RBI highlights decline in GDP growth, says outlook on demand conditions remains subdued

Reserve Bank of India (RBI) stated in a latest monthly update for the November releases of estimates of real gross domestic product (GDP) / gross value added (GVA) for the second quarter of 2024-25 and headline consumer price inflation have confirmed apprehensions in the November issue of the State of the Economy, reprising the dilemma of a slowing growth-high inflation conundrum. As presciently pointed out, from the expenditure side, the major factor contributing to the decline in the growth rate of the economy is fixed capital formation. From the production side, the main concern is manufacturing. Undermining both is inflation. The erosion of purchasing power due to repeated inflation shocks and persisting price pressures is starkly reflected in weakening sales growth of listed non-financial non- government corporations. Their outlook on demand conditions also remains subdued as no let-up in the incidence of price shocks seems to be in sight; they will increasingly be inclined to pass on input costs to selling prices. Consequently, there is no robust capacity creation by investing in fixed assets.

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