RBI Governor Shaktikanta Das on Thursday noted that both rural and urban demand are showing resilience, propelled by a combination of factors including strengthening farm-level activities and increased income levels.
“On the demand side, improving employment conditions and moderating inflation, together with a rebound in agricultural activity should push up household consumption,” the central bank governor said in his statement announcing the decision of the Monetary Policy Committee (MPC) to keep the headline rates unchanged again.
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The extension of initiatives such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) and a decline in demand for rural employment schemes like MNREGA indicate positive momentum in rural consumption, he added.
Urban consumption remains strong on the back of improved income levels, the governor added.
As economic indicators point towards a buoyant consumer sentiment, India's consumption landscape appears set for a promising trajectory, Das said.
The RBI governor has forecasted Consumer Price Index (CPI) inflation to stand at 5.4 percent for the fiscal year 2024, and projected it to moderate to 4.5 percent in the coming fiscal. These predictions hinge on the assumption of a normal monsoon season.
Notably, there has been a continued decline in core inflation, demonstrating a broad-based trend.
To be sure, the governor cautioned that the trajectory of inflation going forward will be heavily influenced by the outlook on food inflation, although there remains significant uncertainty surrounding this aspect, said Governor Das.
The RBI Governor also noted increasing geopolitical tensions have raised concerns about potential supply-chain disruptions, further adding to the uncertain inflation outlook. Specifically, the prices of key vegetables are currently undergoing seasonal adjustments, contributing to the overall inflation dynamics, he added.
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