New Delhi: The economic demand conditions are showing signs of acceleration following a period of stagnation during the first quarter of 2024-25, as outlined in the Reserve Bank of India's monthly report for August 2024.
The central bank has observed indications of a resurgence in rural consumption, attributed to the increasing income levels that are beginning to drive the volume growth of fast-moving consumer goods (FMCG), indicating a strengthening economic foundation.
Additionally, the RBI noted an upward trend in rural savings, as evidenced by the increasing number of savings bank accounts and their outstanding balances.
It was also mentioned that the easing of inflation pressures has stimulated rural spending, contributing to a catch-up with urban consumption levels.
The Consumer Price Index (CPI) inflation fell to 3.54 percent in July 2024, marking its lowest point in nearly five years.
"In light of these positive developments, FMCG companies are beginning to witness early signs of recovery, suggesting a significant shift in market dynamics as price stability is established and expectations for improved monsoon conditions and increased budgetary allocations for the rural economy are met, leading to enhanced volume growth," the central bank stated in its monthly report.
Furthermore, the RBI highlighted that these positive trends are expected to encourage greater private sector involvement in total investment.
The overall sentiment of businesses has also seen an improvement, as reflected in the National Council of Applied Economic Research (NCAER) Business Confidence Index, which saw an increase in the proportion of firms anticipating an improvement in overall economic conditions over the next six months.
According to the high-frequency indicators, the demand conditions remained robust in July 2024, with a 19.2 percent year-over-year growth in e-way bill transactions.
Toll collections also saw a 9.4 percent year-over-year increase in July 2024. The automobile sector experienced a 9.5 percent year-over-year growth, with the two-wheeler segment leading the way. Domestic tractor sales showed a modest increase, while vehicle registrations saw a robust double-digit growth, driven by both transport and non-transport sectors.
