India on cusp of long-awaited economic take-off: RBI Bulletin

India is on the cusp of long-awaited take-off on the back of rising aggregate demand, and non-food spending in rural economy, according to the Reserve Bank of India May Bulletin released on Tuesday.

The outlook for the global economy is turning fragile as the descent of inflation is stalling, re-igniting risks to global financial stability, said an article on 'State of the Economy' published in the Bulletin.Capital flows have become volatile as nervous investors turn risk averse, it added.

The article is prepared by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra.The article further said "there is a growing optimism that India is on the cusp of a long-awaited economic take-off" as recent indicators are pointing to a quickening of the momentum of aggregate demand.

It notes that for the first time in at least two years, rural demand for fast moving consumer goods (FMCG) has outpaced urban markets -- in the quarter just gone by.FMCG volume growth of 6.5 per cent was driven by rural growth of 7.6 per cent relative to urban growth of 5.7 per cent on the back of robust demand for home and personal care products.

Turning to private investment, for listed private manufacturing companies, retained earnings remained the major source of funds during the second half of 2023-24, it said.

Results that have been declared by listed corporate so far indicate that they closed the financial year 2023-24 with the highest growth in quarterly revenues registered in January-March 2024 year-on-year as well as sequentially."A modest easing of headline inflation in the reading for April 2024 confirmed our expectation that an uneven pace of alignment with the target is underway," the authors said.

The prices of vegetables, cereals, pulses, meat and fish in the food category may keep the headline elevated and closer to 5 per cent in the near term, in line with projections set out in the April Monetary Policy Committee (MPC) resolution in spite of deflation in fuel prices and further softening of core inflation to a new historic low, they said.

The central bank, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.