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

Speaking at the annual banking conference FIBAC 2024 in Mumbai, Das stressed that the latest data from FMCG companies show that rural demand has improved.

“Private consumption, which is the mainstay of overall demand and accounts for about 56 per cent, grew at 7.4 per cent, actually recovering from the very weak growth of 4 per cent in the second half of last year. This confirms the improvement in rural demand, with FMCG data showing that rural demand has picked up,” Das said.

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

This momentum gives us confidence that India's growth story will continue, the Governor said.

He also pointed out that private consumption accounts for 56 per cent, but investment is another important factor in growth. It accounts for 35 per cent of GDP and has grown at a rate of 7.5 per cent, in line with the recent pace.

The Governor highlighted that more than 90 per cent of the Gross Domestic Product (GDP) growth has been in line with expectations, with private consumption and investment seeing healthy growth and the slowdown in Gross Domestic Product (GDP) is due to the reduction in government expenditure on account of elections and Model Code of Conduct.

“More than 90 per cent of the GDP has grown in a strong phase and in fact it is more than 7 per cent, so when we talk of a slowdown in the GDP number to 6.7 per cent in the first quarter, we have to take note of it; we should not ignore it,” Das said.

The Governor also informed that as per the latest RBI data, banks' credit to agriculture and allied activities has remained strong and has increased by 18.1 per cent over last year. Loans to industries have increased by 10.2 per cent in July this year over last year. Loans to MSMEs within industry have also increased by 14.4 per cent over last year.

He also called upon the private sector to increase investment in their respective businesses.

On food inflation, Das said that with a good monsoon and good kharif sowing, “it looks like food inflation may be more benign this year. However, we have to keep an eye on how the forces influencing inflation work out.”

The governor said the balance between inflation and growth is now in a good position. The best contribution of monetary policy to sustainable growth is to maintain price stability.

All key indicators of the financial sector have demonstrated the robust health of the sector. India is poised to shift its orbit, and the nation's journey towards becoming an advanced economy is drawing strength from a unique mix of factors, including a young and dynamic population, a resilient and diverse economy, and strong democracy and a rich tradition of entrepreneurship and innovation.