RBI Governor Confirms Surge in Rural Demand, Reinforces Strong Economic Fundamentals

RBI Governor Shaktikanta Das announced that rural demand has strengthened based on recent GDP and FMCG data. Speaking at the FIBAC 2024 in Mumbai, he cited revival in private consumption and investment as key growth drivers and expressed confidence in India's economic resilience despite slight dips in GDP numbers.

Rural demand in India's economy has shown notable improvement, according to RBI Governor Shaktikanta Das. Speaking at the FIBAC 2024 annual banking conference in Mumbai, Das emphasized the expansion in private consumption and investment, leading to a boost in the latest quarterly GDP figures.

Das highlighted that private consumption, which constitutes around 56 percent of aggregate demand, grew by 7.4 percent—a significant rebound from 4 percent growth in the latter half of the previous year. This rise was corroborated by FMCG data suggesting a revival in rural demand. Discussing the 6.7 percent GDP growth in the first quarter, he noted that India's fundamental growth drivers are gaining momentum rather than slowing down.

He elaborated that investment, another critical growth driver, accounts for 35 percent of GDP and grew at 7.5 percent, reflecting recent economic trends. Das pointed out that over 90 percent of GDP expanded as expected, with declines attributed mainly to reduced government spending around elections and the Model Code of Conduct. Additionally, he shared that RBI data indicates robust growth in bank credit to agriculture and allied activities, as well as a 14.4 percent rise in MSME credit year-on-year.

Addressing food inflation, Das noted potential for favorable trends due to good monsoon progression and healthy kharif sowing, while maintaining vigilance on inflation forces. He reiterated the balance between inflation and growth, asserting that the most significant contribution of monetary policy is maintaining price stability for sustained growth.

Finally, Das highlighted the robust health of India's financial sector, projecting confidence in the country's journey towards becoming an advanced economy, driven by a youthful population, a diverse economy, and entrepreneurial innovation.

(With inputs from agencies.)