New Delhi:
As the global economic landscape navigates through varied growth trajectories, India is gearing up for a significant economic rebound, driven by a robust resurgence in domestic demand and rural consumption. The Reserve Bank of India (RBI) has highlighted a promising pickup in high-frequency indicators of economic activity, particularly in the second half of the fiscal year 2024-25.
In a year marked by divergent economic outlooks across the globe, with the US experiencing a slowdown and moderate growth in emerging economies, India stands out as a beacon of resilience. The latest RBI Bulletin, authored by a team led by former RBI Deputy Governor Michael Patra, underscores this optimism. Here’s a closer look at the key factors driving India’s economic rebound.
India’s economic growth is poised to rebound as domestic demand regains strength, especially in the latter half of 2024-25. Rural demand is gaining momentum, supported by strong agricultural prospects and resilient consumption. This rural resilience is a significant indicator of the overall health of India’s economy, as it reflects the country’s ability to maintain consumption levels despite global headwinds.
A revival in public capital expenditure on infrastructure is expected to stimulate growth in key sectors. This strategic investment is crucial for driving economic activity and ensuring that India’s growth is sustainable and broad-based. Infrastructure projects backed by public capital will play a pivotal role in nurturing this growth.
While headline inflation eased for the second successive month in December, food inflation remains a concern that warrants careful monitoring. Rising input cost pressures in the manufacturing sector, coupled with weather-related exigencies and global headwinds, pose risks to this optimistic outlook. However, the RBI’s proactive approach to managing these challenges is expected to mitigate their impact.
The global economic outlook for 2025 is marked by a slowdown in the US, weak recoveries in Europe and Japan, and moderate growth in emerging and developing countries. Despite these global uncertainties, India’s economic resilience is driven by strong manufacturing exports, particularly in high-value-added components such as electronics and pharmaceuticals. This diversification in exports underscores India’s growing role in global value chains.
The RBI projects real GDP growth at 6.6% for 2024-25, with an expected uptick in the second half of the fiscal year. This projection is supported by the RBI’s now-cast model, which forecasts a 6.2% growth in the October-December quarter. India’s economic resilience, therefore, is not just a short-term phenomenon but a sustained trend driven by robust domestic demand and strategic fiscal investments.
