"Time Apposite To Rekindle Animal Spirits": RBI Bulletin On 'State Of Economy'

Weeks before the presentation of the Union Budget, the Reserve Bank Bulletin made a strong case for providing a consumption boost as the time is apposite to rekindle the animal spirits, create mass consumer demand and trigger a boom in investment.

Finance Minister Nirmala Sitharaman will present the Union Budget 2025-26 in the Lok Sabha on February 1.

The first advance estimates for 2024-25 released by the National Statistics Office (NSO) on January 7 confirmed that India continues to be the fastest-growing major economy, although gross domestic product (GDP) growth has moderated to 6.4 per cent from three consecutive years of above 7 per cent growth, said an article published in the January Bulletin.

"This slowdown reflects the effect of a host of unfavourable factors in H1:2024-25, such as the impact of localised excess rainfall on non-farm activity. Private capex is yet to show visible signs of pick-up and with growth in general government capital expenditure moderating too, gross fixed investment in GDP and manufacturing in gross value added emerged as the biggest drags on growth," it said.

The central bank, however, said the views expressed in the Bulletin are of the authors and do not represent the views of the Reserve Bank of India.

The article on 'State of the Economy' said that with agriculture and allied activities turning in a reasonable performance on the back of a record kharif harvest, and with higher rabi sowing, the fortunes of the rural economy have improved.

Headline inflation eased for the second successive month in December, driven by winter easing of prices when the earth offers up a rich bounty of fruits and vegetables.

"The time is apposite to rekindle the animal spirits, create mass consumer demand and trigger a boom in investment... One way to revive the animal spirits may be to provide a consumption boost," said the article authored by a team led by Michael Debabrata Patra, who demitted the office of RBI Deputy Governor earlier this month.

The article further said there is a conducive quickening of high-frequency indicators of economic activity in the second half of 2024-25, bearing out the implicit pick up in real GDP growth for this period in the annual first advance estimates of the NSO.

"There are early indications that corporate India may post a much better revenue and earnings growth in the third quarter vis-à-vis that in the first half of 2024-25," it said.

According to estimates by various brokerages, the combined net profit of Nifty 50 companies may grow at its fastest rate in three quarters.

Banking, finance and insurance companies are again expected to report better earnings. It is also believed that unlisted companies are likely to outpace their listed counterparts with faster revenue growth. 

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