State of the Economy Report: RBI Bringing Insight for India’s Economic Outlook

Amid the ongoing global economic scenario, the Reserve Bank of India (RBI) has released its latest ‘State of Economy’ report to bring major highlights of the Indian economy through holistic coverage of economic growth, employment, the bank’s strategy for monetary management, and inflation.

India has shown signs of real GDP growth in Q3: 2023-24 which is a six-quarter high as per the RBI data where the major world economies are looming down on the further economic slowdown and poor performance of high-frequency economic indicators. The RBI uses the report to get assistance in deciding interest rates and designing economic policies. The importance of this report is high because it is referred by multiple stakeholders to recognize the prevailing economic condition leading to informed decisions.

The strong momentum, lower subsidies along robust indirect tax regime have suggested growth for the Indian economy. The need for a tight monetary policy has been once again identified to minimize the risk and keep the inflation target well towards 4%. The soaring geopolitical risk index and global supply chain pressure index during February 2024 were a concern. The risk has been increasing due to rising cyber attack incidences, ongoing geopolitical rift in the Middle East, US-China tension over Taiwan, and many other contemporary issues globally challenging economic growth.

But India still holds the place for the fastest-growing economy by showing a robust growth pattern amid disruption in the global supply chain. The report suggested 7.4% growth during 2024-25  based on the Dynamic Stochastic General Equilibrium (DSGE) model while CPI inflation is expected to be at an average of  4.4% in 2024-25.

The report stated that the data of the Household Consumption Expenditure Survey (HCES) reveals that the real per capita income has seen an increasing trend (1.5 times) from 2011-12 with a CAGR of 4%. The aggregate demand has shown investment-driven growth in the third quarter of 2023-24 and promised the revival of a private capex cycle supporting economic growth. Overall the report stated high structural demand with better performance of corporates as well as bank’s balance sheets to catalyze growth in India’s infrastructure, economy, and trade through new investments.