Rate cut to boost demand, says RBI Report

On February 19, 2025, the Reserve Bank of India (RBI) released its monthly bulletin, providing insights into the state of the economy.

- Madhusudhanan S

The RBI stated, "The Indian economy is regaining its growth momentum, driven by a recovery in consumption demand and overall investment." According to the economic activity index, the RBI projected GDP growth for the fourth quarter (Q4) of 2024-25 at 6.6%.

The RBI analyzed the state of the economy based on the following factors:

Aggregate Demand
Aggregate Supply
Inflation
Financial Conditions

Additionally, it examined global economic trends and payment systems. While the full report is available in the RBI bulletin, here we highlight key takeaways from each aspect.

1. Aggregate Demand

Aggregate demand rebounded following a slowdown in the first half of the year (H1). Automobile sales grew by 2.5% YoY in January after two months of contraction, while petroleum consumption expanded by 3.1% YoY.

Toll collections showed strong growth in both volume and value, with e-way bill growth surging to 23.1% in January. Employment in the organized manufacturing sector increased at a record pace, according to the PMI survey. Job creation in the service sector also strengthened.

Under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), demand for work rose for the third consecutive month, growing 14.4% YoY in January due to the end of rabi sowing.

Merchandise exports contracted by 2.4% YoY in January, primarily due to a decline in oil exports. However, from April to January 2024-25, exports increased by 1.4%, driven by growth in engineering goods, electronics, rice, and pharmaceuticals. Meanwhile, imports grew by 10.3% in January and by 7.4% over April-January 2024-25, fueled by higher demand for gold, petroleum, and electronics.