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Amidst weakening global prospects, the Indian economy is gaining strength led by domestic drivers – private consumption and fixed investment with strong public sector capex, said an article published in Reserve Bank of India’s latest monthly bulletin. Supply responses are improving and headline inflation has softened in August from the previous month’s peak, it added.
“In the second quarter, available indicators point to a gain in quarter-on-quarter (q-o-q) momentum on the back of domestic demand. Clothing and lifestyle retailers and shopping malls are experiencing a sharp recovery in sales across price points in the past few weeks. This has raised hopes of a pick-up in demand through the rest of the festival season that began with Raksha Bandhan and Onam, and cheers for discretionary retail spending,” the article said.
On the investment side, capex by large central public sector enterprises (CPSEs) is strong at above 42 per cent of the annual target of ₹100 crore.
On the other hand, the private corporate sector is reported to be continuing to go slow on capex 11, although sectoral improvements are also being reported, based on projects sanctioned by banks/financial institutions.
Supply responses are also improving. In spite of August turning out to be the driest and warmest since 1901, kharif sowing has kept pace with last year’s activity. According to the India Meteorological Department (IMD), precipitation in September is expected to be normal, ranging between 91 and 109 per cent of the long-period average (LPA), which should restore reservoir levels and soil moisture content.
“An important development for the conduct of monetary policy is stabilising of core inflation, which also reflects a broad-based easing of price pressures across its constituents, both goods and services. Both rural and urban CPI inflation have eased, each tracking the magnitude of easing of the headline inflation,” the article said.
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