MUMBAI: With the revival of the much-delayed rural consumption on the back of growing income, aggregate demand conditions are gathering momentum, which in turn will lead to the revival of private capex, says the RBI bulletin for July.
“This stimulus to demand is expected to reinvigorate the hitherto subdued participation of the private sector in total investment,” the bulletin released on Monday said in the state of the economy section, which is co-authored by the deputy governor Michael Patra.
High frequency indicators suggested that demand conditions remained firm in July with e-way bills recording a growth of 19.2% and toll collections rising by 9.4% in July. The chapter also says that headline inflation moderated from its spike in June to 3.5% in July, but quickly notes that this is primarily due to the downward statistical pull of base effects.
Yet the bulletin notes the significant decline in prices of vegetables and cereals, based on the high frequency food price data, which show that prices of cereals, pulses, edible oil moderated in August (till August 12).
But the article is quick to note that despite the moderation in headline inflation and overall food inflation, year-on-year inflation in cereal prices remains high at 8.1% in July, while overall retail inflation plunged to 3.5 in July, first since 2019 from 5.1% in June. The 154 bps fall was on account of a favourable base effect of 2.9% which more than offset a positive momentum of 1.4%, bulletin said.
Demand conditions firm
High frequency indicators suggested that demand conditions remained firm in July with e-way bills recording a growth of 19.2% and toll collections rising by 9.4% in July. The chapter says headline inflation fell from its spike in June to 3.5% in July, but quickly notes that this is mainly due to downward statistical pull of base effects