Indian Inc healthy, investment activity buoyant: RBI Bulletin article

The government has mandated RBI to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

“We need to evaluate the effects on underlying economic activity as past monetary policy actions work their way through the well-known lags associated with the implementation of monetary policy,” the central bank said in the ‘State of Economy’ article, authored by a team led by deputy governor Michael Patra.

Despite various challenges, the corporate sector remains healthy, the article noted, and this may fuel the revival in the corporate capital expenditure cycle in fiscal 2023-24.

Aggregate demand conditions are resilient, supported by a rebound in contact-intensive services. Expectations of a bumper rabi harvest, the fiscal thrust on infrastructure and the revival in corporate investment in select sectors bode well for the economy, the article said.

Investment activity in India is buoyant due to strong composite purchasing managers indices (PMIs). India has the highest PMI among comparable countries. This is due to the fiscal focus on infrastructure spending, and revival in corporate investment in certain key sectors, the article said.

“In time, enduring price and financial stability will strengthen the foundations of the economy and provide a fillip to growth,” the article said.

The retail inflation in March fell to a 15-month low of 5.66 per cent and came back to RBI’s comfort level of 6 per cent.

Enduring price and financial stability will strengthen the foundations of the economy and provide a fillip to growth, the article added.

ALCHEMPro News Desk (DS)