MUMBAI: Even as admitting that the global economy is lurching towards protectionism with Donald Trump getting back to White House with more radical plans.
The in-house economists at the Reserve Bank believe that the domestic economy is insulated from all these headwinds and is on course for a strong growth this fiscal and that the slowdown seen in the first half of the fiscal are behind us.
The bulletin, at the same time, also warns against going soft on inflation saying this can scupper all the hard earned gains made in recent years saying uncontrolled price rise can undermine prospects of real economy if allowed to run unchecked.
In an article edited by the deputy governor Michael Debabrata Patra and his team of economists as their personal views, and published in the RBI November bulletin on Wednesday, they said “the slack in speed (of GDP growth) observed in the second quarter of FY25 is behind us as private consumption is back to being the driver of domestic demand with festival spending lighting up real activity in Q3. And that the medium-term outlook remains bullish as the innate strength of the macro fundamentals reasserts itself.”
The bulletin also notes that domestic financial markets are seeing corrections with relentless hardening of the US dollar and equities being under pressure from persistent portfolio outflows on one hand on the other October saw a massive spike in inflation with food prices on the boil again.
The article attributed the lacklustre private investment in the first half to subdued corporate earnings. “Yet moderation in staff cost growth and rise in non-operating income boosted net profit even after excluding the moribund oil & gas sector and the high performing financial services sector,” they said.
The authors go onto note that “private consumption is back to being the driver of domestic demand, although with mixed fortunes,” with festival spending has lighted up real activity in the third quarter.