Rural income growth to drive demand: RBI report

According to RBI’s State of the Economy Report, aggregate demand conditions are gathering momentum with revival in rural consumption on the back of growing incomes and are expected to reinvigorate the hitherto subdued participation of the private sector in total investment.

According to the report, persistent geopolitical tensions, fears of a potential recession in key economies, and financial market volatility driven by divergent monetary policies are casting a shadow on global economic prospects.

Despite these challenges, inflation has moderated, albeit grudgingly, across countries. “Headline inflation moderated from its spike in June to 3.5% in July, but this was primarily due to the downward statistical pull of base effects,” the report said.

The outlook for private capital expenditure is positive according to the report. In the first quarter of 2024-25, the total cost of projects sanctioned or assisted was Rs 1,01,433 crore — higher than the quarterly average of Rs 97,745 crore during 2023-24. Additionally, funds raised through IPOs for capex purposes also increased compared to the previous quarter.