RBI calls for consumption boost, sees growth pick-up in H2 FY25

The Reserve Bank of India (RBI) today said there is a "conducive quickening" of the high frequency indicators in the second half of the current financial year and called for reviving the animal spirits in the economy through consumption boost.

"The time is apposite to rekindle the animal spirits, create mass consumer demand and trigger a boom in investment. There is a conducive quickening of high frequency indicators of economic activity in the second half of 2024-25, bearing out the implicit pick up in real GDP growth for this period in the annual first advance estimates of the NSO," the RBI says in the January 2025 bulletin released today.

The RBI bulletin also points out that there are early indications that corporate India may post a much better revenue and earnings growth in the third quarter vis-à-vis that in the first half of 2024-25.

"According to estimates by various brokerages, the combined net profit of Nifty 50 companies may grow at its fastest rate in three quarters. Banking, finance and insurance companies are again expected to report better earnings. It is also believed that unlisted companies are likely to outpace their listed counterparts with faster revenue growth," says the central bank.

The RBI says private final consumption is the brightening spot in the economy, driven by e-commerce and q-commerce, among which it is important to foster competition rather than being restrictive. "One way to revive the animal spirts may be to provide a consumption boost," it adds.

On inflation, the RBI says careful monitoring on secondary impact of food inflation is needed. "Headline inflation eased for the second successive month in December, driven by winter easing of prices when the earth offers up a rich bounty of fruits and vegetables," it says.

"Despite the sequential easing, the level of food inflation continues to remain high, with select key products experiencing high double digits inflation. The stickiness in high food inflation, in an environment of firming rural wages and corporate salary outgoes, warrants careful monitoring of second order effects," says the apex bank.