Strong demand, balance-sheets to galvanise economy: RBI

Various indicators such as e-way bills generation, indirect tax mop-up, rising retail and auto sales point to a resurgent economy [View in browser]( [See all newsletters]( 20 March 2024 Strong demand, balance-sheets to galvanise economy: RBI [Market research indicates that the domestic fast-moving consumer goods (FMCG) sector may experience moderate growth over the next six months] Economy Bulletin High visibility of structural demand and healthier corporate and bank balance sheets will likely be the galvanising forces for economic growth going forward, according to the RBI monthly bulletin, adding that India’s real GDP growth was at a 6-quarter high in the third quarter of FY24, powered by strong momentum, robust indirect taxes, and lower subsidies. However, private final consumption expenditure remained low, despite the third quarter coinciding with the festival season, according to an article titled “State of the Economy” authored by RBI officials, including MD Patra. - [Robust domestic fundamentals and global macro landscape supportive of a stronger rupee: BoB report]( Moreover, government final consumption contracted during the quarter. Moderate growth for FMCG “Market research indicates that the domestic fast-moving consumer goods (FMCG) sector may experience moderate growth over the next six months,” the article said. On the other hand, the demand outlook for premium consumer businesses is robust, and the growth pattern is expected to persist into the medium term. This suggests that there are significant per capita income shifts underway, the officials opined. “Small town opportunities are leading to growth of business across lifestyle segments, with companies that entered these markets enjoying the fruits of being first movers,” they said. High-frequency indicators point towards a continued verve in domestic demand conditions in February 2024, going by e-way bills, toll collections, automobile and retail sales growth, etc., opined the officials. Eco-activity gains momentum Economic activity gained momentum in February 2024 after witnessing a slight moderation in January, and GDP growth for Q4 (January–March) 2023–24 is nowcast at 7.2 per cent, per the article. Looking ahead to the next year, the authors said projections from the in-house Dynamic Stochastic General Equilibrium (DSGE) model suggest that GDP growth is likely to remain robust at 7.4 per cent during 2024-25. Revival of pvt capex cycle The officials observed that aggregate demand in the third quarter of 2023-24 was investment-driven, with some indications of a revival of the private capex cycle. Capacity utilisation in several sectors has reached a point where there have to be new investments. The officials noted that new household consumption expenditure survey (HCES) information shows that per capita spending on durables and discretionary products has been rising in both rural and urban markets, with real per capita income up 1.5 times since 2011-12 at a compound annual growth rate of 4 per cent. You Might Also Like [Net direct tax mop-up jumps 20% to ₹18.9-lakh cr in FY24 on rising income, compliance]( [Economy]( [Net direct tax mop-up jumps 20% to ₹18.9-lakh cr in FY24 on rising income, compliance]( [World’s largest sovereign fund ups India bet in CY23]( [Markets]( [World’s largest sovereign fund ups India bet in CY23]( [Why only NCP may blow its trumpet these Maharashtra polls]( [Elections 2024]( [Why only NCP may blow its trumpet these Maharashtra polls]( [‘Arunachal Pradesh was, is and will always be an integral and inalienable part of India’]( [National]( [‘Arunachal Pradesh was, is and will always be an integral and inalienable part of India’]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](