Demand momentum in India rising, rural spending picking pace, says RBI 2024

Demand momentum in India rising, rural spending picking pace, says RBI


Aggregate demand momentum in India is rising, with the overall non-food spending being pushed up by green shoots in rural spending recovery, the Reserve Bank of India said in its monthly bulletin on Tuesday.


“Recent indicators are pointing to a quickening of the momentum of aggregate demand. In the personal consumption space, Nielsen IQ data indicate that a welcome pivot is underway that will boost this category of spending,” the RBI said in its ‘State of the Economy’ article.

Rural demand for fast moving consumer goods (FMCG) has outpaced urban markets for the first time in at least two years, the bulletin said.

“In the quarter just gone by, FMCG volume growth of 6.5% was driven by rural growth of 7.6% relative to urban growth of 5.7% on the back of robust demand for home and personal care products.”

Separately, the RBI said a modest easing of headline inflation in April confirmed the expectation that an uneven and lagged pace of alignment with the target of 4% is underway.

Annual retail inflation in April was 4.83%, down from 4.85% in March.

Prices of vegetables, cereals, pulses, meat and fish in the food category may keep the headline inflation elevated and closer to 5% in the near term, in spite of deflation in fuel prices and further softening of core inflation to a new historic low, the RBI said.

“While statistical base effects may help pull down the headline inflation in July and August, it is expected that September may see a reversal,” it said.

“It is only in the second half of the year that a durable alignment with the target may re-commence and sustain till numbers closer to the target are sighted during the course of 2025-26.”