Inflation Control Is Crucial For Inclusive Growth, Highlights RBI's State Of Economy Report
The Indian economy is expected to retain its growth momentum in 2024 while the moderated growth and slow revival of the rural economy in private consumption highlighted the need for bringing down inflation to its target of 4 per cent to make the growth an inclusive one, the Reserve Bank of India (RBI) said in its state of the economy report.
Besides the importance of controlling inflation, the report also charted out a to-do list for sustaining the momentum achieved in 2023 and securing a minimum 7 per cent Gross Domestic Product (GDP) growth in the financial year 2024-25.
According to a report prepared by the Central Bank's economic researchers led by Deputy Governor Michael Debabrata Patra, financial institutions need to strengthen their balance sheets and improve asset quality further. Additionally, the ongoing consolidation of fiscal and external balances must continue. The report emphasises the importance of harnessing the gains of the transformative technological change for inclusive and participative growth in a sound risk-free environment.
The report also highlights the significance of restraining inflation to its target for inclusive and sustained growth.
The researchers have stated that inflation needs to align with the target by the second quarter of the year and remain stable to achieve a 7 per cent GDP growth in the financial year 2025. According to the Reserve Bank of India's policy projection in December 2023, inflation measured by the Consumer Price Index is expected to be 4 per cent in the second quarter of the financial year 2025.
The Indian economy has shown stronger than anticipated growth in FY24, mainly due to a shift from consumption to investment. The government's emphasis on capital expenditure is beginning to attract private investment.
Despite the challenging circumstances, 2023 is ending on a positive note. The prospects for 2024 are looking good, as projections have consistently been too pessimistic when compared to the actual incoming data. The report exudes confidence in emerging market economies, particularly those led by Asia, to outperform the rest of the world.
Although global trade growth was stagnant in 2023, it is expected to recover in 2024. However, it is likely that it will remain below its pre-pandemic trend. International tourism has shown promising signs of recovery, especially in Asia, and is expected to reach pre-pandemic levels by 2024. According to the World Bank, the expected increase in trade volume reflects a recovery in the demand for goods.
