India's Economic Growth to Accelerate Post-Festive Season, RBI Reports

The Reserve Bank of India (RBI) anticipates an improvement in the country's economic growth during the second half of the current fiscal year, primarily driven by festive activity and a surge in rural demand, according to its latest state of the economy report.

The report highlights that high-frequency indicators suggest a recovery in domestic economic activity, aided by strong festive demand and a pickup in rural activities. Agricultural growth is supported by healthy kharif crop production, higher reservoir levels, and better rabi sowing, while industrial activity is expected to normalize and recover from previous lows.

For Indian policymakers, the report emphasizes the importance of acting now to support growth, with prospects for agriculture and rural consumption looking up. The report, co-authored by RBI deputy governor Michael Patra, also notes the challenges posed by global economic tensions and the slowdown in government capital expenditure.

India's GDP growth is projected to recover to 6.8% and 6.5% in Q3 and Q4 of 2024-25, respectively, with headline CPI inflation expected to average 3.8% in 2025-26. The report underscores positive factors such as strong rural demand, recovering urban demand, and an increasing preference for quick commerce platforms, suggesting that policies supporting consumption could further boost growth.