Forex Reserve, Financial Stability Gave Confidence To Global Investors: RBI Governor Shaktikanta Das

The Reserve Bank of India (RBI) Governor, Shaktikanta Das, outlined the nation's solid economic trajectory on Tuesday, emphasising the continuous growth momentum and the positive outlook for India's economy. On the international front, Das underscored India's strong forex reserves and financial stability, which continue to inspire confidence among international investors.

"Forex reserve and financial stability gave confidence to international investors", he noted. The central bank's commitment to maintaining financial stability and its future-ready plans are crucial factors in bolstering investor confidence.

He highlighted significant improvements in economic activities, rural demand, and financial stability, projecting a robust growth for the current financial year. Das said, "We see the growth momentum, we see every strong momentum of economic activities as a strong momentum of growth."

Governor Das stated that India's economy has displayed a remarkable growth trajectory, with the last quarter of 2023 showing a substantial 7.6 per cent growth. Das stated, "If you look at the last Q4 2023 January to March this year, the momentum of activity is much stronger. In fact it was the strongest momentum of the last year and the growth in the last quarter was itself 7.6 per cent."

This exceeded the initial projections of 5.9 per cent by the National Statistical Office (NSO), indicating a strong underlying economic momentum. He said, "Although the implicit number behind NSO's number was 5.9 per cent but the momentum was so strong that it came at 7.6 per cent resulting in high growth of last year. And that same strong momentum of economic activity has also continued into the first quarter of this year."

He also pointed out that this momentum has carried into the first quarter of 2024. The RBI's optimistic projection of a 7.2 per cent growth for the first quarter is expected to slightly surpass expectations, potentially reaching 7.3 per cent.

The central bank raised its overall growth projection for the financial year 2024-25 to 7.2 per cent from the earlier estimate of 7 per cent. Das shared detailed quarterly projections, anticipating consistent growth rates across the fiscal year, with 7.3 per cent in Q1, 7.2 per cent in Q2, 7.3 per cent in Q3, and 7.2 per cent in Q4.

Addressing rural demand, which has been a concern since the Covid-19 pandemic, Das noted significant improvements.

Das said, "Rural demand in the consumption side, rural demand which was lagging behind for a considerable period since the COVID and perhaps in the first half of last year also has also begun to improve and improve quite visibly."

The increase in rural consumption is evidenced by higher FMCG sales and a decline in demand for MGNREGA labour. This uptrend is supported by an optimistic outlook for the agricultural season, bolstered by predictions of an above-normal southwest monsoon.

Das said, "The rural demand/consumption has gone up. FMCG sales in the rural sector have also increased. The demand for MGNREGA labour has also gone down, the agricultural season has also looked very optimistic because of the projections of above normal southwest monsoon this year."

The RBI Governor emphasised that government and private sector investments are expected to further sustain this rural demand.

RBI Governor said, "So rural demand is picking up which was not there earlier and all our analysis, all the trends which have come to us it indicates that the rural demand will hold. And as the government capex starts unfolding as the expenditure from the government side as well as from the private investment, they start picking up, I think rural demand will be well sustained."

Das highlighted the revival of private consumption, particularly in rural areas, as a critical factor in sustaining economic momentum. The increased economic activity and positive rural consumption trends are expected to contribute significantly to the overall growth.

He also mentioned the role of farm activities and the favourable forecast by the India Meteorological Department in enhancing the Kharif output, thereby supporting rural economic health.

Das noted that "private consumption is recovering, and the revival in rural demand is getting a fillip from farm activities. India Meteorological Department's forecast is expected to improve Kharif output."

Das acknowledged that food inflation remains a concern, saying, “The CPI headline has softened further in March-April, but food inflation still remains a concern.” He stressed the RBI's vigilant stance on inflationary pressures and the central bank's readiness to act as needed to ensure economic stability.

The RBI's decision on June 7 to raise the real GDP growth projection underscores the central bank's confidence in India's economic resilience. The move to increase the growth rate projection to 7.2 per cent for the fiscal year 2024-25 reflects the robust economic activities and the positive outlook for the Indian economy.

Earlier, the RBI on June 7 while announcing the monetary policy raised the projection of real gross domestic product for the financial year 2024-25 to 7.2 per cent, from an earlier estimate of 7 per cent.

The governor said, "The GDP growth in the first quarter is likely to be at 7.3 per cent, 7.2 per cent in Q2, 7.3 per cent in Q3 and 7.2 per cent in the last quarter during the monetary policy press briefing on June 7."

Das further said, "India's forex reserve is at a record high, and this gives confidence to the International investors for investing in the Indian economy. There is financial stability in the economy and the central bank is future ready with its plans." (ANI)