RBI's State of the Economy report: Inflation control key for inclusive growth
Writer Admin
The Indian economy is poised to sustain its momentum in 2024 while the slow revival of the rural economy and moderated the growth in private consumption highlighted the need for bringing down inflation to its target of 4% to make the growth an inclusive one, the Reserve Bank of India said in its state of the economy report.

Besides the importance of reigning on inflation, the report also charted out a bucket list for sustaining the momentum achieved in 2023 and securing a minimum 7% GDP growth in FY25.

"Balance sheets of financial institutions need to be strengthened and asset quality improved even further. The ongoing consolidation of fiscal and external balances needs to continue. The gains of the transformative technological change that is underway must be harnessed for inclusive and participative growth in a sound risk-free environment," the report prepared by the central bank's economic researchers led deputy governor Michael Debabrata Patra.

"This only serves to underscore our consistently held view that inflation has to be restrained to its target for growth to be inclusive and sustained," the report said.

The researchers said that inflation needs to align with the target by the second quarter of the year and get anchored there to achieve 7% GDP growth in FY25. RBI in its December 2023 policy projected inflation measured by Consumer Price Index to be at 4% in the second quarter FY25.

The Indian economy recorded stronger than expected growth so far in 2023-24, underpinned by a shift from consumption to investment. The government’s thrust on capex is starting to crowd-in private investment.

With 2023 ending on a high note despite formidable odds, prospects for 2024 look good. First, projections are being consistently proved pessimistic by incoming data, the report said, while exuding confidence on the emerging market economies led by Asia to outperform the rest of the world.

The report also said that global trade growth, which had flatlined in 2023, is expected to recover in 2024, although it will likely remain below its pre-pandemic trend. International tourism has been showing signs of a robust recovery, particularly in Asia, and is expected to reach pre-pandemic levels by 2024. According to the World Bank, the expected upturn in trade volume will reflect a recovery in the demand for goods.

 

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