India Likely to Grow by 7.5% in Q1, Says RBI Bulletin

Rising Aggregate Demand and Rural Non-Food Spending Drive Growth

India is poised for significant economic growth in the first quarter of the current financial year, with projections indicating a 7.5% increase in GDP. This optimistic outlook is largely attributed to rising aggregate demand and increased non-food spending in the rural economy, according to an article in the Reserve Bank of India’s (RBI) May Bulletin released on Tuesday.

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Resilience Amid Geopolitical Headwinds

Despite facing substantial geopolitical challenges affecting global supply chains, the Indian economy has shown remarkable resilience. The RBI’s economic activity index (EAI) highlights a rebound in economic activity in April, with early estimates suggesting that GDP growth for Q1 2024-25 will likely be around 7.5%. 

This index, constructed using a Dynamic Factor Model, amalgamates trends from twenty-seven high-frequency indicators of economic activity. Notably, the EAI was benchmarked at 100 in February 2020 and dropped to zero in April 2020, the peak of mobility restrictions.

Sustained Momentum in Domestic Demand

High-frequency indicators reflect sustained momentum in domestic demand as of April 2024. Toll collections rose by 8.6% year-on-year, while automobile sales surged by 25.4% year-on-year, driven by robust sales in the two-wheeler and three-wheeler segments and record-high passenger vehicle sales. This data underscores the strength of domestic consumption and the overall positive sentiment in the market.

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Rural Economy Shows Signs of Recovery

The article highlights a resurgence in rural spending, which is a significant driver of non-food expenditure. For the first time in two years, rural demand for fast-moving consumer goods (FMCG) has surpassed urban demand. 

FMCG volume growth reached 6.5%, with rural areas experiencing a 7.6% increase compared to urban growth of 5.7%. This rise is particularly evident in the demand for home and personal care products.

Optimism for Economic Take-Off

There is growing optimism that India is on the verge of a sustained economic upswing. According to the article prepared by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra, the momentum of aggregate demand is accelerating. 

The article also noted a modest easing of headline inflation in April 2024, which supports the expectation of a gradual alignment with inflation targets.

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Inflation and Price Projections

While there has been a modest easing in headline inflation, prices for food items such as vegetables, cereals, pulses, meat, and fish are expected to keep inflation close to 5% in the near term. This projection aligns with the April Monetary Policy Committee (MPC) resolution. 

Despite deflation in fuel prices and a historic low in core inflation, food prices continue to exert upward pressure on the overall inflation rate.


The insights provided in the RBI’s May Bulletin paint a promising picture of India’s economic trajectory. With strong domestic demand, robust rural spending, and positive corporate earnings, the Indian economy is well-positioned for significant growth in the coming quarters. However, the central bank clarifies that the views expressed in the Bulletin article are those of the authors and do not necessarily reflect the official stance of the Reserve Bank of India.

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