MUMBAI: Optimism is growing that India is on the cusp of a long-awaited economic recovery and recent indicators point to an acceleration in aggregate demand dynamics, an RBI report said on Tuesday.
The RBI's State of the Economy report also said that non-food spending is being driven up by the early shoots of recovery in rural spending. According to the central bank, this is the first time in two years that rural demand for FMCG has exceeded urban markets. “In the quarter under review, FMCG volume growth of 6.5% was driven by rural growth of 7.6% compared to urban growth of 5.7% due to robust demand for home and personal care products,” it said Report. The RBI cited NielsenIQ data it released earlier this month to support the revival of rural demand. It added that a slight decline in headline inflation in April confirmed expectations that an uneven and lagging approach to the target was underway.
The report urges caution about the outlook for the global economy. This will become fragile as the decline in inflation stalls and new risks arise for global financial stability.
Despite the increased capital flow volatility, the report does not see any negative economic impact. “Capital flows have become volatile again in emerging markets as nervous investors have become risk-averse. “Still, confidence is holding up better in many emerging markets where growth has remained stable, such as India, Indonesia and Mexico,” the report said. It added that equity valuations were supported by robust Q4 results and strong domestic macroeconomic data releases.
Foreign portfolio investors became net sellers in Indian capital markets in April following two months of intensifying geopolitical tensions, rising commodity prices and rising US bond yields.
The RBI's State of the Economy report also said that non-food spending is being driven up by the early shoots of recovery in rural spending. According to the central bank, this is the first time in two years that rural demand for FMCG has exceeded urban markets. “In the quarter under review, FMCG volume growth of 6.5% was driven by rural growth of 7.6% compared to urban growth of 5.7% due to robust demand for home and personal care products,” it said Report. The RBI cited NielsenIQ data it released earlier this month to support the revival of rural demand. It added that a slight decline in headline inflation in April confirmed expectations that an uneven and lagging approach to the target was underway.
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The report urges caution about the outlook for the global economy. This will become fragile as the decline in inflation stalls and new risks arise for global financial stability.
Despite the increased capital flow volatility, the report does not see any negative economic impact. “Capital flows have become volatile again in emerging markets as nervous investors have become risk-averse. “Still, confidence is holding up better in many emerging markets where growth has remained stable, such as India, Indonesia and Mexico,” the report said. It added that equity valuations were supported by robust Q4 results and strong domestic macroeconomic data releases.
Foreign portfolio investors became net sellers in Indian capital markets in April following two months of intensifying geopolitical tensions, rising commodity prices and rising US bond yields.
