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India likely to grow by 7.5% in Q1

In an optimistic turn of events, projections indicate that the India’s growth (GDP) )is likely to grow by 7.5 per cent in the first quarter of the current fiscal year, driven by rising aggregate demand and non-food spending in the rural economy.Recently in the report related to the State of the economy, published by the Reserve Bank of India(RBI) indicate that this growth rate, significantly higher than previous estimates, is due to the emergence of green shoots of rural spending recovery. After several challenging years marked by low agricultural growth and adverse weather conditions, rural areas are beginning to show signs of economic revival. Enhanced agricultural output, coupled with targeted government initiatives aimed at boosting rural incomes, has led to a discernible increase in spending power among rural consumers, stated report.
Inflation and Economic stability
The Reserve Bank of India (RBI) provided a nuanced view of the current inflationary landscape, highlighting a modest easing in headline inflation for April 2024. However, the RBI also issued a cautionary note regarding the potential for persistent inflationary pressures in certain sectors.
According to the report, while the overall inflation rate has shown signs of easing, with headline inflation registering a slight decline, the prices of essential commodities such as vegetables, cereals, pulses, meat, and fish are expected to keep inflation close to the 5% mark in the near term. These staples, integral to the average household's consumption basket, are experiencing upward price pressures that could offset gains made from other sectors.
RBI acknowledged that there has been deflation in fuel prices, which typically has a significant impact on reducing overall inflation. Additionally, core inflation, which excludes volatile food and energy prices, has reached a historic low. Despite these favorable conditions, the persistent rise in food prices remains a key concern.
Experts believe that this rural recovery is crucial for sustaining long-term economic growth. The rural sector, which accounts for a significant portion of India's population and workforce, plays a vital role in the broader economic landscape. As rural incomes rise, the multiplier effect on overall economic activity is expected to be substantial, further driving demand and investment.

(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)


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