RBI says demand conditions in Indian economy are gathering momentum

New Delhi: The demand conditions in the economy are gathering momentum after some slack in the first quarter of 2024-25, the Reserve Bank of India said in its monthly bulletin of August 2024.

As per the apex bank, signs of revival in rural consumption are visible as the growing income has started driving volume growth in fast-moving consumer goods (FMCG) which reflects strengthening fundamentals.

It further added that rural saving is also on the rise, as evidenced by the rising number and outstanding amounts of savings bank accounts.

The RBI said that the receding of inflation pressures has pushed rural spending, driving a catchup with urban consumption volumes.

The Consumer Price Index (CPI) inflation dropped to 3.54 per cent in July 2024, its lowest in nearly five years.

"Reflecting these forces of turnaround, FMCG companies are starting to see green shoots of revival, portending a seismic shift in their markets as price stability sets in and expectations of a better monsoon as well as higher budgetary allocations for the rural economy push up volume growth," the top bank stated in its monthly bulletin.

The RBI further mentioned that the signs of revival will stimulate the participation of the private sector in total investment.

Overall business sentiment has also shown an improvement, as reflected in the rising business confidence index of the National Council of Applied Economic Research (NCAER), with an increase in the share of polled firms expecting overall economic conditions to improve in the next six months.

As per the high-frequency indicators, the demand conditions remained firm in July 2024, with e-way bills recording a growth of 19.2 per cent YoY.

The toll collections increased by 9.4 per cent YoY in July 2024. The automobile sales recorded a growth of 9.5 per cent YoY in July 2024, led by two-wheeler segment. Domestic tractor sales registered a modest rise in July, while the vehicle registrations recorded robust double-digit growth, driven by both transport and non-transport segments.