Mumbai: The Indian economy appears to be picking up speed in Q2 of 2024–25 (July–September), according to the RBI’s monthly bulletin, which was made public on Thursday. The two bright spots in the evolution of demand circumstances have been an improvement in the outlook for agriculture and a resurgence of rural spending.
The last monthly per capita consumption expenditure (MPCE) survey of the NSSO shows that the gap between rural and urban areas is closing as spending in rural areas surpasses that of urban segments.
According to the RBI bulletin, some of the proximate factors increasing the effective spending power of rural households are increased fiscal transfers, rising wage rates as exemplified by the MGNREGS, and rising remittance volumes to rural households due to urban migration.
According to survey consumption trends, the rural MPCE’s share of transportation, medical costs, and consumer services is higher than that of grains. The paper states that these advancements have stoked optimism that rural and urban India is finally catching up and that convergence is possible.
Fast-moving consumer goods (FMCG) companies do better during the rural recovery, and stock prices are raised by profit upgrades. This is a reflection of rising sales volumes and haltingly slowing inflation. The purchasing managers’ index (PMI) surpassed its long-run average in June due to increased new orders, indicating that manufacturing is also picking up speed.
A major component of the push for greater development is manufacturing, which must account for 20–25 percent of India’s GDP to become a major hub for global manufacturing. The research also states that this will give Indian products a competitive edge in the global market and increase employment in important industries like electronics, medicines, textiles, and autos.
The bulletin also notes both advanced economies and emerging market economies seem to be seeing an increase in global economic activity. The increasing global trade momentum in products and services is positive for India’s exports. It adds that India’s exports of nearly $780 billion in 2023–24 and a 10.2% cumulative growth rate in the first quarter have made the country more ready to reach exports of over $800 billion in 2024–25.
