Demand is strong; inflation easing

Introduction:

• The article discusses the state of the Indian economy, which RBI officials say remains resilient despite uncertain global conditions.
• The officials cite several factors supporting the economy, including a rebound in contact-intensive services, a projected bumper rabi harvest, fiscal support for infrastructure, and corporate investment in select sectors.

Resilience of Aggregate Demand:

• RBI officials state that demand conditions in India remain resilient, with e-way bill volumes and toll collections remaining high in March 2023.
• Retail vehicle sales have also increased, reaching a four-month high, while fuel consumption has reached a new peak.
• However, electricity generation has moderated in March.

Index of Supply-Chain Pressures and Economic Activity Index:

• The index of supply-chain pressures for India has remained below its historical average since July, according to RBI officials.
• The economic activity index, which tracks 27 high-frequency indicators, suggests that overall economic activity in Q4 2022-23 may have gathered momentum in February.
• RBI officials project real GDP growth for Q4 2022-23 at 5.4%.

Inflation:

• RBI officials note that headline CPI inflation has gradually declined from a peak of 7.8% in April 2022 to 5.7% in March 2023.
• They attribute the decline to monetary policy actions and supply-side measures.
• CPI inflation is projected to ease further to 5.2% in Q4 2023-24.

Tax Revenue and Merchandise Exports:

• Tax revenue recorded a growth of 12%, with direct and indirect taxes growing by 15.9% and 8.1% year-on-year respectively.
• Merchandise exports grew by 3.7% month-on-month, reaching $38.4 billion.