New Delhi: The Reserve Bank of India (RBI) stated on Friday that household consumption is expected to expand faster in the second quarter of the current fiscal year (FY25) as headline inflation falls, with rural demand already reviving.
In its monthly bulletin, the central bank stated that India’s private consumption and gross fixed investment were robust. At the same time, net exports were sequentially buoyant, supporting GDP growth in the first quarter of FY25.
“The RBI said a buoyant manufacturing sector and resilient services compensated for the underperformance of agriculture.
Consumer price index (CPI) inflation fell below the RBI’s target for the second consecutive month in August; the report added, “although, in light of the recent experience, food price volatility remains a contingent risk.”
The August year-on-year inflation rate (3.65 per cent), based on the All India Consumer Price Index (CPI), was the second lowest in the last five years, below the RBI’s 4 percent inflation target.
India’s foreign exchange reserves rose to an all-time high of $689.2 billion (as of September 6), equivalent to more than 12 months of imports for 2023-24 and more than 103 per cent of total external debt outstanding in March 2024.
“India accumulated $66.8 billion in 2024 so far (as on September 6), the second highest among major foreign exchange reserves holding countries,” said the RBI.
The Indian rupee exhibited the least volatility among major currencies during August 2024, depreciating by 0.4 percent (on-month) compared to the US dollar. In August, the rupee depreciated by 1.9 percent (on-month) in terms of the 40-currency real effective exchange rate (REER) on account of the rupee’s depreciation in nominal effective terms and negative relative price differentials.
According to the central bank, a flexible and robustly equipped regulatory architecture in the financial sector would be essential to stay ahead of the curve and minimise risks.
“Macroeconomic policymakers and other stakeholders must also be quick to adopt a forward-looking approach to navigate the difficult bends and turns on the road ahead. Employing sustainable business models and judiciously harnessing the full potential of technological advances will be the cornerstones of this approach,” the RBI bulletin noted.
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–IANS
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