India on the cusp of a long-awaited economic take-off: RBI Bulletin

According to Reserve Bank of Indias May Bulletin, the outlook for the global economy is turning fragile as the descent of inflation is stalling, re-igniting risks to global financial stability. Capital flows have become volatile as nervous investors turn risk averse. There is a growing optimism that India is on the cusp of a long-awaited economic take-off. Recent indicators are pointing to a quickening of the momentum of aggregate demand. Non-food spending is being pushed up by the green shoots of rural spending recovery. A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway.

Internationally there is a growing optimism that India is on the cusp of a long-awaited economic takeoff, the Bulletin noted. While revising Indias GDP growth upwards by close to 2 percentage points for 2023-24, the IMFs April 2024 World Economic Outlook (WEO) alludes to the robustness of growth expected in 2024 and 2025 as reflecting continuing strength in domestic demand and a rising working-age population. The OECDs May 2024 Economic Outlook points to strong momentum in India in recent monthly indicators and expects strong investment and improving business confidence in India to sustain real GDP growth. There is considerable appreciation about the dramatic reduction in poverty. The World Bank estimates that at the height of the pandemic in 2021, only 12.9 per cent of the population lived on US$ 2.15 a day the global benchmark for extreme poverty. More recent estimates show that extreme deprivation, once considered synonymous with India, is set to become extinct.

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