Rural demand and private consumption have picked up; GDP is expanding well: RBI Governor

RBI Governor Shaktikanta Das stated that the rural demand of the Indian economy has picked up as the private consumption and investment expanded in the latest quarter GDP numbers.

Speaking at FIBAC 2024 an annual banking conference in Mumbai, Das emphasized that the latest data from the FMCG companies shows that rural demand has revived.

“Private consumption is the main stay of aggregate demand, with a share of around 56 per cent, that has grown at a rate of 7.4 per cent, in fact it has rebounded from a very feeble 4 per cent growth in the second half of the previous year. This confirms the revival of rural demand, FMCG data shows that the rural demand has picked up” said Das

On 6.7 per cent GDP numbers in first quarter, he said that “The data actually shows that the fundamental growth drivers of the Indian economy are actually gaining momentum; they are not slowing”.

The governor noted that this momentum showed and gives us the confidence that the India’s growth story is intact.

He also shared that the other important drivers of growth apart from the fact that 56 per cent of private consumption is investment. It accounts for 35 per cent of GDP and it has grown at 7.5 per cent in line with the recent momentum.

So the governor highlighted that more than 90 per cent of the GDP expanded on expected lines, Private consumption and Investment have shown good growth and the slowdown in GDP numbers is because of the reduced government spending due to elections and Model Code of Conduct.

“More than 90 per cent of GDP expanded at robust phase and materially above 7 per cent so when we talk about the slowdown to 6.7 per cent in the GDP numbers in the first quarter, we have to take note of this; we should not brush it out,” added Das.

The governor also shared that according to the latest data by RBI, Banks credit to agriculture and allied activities remained robust and increased by 18.1 per cent Y-o-Y. The credit to industries increased by 10.2 per cent in July this year as compared to last year. Within industry credit to MSMEs also grew at 14.4 per cent Y-o-Y.

He also called for the private sector to step up the investment in their respective businesses.

On the food inflation Das stated that with monsoon progressing well and healthy kharif sowing, “There is an outlook that food inflation could become more favourable during the course of the year. However, we have to remain watchful of how the forces impacting inflation playout”

The governor added that the balance between inflation and growth is now well poised. The best contribution monetary policy can make for the sustained growth is to maintain price stability.

All key indications of the financial sector have demonstrated robust health of the sector. India is geared for orbital shifts, and the nations journey towards becoming an advance economy is drawing strength from a unique blend of factors, which includes a young and dynamic population, a resilient and diverse economy and robust democracy and rich tradition of entrepreneurship and innovation.