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The central bank further stated that sustained government infrastructure spending is likely to boost economic activity and investments. However, global uncertainties and inflationary risks could pose challenges to the evolving economic outlook.
The RBI also pointed to encouraging developments on the climate front. Positive policy measures, including a focus on renewable energy, electric vehicles, green hydrogen, and the establishment of a carbon market, are shaping India’s growth towards more sustainable underpinnings.
Despite these positive signals, recent economic data painted a more sobering picture. India’s GDP grew at 5.4% in the September quarter, its slowest pace in nearly two years and well below the RBI’s 7% forecast.
Inflation in November remained stubbornly high, exceeding the medium-term target of 4%, adding to concerns about demand and industrial growth.
Also read: ICICI Bank’s B Prasanna sees limited RBI rate cuts, shares rupee outlook
Yet, signs of recovery are emerging. High-frequency indicators for Q3 FY25 point to a revival, spurred by robust festive activity and a renewed rural demand upswing.
Brisk rabi sowing is further enhancing rural consumption prospects, the RBI noted in its ‘State of the Economy’ article, authored by Deputy Governor Michael Debabrata Patra and his team.
As the Indian economy works through inflationary pressures, aligning price stability with growth remains the RBI’s focus. Measures like the recent cash reserve ratio cut aim to ease monetary conditions, providing some relief to a slowing economy.
