November 7, 2024
The report attributes Q2's slowdown to temporary factors, with recovery signs already visible in October’s growth data
Rising rural demand, indicating higher income levels, will boost economic recovery in upcoming quarters
Rural consumer sentiment remained consistently above 100 in the first half of FY25, aligning more closely with urban sentiment
SBI urges caution against short-term fiscal measures like loan waivers or blanket crop price guarantees, warning of potential long-term economic issues
According to a report by the State Bank of India (SBI), India’s GDP growth for the second quarter of FY25 will likely hover around 6.5%. Although this reflects a marginal dip, SBI anticipates a rebound driven by strengthened rural demand, which signals improved income levels. The bank forecasts GDP growth in the third and fourth quarters could increase the annual growth rate to 7%.
The report sees October’s performance as an indicator of the economy’s recovery trajectory, which it links to robust rural consumer sentiment and increased purchasing power. Rural demand has been resilient, showing a steady consumer sentiment above 100 in the first half of FY25. This positive sentiment, almost matching urban levels, suggests that government efforts to support lower-income groups are making an impact.
SBI’s analysis highlights rural demand as a crucial factor in sustaining recovery, predicting it will bolster consumer spending, rural markets, job creation, and overall income generation. However, the report warns against policy choices that might pose short-term fiscal strains. Proposals like universal loan waivers and indiscriminate crop price guarantees may create long-term challenges and disrupt economic stability.
This rising trend in rural demand is expected to support broader economic growth and ensure that India’s GDP remains on track for a solid close to FY25.
Source: The Print