as the basis for the bulletin’s observations.
According to the bulletin, rural demand for fast-moving consumer goods (FMCG) has surpassed urban demand for the first time in two years. The strong demand for home and personal care products has driven the growth of the FMCG volume, which has increased by 6.5% in rural areas compared to 5.7% in urban areas.
The RBI Deputy Governor Michael Debabrata Patra led a team that prepared an article for the RBI bulletin. The article suggests that although the global economy is facing challenges due to stalling inflation declines, the Indian economy has shown remarkable resilience in the face of geopolitical obstacles that affect the supply chain. Retail inflation, for example, dropped to an 11-month low of 4.83% year-over-year in April 2024 from 4.85% in March 2024, according to data released by the Statistics Ministry of the Government of India on Monday, May 20, 2024.
Taking note of the IMF’s World Economic Outlook for April 2024
The RBI bulletin notes that the IMF’s April 2024 World Economic Outlook (WEO) mentioned the robust growth in India expected in 2024 and 2025, reflecting continuing strength in domestic demand and a rising working-age population. The IMF revised India’s GDP growth upwards by nearly 2 percentage points for 2023–2024.
OECD observations
The bulletin notes that the OECD predicts that India will continue to grow quickly and generally steadily, with further moderation of inflation.
Strong momentum in India’s recent monthly indicators has reportedly been noted by the OECD’s May 2024 Economic Outlook. The research expects strong investment and better business confidence in India to continue real GDP growth.
World Bank on India’s success in lowering the rate of extreme poverty
While the World Bank estimates that at the height of the pandemic in 2021 only 12.9% of India’s population lived on US$ 2.15 per day, the global benchmark for extreme poverty, recent estimates show that extreme deprivation, once thought to be synonymous with India, is set to become extinct. The bulletin references the widespread appreciation of India for the dramatic reduction in poverty in the nation.
Pay attention to what India has accomplished in terms of both digital and physical infrastructure.
The bulletin highlights India’s accomplishments in achieving global leadership in leveraging the digital public infrastructure for payment efficiency, financial inclusion, and direct benefit transfers, while pointing to the global focus on the transformation of the physical infrastructure, including highways, ports, and other infrastructure. This is on top of the physical infrastructure that India has created and is still creating.
According to the RBI bulletin, as of right now:
- India leads the world in digital transactions thanks to its large population of internet users; over 93% of villages now have broadband connectivity.
- High-speed internet will link every hamlet under the Bharat Net initiative;
- India’s digital public infrastructure, the India Stack (the project of creating a unified software platform to bring India’s population into the digital age), is boosting productivity, efficiency, and creating employment, in addition to enabling better targeting of fiscal transfers. Digital platforms such as the Open Network for Digital Commerce (ONDC) are empowering small businesses by providing a larger marketplace.
The accomplishments of India in the Power Sector
According to the bulletin, India’s power industry has fully electrified and been unified into a single national grid, leading to the following outcomes:
20 hours more power will be available each day in rural areas and 23.5 hours more power will be available each day in urban areas.
As a result, the totality of technical and business losses has been decreased.
The RBI bulletin also highlights a significant increase in the creation of renewable energy capacity, with India emerging as the third-largest producer of renewable energy globally.
According to the report, high-frequency indicators suggest that domestic demand conditions will continue to strengthen in April 2024, indicating that:
In April 2024, toll collections climbed by 8.6% (year over year); automobile sales surged by 25.4% (y-o-y) with robust growth in the two- and three-wheeler divisions; and passenger vehicle sales had their highest-ever monthly sales.
Conclusion
In the June, September, and December quarters of 2023–24, the Indian economy expanded by 8.2%, 8.1%, and 8.4%, respectively. According to data issued by the Statistics Ministry of the Government of India on Monday, May 20, 2024, retail inflation dropped to an 11-month low in April of 4.83% year-over-year from 4.85% in March. The Economic Activity Index (EAI) indicates that activity increased in April. Preliminary projections for Q1:2024–2025 indicate that GDP growth will probably stay around 7.5%.
The OECD, World Bank, and IMF’s views also alluded to India’s strong growth in 2004 and 2005.
Due to all of these successes, there is a growing sense of optimism around the world that India is about to experience a boom in its economy, fueled by rising non-food expenditure in rural areas and rising aggregate demand. The nation can now aspire to maintain the strong growth it has already experienced after the general elections in 2024 with a visionary leader like Narendra Modi in charge as prime minister.
