Weeks ahead of the Union Budget 2025-26, the Reserve Bank Bulletin has emphasized the need for a consumption boost to stimulate mass consumer demand, rekindle animal spirits, and spur investment growth. The call for action comes amid moderating economic growth and ongoing challenges in private and government capital expenditure.
Finance Minister Nirmala Sitharaman will present the Union Budget on February 1 in the Lok Sabha. According to the National Statistics Office (NSO), India remains the fastest-growing major economy despite GDP growth decelerating to 6.4% in 2024-25, down from three consecutive years of over 7% growth.
The slowdown, as noted in an article by a team led by former RBI Deputy Governor Michael Debabrata Patra, is attributed to adverse factors such as localized excess rainfall affecting non-farm activities and limited signs of a pickup in private capital expenditure. Reduced government capital spending has also impacted gross fixed investment and manufacturing output.
However, the rural economy has shown resilience, supported by a record kharif harvest and increased rabi sowing, the article noted. Additionally, headline inflation eased for the second consecutive month in December, aided by lower prices of fruits and vegetables.
The Bulletin highlighted positive signs for the second half of 2024-25, with high-frequency economic indicators pointing to an uptick in real GDP growth. Corporate earnings are expected to show marked improvement, with estimates suggesting robust revenue and profit growth for Nifty 50 companies in the third quarter. Banking, finance, and insurance sectors are projected to lead this recovery, with unlisted firms potentially outperforming listed ones in revenue growth.
The central bank, however, said the views expressed in the Bulletin are of the authors and do not represent the views of the Reserve Bank of India.
