MUMBAI: A revival in rural demand has been pushing the overall demand conditions in the economy, leading to a surge in economic activity in the June quarter of the current fiscal, the Reserve Bank said in its monthly bulletin.
The RBI also notes that global trade in goods and services is gaining momentum. However, consumer price inflation increased in June, crossing the sensitive 5% mark after four months, halting the overall disinflation.
“The second quarter of 2024 has begun with signs of quickening momentum in the economy,” said the July bulletin released on Thursday, noting that the revival of rural spending has turned out to be a bright spot in the evolution of demand conditions.
Global economic activity also appears to be strengthening across advanced economies and emerging market economies and global trade in goods and services is gathering momentum, it said in an article on 'state of the economy’. It further said monetary policy divergence is setting the tone for global economic developments.
The improvement in the outlook for agriculture and the revival in rural spending have turned out to be the bright spots in the evolution of demand conditions. The RBI notes that consumer price inflation ticked up in June after three consecutive months of moderation due to broad flare-up in vegetable prices halting the overall disinflation that had been underway.
Food inflation based on the consumer food price index rose 9.36% year-on-year in June from 8.69% in May and 8.7% in April, while retail inflation based on the consumer price index rose to 5.08% YoY in June.
Meanwhile, it also said the natural rate of interest has moved up to 1.4-1.9% in Q4FY24 compared to the earlier estimate of 0.8-1.0% for Q3F22.
“The natural rate of interest has moved higher in the post-pandemic era, driven by growth of potential output and our natural rate of interest is now at 1.4-1.9%,” said the bulletin.
The natural rate of interest is an equilibrium rate where growth is close to the potential, alongside stable inflation.
It further said monetary policy divergence is setting the tone for global economic developments.
