4 - State of The Economy (21-05-2024)

State of the Economy ARTICLE
State of the Economy* delivery time improved, but the persisting weakness
in manufacturing remains a concern.
The outlook for the global economy is turning fragile The rapid fall of inflation through 2023, which
as the descent of inflation is stalling, re-igniting risks took the headline to or below target in about a third
to global financial stability. Capital flows have become of economies worldwide by the first quarter of 2024,
volatile as nervous investors turn risk averse. There has slowed in terms of month-on-month (m-o-m)
is a growing optimism that India is on the cusp of a
changes across advanced economies (AEs) and
long-awaited economic take-off. Recent indicators are
EMEs. Services inflation has exhibited stickiness at
pointing to a quickening of the momentum of aggregate
pre-pandemic levels, although core goods inflation
demand. Non-food spending is being pushed up by the
has fallen steadily. Looking ahead, the ongoing
green shoots of rural spending recovery. A modest easing
of headline inflation in the reading for April 2024 disinflation may proceed more slowly than expected.
confirms the expectation that an uneven and lagged The last mile is confronted with the last lags. The
pace of alignment with the target is underway. worry is what looks like noise may turn out to be
the trend, leaving inflation closer to 3 per cent rather
I. Introduction than the AEs’ target of 2 per cent: “inflation is still
Globally, a frisson of apprehension stirs the air. too high, further progress in bringing it down is not
Even as succour is being drawn from the ‘resilience’ assured, and the path forward is uncertain.”1
of global growth, the descent of inflation is stalling, Recent high frequency indicators are suggesting
re-igniting risks to global financial stability and that a modest recovery in world trade volumes is
growth itself. Alongside the looming spectres of holding on from early 2024, with services export
unsustainable public debt and the fragmentation of orders strengthening alongside cross-border travel
global trade, the outlook for the global economy is
and air freight traffic. There is also a vigorous growth
turning fragile. In fact, the world is priming for more
in e-commerce. Attacks on shipping in the Red Sea
balanced growth - surveys of purchasing managers
are resulting in trade flows being re-routed, with
point to a cooling of activity in the United States
average daily container vessels between January and
(US) in the second quarter while the eurozone is
April being 51 per cent lower than in the last quarter
gaining pace and the United Kingdom (UK) exited
of 2023. The Organization for Economic Cooperation
recession. Major emerging market economies (EMEs)
and Development (OECD) estimates that re-routing
also experienced output expansion. The narrowing
has affected 9 per cent of world maritime trade and
of the growth divergence is being mostly driven
18 per cent of long-haul ocean volumes, resulting in
by services even as export orders and suppliers’
journey time for affected cargo between Europe and
* This article has been prepared by Michael Debabrata Patra, G. V. Asia rising by about 30 per cent. With drought in the
Nadhanael, Shashi Kant, Rajni Dahiya, Shivam, Kunal Priyadarshi,
Soumasree Tewari, Harshita Keshan, Ramesh Kumar Gupta, Pankaj Kumar,
Panama Canal having also impacted journey time,
Harendra Behera, Satyarth Singh, Love Kumar Shandilya, Prashant Kumar, shipping costs have risen 60 per cent higher than
Khushi Sinha, Harshita Yadav, Pratibha Kedia, Shelja Bhatia, Anjaly Maria
Jose, Sukti Khandekar, Suvendu Sarkar, Shreya Gupta, Supriyo Mondal, their 2023 levels. The overall shipping and logistics
Yuvraj Kashyap, Abhinandan Borad, Himani Shekhar, Asish Thomas
environment remains challenging in which shipping
George, Samir Ranjan Behera, Vineet Kumar Srivastava, and Rekha Misra.
Views expressed in this article are those of the authors and do not
1 Jerome Powell, Chairman, US Federal Reserve, press May 1, 2024.
represent the views of the Reserve Bank of India.
RBI Bulletin May 2024 13

ARTICLE State of the Economy
majors are focussing on efficiency and streamlined averse. Nonetheless, confidence is holding up better
structures so as to reduce costs. Indicators of in many emerging economies where growth has
supply chain pressures have so far worsened only remained resilient as in India, Indonesia and Mexico.
marginally; however, higher shipping costs will slow High frequency indicators of consumer spending
the pace of disinflation globally. have moderated a little recently and the growth of
A potential debt crisis casts an ominous shadow industrial production ex-China has remained soft.
over the global economic landscape. The International Asian emerging economies, particularly India and
Monetary Fund’s (IMF’s) Global Debt Monitor Indonesia, are expected to continue to experience
reported total global debt (private plus public) to broadly stable and rapid growth according to the
have risen to US$ 235 trillion, equivalent to 238 OECD, while inflation should moderate further
per cent of global GDP. There is grave concern that provided food prices remain insulated from extreme
fiscal prudence may take a back seat in 2024 as more weather events. In Latin America, especially in Brazil
than half the world’s population goes to elections. and Mexico, growth is holding up well, supported by
As interest rates remain elevated to fight stubborn resilient labour markets, infrastructure investment
inflation, debt servicing costs are spiralling. This can and near-shoring of manufacturing. Inflation is likely
feed a vicious cycle of financial instability by straining to ease towards targets next year. The recent global
government finances and household budgets, sovereign debt roundtable meeting held on the
choking off credit and investment. Unsustainable sidelines of the IMF-World Bank spring meetings in
debt levels can worsen sovereign ratings and mid-April offered a ray of hope for low- and middle-
constrain governments’ ability to raise resources income countries overburdened with debt. In the past
for productivity-enhancing public investments. three years, the number of sovereign debt defaults
Overleveraged corporations can face heightened in these countries has surged to 18, outstripping
bankruptcy risks. At the household level, precarious the total of the previous two decades. Spending on
finances can portend drastic cuts in consumer debt servicing is five times higher than a decade ago.
spending amidst job losses and higher borrowing According to the UNCTAD’s update of April 2024,
costs, thereby stifling aggregate demand. The debt nine low- and middle-income countries fell into debt
crisis has already affected developing countries distress, with an additional 25 on the brink. In this
the most, accentuating their vulnerabilities. A full- context, the roundtable proposed setting a target of
blown debt crisis could reverse decades of progress programme approvals within 2-3 months for future
on poverty alleviation, fighting disease, and taking debt restructuring cases, including under the G20
forward development. The time to act against the common framework for debt treatment. The need
gathering storm is now, beginning with reforming the for enhanced information flow was emphasised, and
international financial architecture, democratising in this regard the multilateral institutions need to
finance, harmonising cross-border bankruptcy play a proactive role.
regimes and adequately funding multilateral safety Global financial conditions have eased modestly.
nets. As market expectations and central bank guidance
In the emerging world, capital flows have align, equity prices have strengthened amidst a
turned volatile again as nervous investors turn risk receding of volatility, especially for tech-related
14 RBI Bulletin May 2024

stocks. Bond yields have been rising since early 2024 demand and a rising working-age population”.2 The
in response to expectations of a firmer future path OECD’s May 2024 Economic Outlook points to strong
of interest rates as early rate cut hopes recede, and momentum in India in recent monthly indicators
also because of sensitivity to rising fiscal risks and and expects “strong investment and improving
liquidity tightness due to quantitative tightening. business confidence in India …to sustain real GDP
In contrast, corporate bond spreads have moderated growth”.3 There is considerable appreciation about
across rating categories, despite an increase in the the dramatic reduction in poverty. The World Bank
number of corporate bankruptcies in some parts of estimates4 that at the height of the pandemic in
the world. The US dollar has appreciated in nominal 2021, only 12.9 per cent of the population lived on
effective terms, although some of this strengthening US$ 2.15 a day – the global benchmark for extreme
is reflecting the persisting weakness in the yen. poverty. More recent estimates show that extreme
Consequently, sizeable depreciations have pulled deprivation, once considered synonymous with
down emerging market currencies. India, is set to become extinct.
Heightened geopolitical tensions are exerting There is worldwide focus on the transformation
substantial upward pressures on key commodity of the physical infrastructure, including highways,
prices, with crude oil and gold leading the surge. ports and airports. India’s power sector has attained
Base metal prices have seen a strong revival in 2024 100 per cent electrification and has been integrated
after being beaten down in 2023. This could impede in a single grid across the country. Daily power
the decline of inflation from current levels and availability has increased to 20 hours in rural
hence dampen early prospects of monetary policy areas and 23.5 hours in urban areas. Aggregate
easing. The recent upturn in commodity prices technical and commercial losses have narrowed
in the context of the moderating momentum of considerably. There has been a leap in renewable
global growth reflects several factors at play besides energy capacity creation, with India becoming the
geopolitical developments – tightening supply world’s third largest renewable energy producer.
conditions; climate change; pick-up in infrastructure It has attained world leadership in leveraging the
digital public infrastructure for payment efficiency,
spending in China; and firming demand on the back
financial inclusion and direct benefit transfers.
of industrial activity and trade. While the World Bank
Currently, India boasts the highest number of digital
commodity prices are projected to decline in 2024
transactions, fuelled by a massive internet user base.
and 2025 on subdued global growth, risks remain
Broadband connectivity has also seen a significant
tilted to the upside, mainly due to conflict disrupting
leap, reaching over 93 per cent of our villages. The
energy supplies and weather events.
Bharat Net project will connect all villages through
Internationally there is a growing optimism high-speed internet. Digital platforms like the
that India is on the cusp of a long-awaited economic Open Network for Digital Commerce (ONDC) are
takeoff. While revising India’s GDP growth upwards empowering small businesses by providing a larger
by close to 2 percentage points for 2023-24, the IMF’s marketplace. India’s digital public infrastructure –
April 2024 World Economic Outlook (WEO) alludes
2 World Economic Outlook, IMF, April 2024.
to the robustness of growth expected in 2024 and 3 OECD Economic Outlook, May 2024.
2025 as “reflecting continuing strength in domestic 4 https://data.worldbank.org/country/india.

the India Stack – is boosting productivity, efficiency effect. Overall, net profits declined y-o-y for listed
and generating employment, besides enabling better non-financial companies for the first time after four
targeting of fiscal transfers. consecutive quarters of robust growth. This suggests
that gross value added (GVA) by manufacturing would
Recent indicators are pointing to a quickening of
the momentum of aggregate demand. In the personal have been muted in the fourth quarter of 2023-24
consumption space, Nielsen IQ data indicate that relative to preceding quarters, weighing in on overall
a welcome pivot is underway that will boost this GVA/GDP growth of the economy. Listed banking and
category of spending. For the first time in at least two financial sector companies, on the other hand, posted
years, rural demand for fast moving consumer goods a robust quarterly performance in terms of both
(FMCG) has outpaced urban markets - in the quarter top-line and bottom-line growth, notwithstanding
just gone by, FMCG volume growth of 6.5 per cent increase in provisioning costs and interest expenses.
was driven by rural growth of 7.6 per cent relative to With net profits expanding by double digits owing to
urban growth of 5.7 per cent on the back of robust robust credit disbursal, GVA of the financial sector is
demand for home and personal care products. The likely to have expanded strongly in January-March
sequential easing of urban consumption growth is 2024. These developments are discussed in greater
attributable to slowdown in volume growth of staples detail in Section IV.
(rice; salt; atta), reflecting high inflation in these Private investment activity in India is being
categories. On the other hand, non-food spending, bolstered by the adaptability and resilience of
including car and two-wheeler sales, is being pushed mergers and acquisitions (M&A) amidst global
up by the green shoots of rural demand. challenges. Traditionally dominant sectors like
Turning to private investment, for listed private financial services, technology, media and telecom are
manufacturing companies, retained earnings experiencing declines but large-scale consolidation
remained the major source of funds during the second and restructuring is driving up M&A activity.5
half of 2023-24. They were mainly used to build up Energy is clearly the sunrise sector for M&As on the
fixed assets and non-current investments, indicating back of transactions in renewables. Cross-border
a pick-up in new capacity creation relative to the investments are the locomotive force, with inbound
first half of the year. Results that have been declared strategic private equity deals on a rising profile while
by listed corporates so far indicate that they closed outbound deals have fallen substantially.
the financial year 2023-24 with the highest growth Net exports reveal diverging patterns. The share
in quarterly revenues registered in January-March of petroleum products has stagnated as also that of
2024 both year-on-year (y-o-y) and sequentially. On chemicals and marine products, while the share of
the other hand, operating profit growth moderated gems and jewellery has halved and that of readymade
as rising expenditure – especially input costs for garments has declined. Success stories are of
manufacturing firms and staff costs for information engineering exports and cotton, including yarn and
technology (IT) companies - shaved off the gains fabrics. Services exports have jumped significantly.
in earnings. Other income, reflecting income from According to the UNCTAD, India beat the world
dividends and treasury activities, declined on an
annual basis, partly due to an unfavourable base 5 Hindu business line, April 22, 2024.

average in services exports in 2023. The biggest gain II. Global Setting
was in digitally traded services, followed by travel.
The global activity is moderating amidst
Currently, India is the seventh largest exporter of momentum of a halting decline in inflation,
services in the world and the second largest among flattening of consumer confidence, and some easing
developing countries. Business services have seen of labor market conditions. Despite moderate easing,
a ramp-up on the back of global capability centres. financial conditions remain tight, especially in
Although the share of software exports in the total housing and credit markets. In its Economic Outlook
has eased to about 46 per cent, global IT expenditures of May 2024, the OECD projected global growth at 3.1
are expected to grow by 8 per cent in 2024 and IT per cent in 2024 (same as in 2023), before edging up
exports from India may outpace global IT spending, to 3.2 per cent in 2025 on the support from stronger
led by the consulting segment.6 real income growth and lower policy interest rates.
A modest easing of headline inflation in the These projections place global growth lower than
reading for April 2024 confirmed our expectation the pre-pandemic average (2013-2019) of 3.4 per cent
that an uneven pace of alignment with the target is (Table II.1).
underway. The prices of vegetables, cereals, pulses,
Table II.1: GDP Growth Projections -
meat and fish in the food category may keep the
Select AEs and EMEs
headline elevated and closer to 5 per cent in the near- (Per cent)
2024 2025
term, in line with projections set out in the April MPC
Month of Projection →
resolution in spite of deflation in fuel prices and May February May February
Region/Country 2024 2024 2024 2024
further softening of core inflation to a new historic ↓
low. While statistical base effects may help pulling World 3.1 2.9 3.2 3.0
down the headline inflation in July and August, it AEs
is expected that September may see a reversal. It is US 2.6 2.1 1.8 1.7
only in the second half of the year that a durable
UK 0.4 0.7 1.0 1.2
alignment with the target may re-commence and
sustain till numbers closer to the target are sighted Euro area 0.7 0.6 1.5 1.3
during the course of 2025-26.

Japan 0.5 1.0 1.1 1.0
Set against this backdrop, the remainder of
EMEs
the article is structured into four sections. Section
Brazil 1.9 1.8 2.1 2.0
II covers the rapidly evolving developments in
the global economy. An assessment of domestic Russia 2.6 1.8 1.0 1.0
macroeconomic conditions is set out in Section
III. Section IV encapsulates financial conditions in India# 6.6 6.2 6.6 6.5
India, while the last Section sets out concluding China 4.9 4.7 4.5 4.2
remarks.
South Africa 1.0 1.0 1.4 1.2
6 Gartner Forecasts Worldwide IT Spending to Grow 8 per cent in 2024 Note: *: PPP weighted. #: Data is on a fiscal year basis.
(Gartner, April 17, 2024). Source: OECD.

Chart II.1: GDP Growth Projections
Source: OECD Economic Outlook, May 2024.
The outlook is levelling across economies, with The global supply chain pressures index (GSCPI)
Europe and most low-income economies gaining and the container shipping costs have moderated
pace recently, while the US economy is moderating since February 2024 (Chart II.3a and II.3b). The
and many large EMEs are poised for a stronger
geopolitical risks (GPR) index has, however, edged up
performance. India is projected to remain the fastest
since mid-April 2024 due to rekindling of tensions
growing major economy (Chart II.1).
between Iran and Israel (Chart II.3c). GPR continue to
Our nowcast for global GDP points to sustained
be a major risk to global growth (Box 1).
growth momentum during Q1:2024 but some
deceleration in Q2:2024 (Chart II.2).
Chart II.2: Global GDP Growth Nowcast (Q-o-Q)

2.5
2.0
1.5
Per cent
1.0 0.7 0.5

0.5
0.5 0.9
0.8 0.4
0.5
0.0
-0.5
Q1-2021
Q2-2021
Q3-2021
Q4-2021
Q1-2022
Q2-2022
Q3-2022
Q4-2022
Q1-2023
Q2-2023
Q3-2023
Q4-2023
Q1:2024
Q2:2024
47 countries OECD+ actual 86 countries CEIC nowcast
20 countries OECD+ actual 86 countries CEIC actual
Sources: CEIC; OECD; and RBI staff estimates.

Chart II.3: Trends in Supply Chain Pressures and GPR

a. GSCPI b. Drewry World Container Index (WCI) c. GPR Indicator
0.5 4000 0.6
Standard deviations from average value
0.5
0.0 3500
0.37
0.4
3000
US$ per 40 ft
-0.5 0.3
Index
2500 2706
0.2
-1.0 -0.9
2000 0.1
-1.5 1500 0.0
1000 -0.1
-2.0
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Jun-23
Oct-23
Jan-24
Mar-24
Sep-23
Feb-24
Jul-23
Dec-23
Nov-23
Apr-23
May-23
Apr-24
Aug-23
Notes: 1. GSCPI reflects data on transportation costs and manufacturing indicators.
2. The WCI assessed weekly by Drewry reports actual spot container freight rates for major east west trade routes. The composite represents a weighted average
of the 8 shipping routes by volume and is reported in USD per 40-foot container.
Sources: Federal Reserve Bank of New York; BlackRock Investment Institute, April 2024; and Bloomberg.
Box 1: Impact of Geopolitical Risks on Economic Growth: A Cross Country Analysis

Geopolitical tensions and supply chain disruptions have welfare losses (Góes and Bekkers, 2022). Additionally,
emerged as new challenges for global economy in the GPR can affect economic growth through the financial
post-pandemic era (Das, 2024). Increased tensions are channel, increased uncertainty, higher risk premia and
impacting trade flows and disrupting supply chains asset price surges (GFSR, 2023).
even in bystander countries. Sanctions and tariffs are A monthly index of GPR counting the occurrence
leading to shortages of key resources such as oil and of words related to geopolitical tensions in leading
gas with spillovers to commodity prices and eventually international newspapers7 shows multiple episodes of
economic output. The confluence of these factors may increase in GPR over the last three decades (Caldara and
result in higher inflation, lower growth and significant Iacoviello, 2022) [Chart B1].
Chart B1: GDP Growth vs Global GPR

8 6
6 5
Real GDP growth (per cent)
4 4
Index
2 3
0 2
-2 1
-4 0
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
AE EME Global GPR index (RHS)

Sources: World Economic Outlook (WEO); CEIC; and Authors’ calculations. (Contd...)
7 This measures frequency of articles in leading newspapers discussing geopolitical tensions.

A panel data regression framework using data for 42

Panel Regression Results (Fixed Effects)
countries during 1996 to 2023 shows that GPR has a
Variables (1) (2) (3) (4) (5)
significant negative effect on real GDP growth. The
Real Real Real Real Real
GDP GDP GDP GDP GDP significant inverse interaction between GPR and a
growth growth growth growth growth dummy variable for EMEs in the results implies that
GPR Index -0.736** -0.746* -0.593 -0.794** -0.782** EMEs face a larger drag on their growth from an increase
(0.341) (0.440) (0.362) (0.368) (0.373)
in GPR.
EMEs * GPR Index -4.164* -4.269** -2.935** -2.650** -2.616**
(2.142) (2.077) (1.412) (1.232) (1.245) References:
Control variables
1. Caldara, D., and Iacoviello, M. (2022). Measuring
Private consumption Y Y Y Y
(per cent of GDP) Geopolitical Risk. American Economic Review, 112
Govt. consumption Y Y Y (4): 1194-1225.
(per cent of GDP)
2. Das, S., (2024). Fundamental Shifts in the Global
Investment Y Y
(per cent of GDP)
Economy: New Complexities, Challenges and Policy
Trade of goods and Y Options (Keynote Address). 59th SEACEN Governors’
services (per cent of GDP) Conference, Mumbai.
constant 4.187*** 3.893*** 19.13*** 25.09*** 16.06***
3. Goes, C., and Bekkers, E. (2022). The Impact of
(0.454) (0.610) (3.555) (3.719) (3.542)
Observations 1,113 1,113 1,113 1,113 1,113 Geopolitical Conflicts on Trade, Growth, and
R-squared 0.424 0.490 0.512 0.538 0.538 Innovation. World Trade Organization (WTO) Staff
Number of regions 42 42 42 42 42 Working Paper.
Notes: 1. EMEs is a dummy variable which is coded as 1 for EMEs and 0 for AEs.
4. International Monetary Fund (2023). Geopolitics
2. The results include time fixed effects.
3. The parenthesis include robust standard errors. And Financial Fragmentation: Implications for
4. *, **, and *** denote statistical significance at the 10 per cent, 5 per
cent, and 1 per cent levels, respectively.
Macro-Financial Stability. Global Financial Stability
Sources: CEIC; and Authors’ calculations. Report (GFSR) [Chapter 3].
Consumer sentiments ebbed across major regions, with hardening of government bond yields,
economies in April 2024, reflecting increased economic and volatility in equity markets while it marginally
uncertainty (Chart II.4a). Financial conditions in some eased in others (Chart II.4b).
Chart II.4: Consumer Sentiment and Financial Conditions

a. Consumer Sentiment Index b. Financial Conditions
100 0 106 2.5
90 -5
-10 104 1.5
80
-15
70 -20 102 0.5
Index
Index
Index
Index
60 -25
-30 100 -0.5
50
-35
40 98 -1.5
-40
30 -45
96 -2.5
20 -50
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Jun-23
Mar-24
Oct-23
Sep-23
Feb-24
May-23
Jan-24
Nov-23
Dec-23
Apr-23
Jul-23
Apr-24
Aug-23
US Japan UK (RHS) India China Euro zone (RHS)

India Euro zone (RHS) Brazil US (RHS) UK (RHS)
Notes: 1. Japan: A score above 50 indicates consumer optimism, below 50 shows lack of consumer confidence and 50 indicates neutrality.
2. Eurozone and UK: -100 indicate extreme lack of confidence, 0 denotes neutrality while 100 indicates extreme confidence.
3. India and US: Higher the index value, higher is the consumer confidence.
Source: Bloomberg.

Chart II.5: Global PMI

56
54
52.7
52.4
Index
52
50.3
50
48
Jul-23
Jan-24
Apr-23
Jun-23
Oct-23
Feb-24
Apr-24
Aug-23
Sep-23
Dec-23
Nov-23
Mar-24
May-23
Composite Manufacturing Services
Note: A level of 50 corresponds to no change in activity and a reading above 50 denotes expansion and vice versa.
Source: S&P Global.
The global composite purchasing managers index expansionary territory for the third consecutive
(PMI) recorded a sequential uptick in April 2024 as month as output and new orders continued to grow
faster increase in service sector output offset a mild (Chart II.5).
slowdown in manufacturing production. The services The global trade outlook continued to improve
PMI rose to a ten-month high, supported by increased and the composite PMI for export orders maintained
intake of new business, reduced backlog of work and its uptrend in April 2024 (Chart II.6). Notably, the
new export orders. The global manufacturing dipped manufacturing export orders index returned to
marginally in April 2024; however, it remained in expansion for the first time since February 2022,
Chart II.6: Global PMI: Export Orders

54
53
52 51.1
50.6
51
50.5
Index
50
49
48
47
46
Jul-23
Jan-24
Jun-23
Apr-23
Oct-23
Sep-23
Feb-24
Apr-24
Aug-23
Dec-23
Nov-23
Mar-24
May-23
Services Composite Manufacturing
Source: S&P Global.

reaching a 26-month high in April. The services The index, however, recorded a decline of 7.4 per cent
export orders index has remained in expansion since (y-o-y), mainly due to an 18.3 per cent decline (y-oy)
January 2024. in cereals prices (Chart II.7c). Gold prices touched
record highs in April, ending 8.3 per cent higher vis-
Global commodity prices increased further in
à-vis March on concerns over a potential escalation in
April, driven by higher crude oil and metals prices. The
the Middle East region triggering safe haven demand
Bloomberg commodity index increased by 2.2 per cent (Chart II.7d). Easing of geopolitical tensions, however,
(m-o-m) [Chart II.7a]. Brent crude oil prices increased led to a moderation in gold prices during early May
by 5.6 per cent in April, hovering at US$ 90 per barrel till 2024.
mid-April but reversed trend thereafter (reaching US$
Headline inflation exhibited reticence in
81.3 per barrel as on May 15) as optimism surrounding
traversing the last mile of disinflation and remained
a potential ceasefire in the Middle East contributed to
above target in most economies. In the US, consumer
a reduction in risk premium (Chart II.7b). A sharp rise price index (CPI) inflation eased to 3.4 per cent in
in the US crude oil inventories also contributed to the April from 3.5 per cent in March, while the headline
recent pullback of prices. The Food and Agriculture personal consumption expenditure (PCE) inflation
Organization’s (FAO’s) food price index rose by 0.3 increased to 2.7 per cent in March from 2.5 per cent
per cent (m-o-m) in April 2024, primarily driven by an in February. As per flash estimates, euro area inflation
increase in the prices of meat (1.6 per cent), which was remained unchanged at 2.4 per cent in April. Japan’s
partially offset by a fall in sugar prices (-4.4 per cent). CPI inflation (excluding fresh food) eased marginally
Chart II.7: Commodity and Food Prices

a. Bloomberg Commodity Index b. Brent Crude Oil
110 100
95
90
105
US$/ bbl
85
Index
80
100
75
70
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Mar-24
May-24
Jul-24
Sep-24
Nov-24
95
15-May-24
03-May-23
24-May-23
08-Nov-23
29-Nov-23
01-Mar-23
22-Mar-23
13-Mar-24
16-Aug-23
20-Dec-23
03-Apr-24
24-Apr-24
12-Apr-23
06-Sep-23
27-Sep-23
21-Feb-24
18-Oct-23
14-Jun-23
10-Jan-24
31-Jan-24
05-Jul-23
26-Jul-23
Price Futures as on Apr 15, 2024

Futures as on May 15, 2024
c. Food Prices d. Gold

170 2,500
160 2,400
Index (2014-16=100)
150
2,300
$/troy oz
140
-
2,200
130
2,100
120
110 2,000
100 1,900
Mar-23
Mar-24
May-23
May-24
Sep-23
Sep-24
Nov-23
Nov-24
Jan-24
Jul-23
Jul-24
Jun-23
Mar-23
Mar-24
Oct-23
Sep-23
Jan-24
Feb-24
May-23
Nov-23
Dec-23
Apr-23
Jul-23
Apr-24
Aug-23
Food price index Vegetable oil Cereals Price Futures as on Apr 15, 2024
Dairy Meat Sugar Futures as on May 15, 2024
Sources: Bloomberg; World Bank Pink Sheet; and FAO.

to 2.6 per cent in March, while CPI inflation in the UK government securities (G-sec) yields – both 10-year
softened to 3.2 per cent (Chart II.8a). Among EMEs, and 2-year – hardened by over 40 basis points (bps)
inflation moderated in Brazil while it ticked up in each in April as financial markets priced in fewer
China in April (Chart II.8b). Core and services inflation rate cuts by the US Fed in 2024. However, it reversed
remained higher than headline inflation across major trend in early May, softening by over 30 bps each
AEs (Chart II.8c and II.8d). (Chart II.9b). In the currency markets, the US dollar
index strengthened on the back of restrictive US
In April 2024, global equity markets retreated
monetary policy and trimmed probability of rate cuts
from the highs recorded in March. The Morgan Stanley
by the Fed but recorded moderation in first half of
Capital International (MSCI) world equity index
May post the release of softer US inflation print and
decreased by 3.4 per cent as data on strong consumer
consumer spending data. The MSCI currency index
demand and high PCE inflation in the US rekindled
for EMEs mirrored the greenback’s movement in
concerns about interest rates remaining higher for
April, exacerbated by capital outflows, especially in
longer (Chart II.9a). Disappointing semiconductor
the equity segment (Chart II.9c and II.9d).
earnings, and escalating GPR also contributed to
the downturn. Equity markets, however, recovered Major central banks, especially in AEs, retained
in first half of May as geopolitical tensions in the their restrictive policy stance, holding their policy
Middle East de-escalated and the labour market and rates steady in their latest meetings. On the other
inflation in the US exhibited signs of easing. The US hand, the Czech Republic and Sweden which lowered
Chart II.8: Inflation - AEs and EMEs
Sources: Bloomberg; and OECD.

24
Index Index (June end-2021=100)
ARTICLE
100
105
110
115
60
65
70
75
80
85
90
95
1,650
1,660
1,670
1,680
1,690
1,700
1,710
1,720
1,730
1,740
1,750
01-Mar-23
01-Mar-23 22-Mar-23
Source: Bloomberg.
22-Mar-23
12-Apr-23 12-Apr-23
03-May-23 03-May-23
24-May-23 24-May-23
Sources: Bloomberg; and IIF.

14-Jun-23 14-Jun-23
05-Jul-23 05-Jul-23
World
26-Jul-23
16-Aug-23 26-Jul-23
06-Sep-23 16-Aug-23
MSCI EME currency index

27-Sep-23 06-Sep-23
18-Oct-23 27-Sep-23
08-Nov-23 18-Oct-23
29-Nov-23
c. Currency Indices
AEs
20-Dec-23 08-Nov-23
29-Nov-23
a. Equity Indices (MSCI)
10-Jan-24
31-Jan-24 20-Dec-23
21-Feb-24 10-Jan-24
13-Mar-24 31-Jan-24
03-Apr-24
24-Apr-24 21-Feb-24
EMEs
15-May-24 13-Mar-24
Dollar index (RHS)

98
03-Apr-24
100
102
104
106
108
24-Apr-24
Index 15-May-24
central banks, Brazil and Peru reduced their policy

their policy rates by 50 bps and 25 bps, respectively
in their May meetings (Chart II.10a). Amongst EME
US$ billion Per cent
-13
-8
-3
2
7
12
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
1-Mar-23 01-Mar-23
22-Mar-23 22-Mar-23
12-Apr-23 12-Apr-23
3-May-23 03-May-23
24-May-23
Chart II.10: Changes in Policy Rates

24-May-23
Chart II.9: Global Financial Markets
Debt
14-Jun-23
10-year
14-Jun-23
5-Jul-23
05-Jul-23
26-Jul-23
26-Jul-23
16-Aug-23
16-Aug-23
6-Sep-23
06-Sep-23
27-Sep-23
27-Sep-23
18-Oct-23
2-year
18-Oct-23
8-Nov-23
08-Nov-23
Equity
29-Nov-23
29-Nov-23
d. Portfolio Flows to EMEs
20-Dec-23
10-Jan-24 20-Dec-23
b. US Government Bond Yields
31-Jan-24 10-Jan-24
21-Feb-24 31-Jan-24
13-Mar-24 21-Feb-24
3-Apr-24 13-Mar-24
Total
24-Apr-24 03-Apr-24
Spread (10yr-2yr)
15-May-24 24-Apr-24
15-May-24
RBI Bulletin May 2024

by 50 bps each in their April meetings. Indonesia,
Hungary and Columbia cut their benchmark rates
State of the Economy
rates by 25 bps each in their May meetings while

however, hiked its policy rate by 25 bps in its April Automobile sales increased by 25.4 per cent (y-o-y)
meeting after maintaining the rate steady in the in April 2024, led by a strong growth in two wheelers
previous five meetings (Chart II.10b). and three wheelers segment while passenger vehicles
recorded the highest-ever monthly sales.8 Domestic
III. Domestic Developments
tractor sales exhibited signs of improvement in April
The Indian economy has demonstrated 2024 (Chart III.3a and III.3b). Vehicle registrations
marked resilience in the face of geopolitical recorded a sequential pick up in April 2024, driven
headwinds imparting supply chain pressures by the non-transport vehicles segment (Chart III.3c).
(Chart III.1a). According to the economic activity Average daily petroleum consumption increased by
index (EAI), activity rebounded in April and early 6.1 per cent in April 2024, led by motor spirit (petrol)
estimates suggest that GDP growth for Q1:2024-25 is and aviation turbine fuel (ATF) [Chart III.3d].
likely to remain close to 7.5 per cent (Chart III.1b and According to the business survey conducted by
III.1c). the Retailers Association of India, retail sales growth
Aggregate Demand (y-o-y) gained momentum in Q4:2023-24 from the
previous quarter, driven by acceleration in sales
High frequency indicators point towards
growth of sports goods, food and grocery, apparel
sustained momentum in domestic demand
and clothing, footwear and quick service restaurants
conditions in April 2024. E-way bills grew by 14.5
(Chart III.4).
per cent (y-o-y) in April 2024, notwithstanding a
sequential moderation from a record high of 10.4 The renewable electricity sector anticipates
crore in March 2024 (Chart III.2a). Toll collections substantial project completions this fiscal year and the
increased by 8.6 per cent (y-o-y) in April 2024 (Chart next.9 Green power projects valued at approximately
III.2b). ₹700 billion are slated to be operational this year,
Chart III.1: Economic Activity and GDP Growth Nowcast

a. Index of Supply Chain Pressures for b. Economic Activity Index (EAI) c. GDP - Actual and Nowcast
3 India (ISPI) 135 30
Standard deviations from average
2 20
130
7.4
1 10 7.5
Y-o-y, per cent
125
Index
0
0
120 -10
-1
115 -20
-2
-30
-3 110
Mar-19
Dec-18
Mar-20
Dec-19
Mar-21
Jun-18
Sep-18
Dec-20
Mar-22
Mar-23
Jun-19
Sep-19
Dec-21
Jun-20
Sep-20
Dec-22
Mar-24
Jun-21
Sep-21
Jun-22
Sep-22
Dec-23
Jun-23
Sep-23
Jun-24
May-23
Aug-23
Nov-23
Mar-24
Apr-23
Jun-23
Apr-24
Dec-23
Jan-24
Oct-23
Feb-24
Sep-23
Jul-23
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Apr-18
Apr-19
Apr-24
Oct-17
Oct-18
Oct-19
Apr-20
Oct-20
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Oct-23
GDP - Actual GDP - Nowcast
Note: The economic activity index (EAI) was constructed by extracting the common trend underlying twenty seven high frequency indicators of economic activity using a
Dynamic Factor Model. EAI was scaled to 100 in February 2020 and 0 in April 2020, the worst affected month due to mobility restrictions.
Sources: National Statistical Office (NSO); and RBI staff estimates.
8 https://www.carandbike.com/news/auto-sales-april-2024-india-saw-25-growth-in-volume-driven-by-strong-twowheeler-sales-3213133
9 https://industryoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&nvdt=20240429162158756&nvpc=055000000000&nvtype=ANALYSIS+%26
+OUTLOOK&icode=0101030110000000&ver=pf (Centre for Monitoring Indian Economy)

Chart III.2: E-way Bills and Toll Collections
a. E-way Bills b. Toll Collections

120 35 360 64
100 30
340 60
25
80
Per cent, y-o-y

Million units
20
60 320 56
Million units
15
billion
40
10 300 52
20 5
0 0 280 48
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
260 44
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
GST E-way bill inter-state
GST E-way bill intra-state
E-way bills growth (RHS) Volume Value (RHS)
Sources: GSTN; and RBI.
marking the highest investment completion in ₹765.2 billion by 2025-26, propelled by the policy
any single year to date. Moreover, incremental focus on enhancing India’s dependence on eco-
project investments are projected to surge to friendly energy sources.
Chart III.3: Automobile Sector Indicators

b. Rural Demand
2500 2.0 150
2000 1.5
100
Thousands
Millions
1.0
Thousands
1500
50
1000 0.5
0.0 -
500
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
0
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Motorcycle sales Scooters

Three wheeler sales (RHS) Tractor sales (RHS)
Source: Society of Indian Automobile Manufacturers (SIAM). Sources: SIAM; and Tractor and Mechanization Association (TMA).
d. Petroleum Consumption
14 0.8
12 0.7
0.6
Million tonnes
Million tonnes
10
0.5
8
0.4
6
0.3
4 0.2
2 0.1
0 0.0
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Petrol Diesel ATF

Average daily petroleum consumption (RHS)

Chart III.4: Retail Sales Growth

15
12
9
Per cent, y-o-y
-3
Jewellery
Consumer durables and
All categories
Quick service restaurants
personal care
Sports goods
electronics
Footwear
Food and grocery
Apparel and clothing

furnishing
Furniture and
Beauty, wellness and
Q2:2023-24 Q3:2023-24 Q4:2023-24

Sources: Retailers Association of India; and RBI staff estimates.
As per the Quarterly Urban Periodic Labour by higher female workers. The rise in employment
Force Survey (PLFS) released on May 15, 2024 the was driven by self-employment, while the share of
labour force participation rate (LFPR) and the worker regular salaried and casual labour remained the same
population ratio (WPR) increased during Q4:2023-24 as in the preceding quarter. The unemployment rate
– the LFPR for persons aged 15 years and above
(UR) was at 6.7 per cent as against 6.5 per cent in Q3.
increased to 50.2 per cent, the highest since the
survey’s inception (Chart III.5). The WPR increased As per the data from the Centre for Monitoring
to 46.9 per cent, up from 46.6 per cent in Q3, driven of Indian Economy (CMIE), the all-India UR was at
Chart III.5: Quarterly PLFS (age 15 and above)

55 25
50.2
50 20
46.9
45 15
Per cent
Per cent
40 10
6.7
35 5
30 0
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Labour force participation rate Worker population ratio Unemployment rate (RHS)
Source: MoS&PI.

Chart III.6: Labour Market Conditions
a. Unemployment Rates b. Employment Situation: All India

12 42
11 41 40.9
10 40
9 39
8.7
Per cent
Per cent
8 8.1 38
7.8 37.6
7 37
6 36
5 35
4 34
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Jun-23
Oct-23
Feb-24
Apr-23
Apr-24
Dec-23
Aug-23
Labour participation rate Employment rate
Source: CMIE.
8.1 per cent in April (Chart III.6a). The LFPR and outlook. Services job creation continued to be in
employment rate (ER) fell marginally as compared to expansionary zone in April, albeit with a sequential
moderation from a seven-month high recorded in
the previous month (Chart III.6b).
March (Chart III.7).
In April 2024, organised manufacturing
Household demand for work under the Mahatma
employment recorded the fastest expansion in the last Gandhi National Rural Employment Guarantee Act
seven months, as captured by the PMI employment (MGNREGA) witnessed an increase of 18.0 per cent
Chart III.7: PMI Employment Indices

55
54
Index (50 = No change)
53
52 52.2
51
50.4
50
49
48
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Manufacturing Services
Note: A PMI value of above 50 indicates expansion.

Source: S&P Global.

Chart III.8: Demand for Work under MGNREGA

4.0 30
3.5
20
3.0
10
2.5
Per cent
Crores
2.0 0
1.5
-10
1.0
-20
0.5
0.0 -30
Jul-23
Jun-23
Jan-24
Oct-23
Sep-23
Feb-24
Mar-24
Apr-23
Apr-24
Dec-23
Nov-23
May-23
Aug-23
Y-o-y growth (RHS)

Source: Ministry of Rural Development.
(m-o-m) in April with the rabi harvesting season Out of 30 major commodities, 13 commodities
coming to an end in most parts of the country. (accounting for 46.7 per cent of export basket)
MGNREGA employment, however, recorded a decline registered an expansion on y-o-y basis. Electronic
by 10.6 per cent on a y-o-y basis (Chart III.8). goods, organic and inorganic chemicals, petroleum
products, drugs and pharmaceuticals, and cotton yarn,
India’s merchandise exports at US$ 35.0 billion fabrics, made-ups and handloom products supported
grew by 1.1 per cent (y-o-y) in April 2024, as a export growth, while engineering goods, iron ore,
favourable base effect more than offset the negative gems and jewellery, marine products, and oil meals
momentum (Chart III.9). dragged down overall exports in April (Chart III.10).
Chart III.9: India’s Merchandise Exports

a. Trend in Exports b. Decomposition of Export Growth (y-o-y)
45 40 25
40 20
30
15
Growth in per cent
35
30 20 10
US$ billion
5
Per cent
25
10 0
20
-5
15 0 -10
10 -15
-10
5 -20
0 -20 -25
Aug-22
Aug-23
Dec-22
Dec-23
Apr-22
Apr-23
Apr-24
Feb-23
Feb-24
Oct-22
Oct-23
Jun-22
Jun-23
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Non-POL POL Momentum Base effect

Y-o-y, growth (RHS) M-o-m, growth (RHS) Change in y-o-y growth
Sources: PIB; and DGCI&S. Sources: PIB; DGCI&S; and RBI staff estimates.

Chart III.10: India’s Merchandise Exports – Relative Contribution

(April 2024 over April 2023)
Sources: PIB; and RBI staff estimates.
Merchandise imports at US$ 54.1 billion Petroleum crude and products, gold, electronic
expanded by 10.3 per cent (y-o-y) in the month as goods, pulses, and vegetable oil supported import
base effect more than offset negative momentum growth, while pearls, precious and semi-precious
(Chart III.11). Among the 30 major commodities, 16 stones, coal, artificial resins, plastic materials, iron
commodities (accounting for 58.7 per cent of import and steel, and machinery were the main drags in
basket) registered growth on a y-o-y basis in April. April (Chart III.12).
Chart III.11: India’s Merchandise Imports

a. Trend in Imports b. Decomposition of Import Growth (y-o-y)
70 60 25
50 20
60
15
40
50 10
Growth in per cent
US$ billion
30 5
Per cent
40
20 0
30 -5
10
20 -10
0
-15
-10 -20
0 -20 -25
Apr-22
Apr-23
Apr-24
Oct-22
Oct-23
Aug-22
Aug-23
Dec-22
Dec-23
Jun-22
Jun-23
Feb-23
Feb-24
Feb-23
Feb-24
Aug-22
Aug-23
Apr-22
Dec-22
Jun-22
Oct-22
Apr-23
Dec-23
Apr-24
Jun-23
Oct-23
Non-POL non-gold Gold POL Momentum Base effect

Y-o-y, growth (RHS) M-o-m, growth (RHS) Change in y-o-y growth
Sources: PIB; DGCI&S; and RBI staff estimates.

Chart III.12: India’s Merchandise Imports – Relative Contribution

(April 2024 over April 2023)
Sources: PIB; and RBI staff estimates.
The merchandise trade deficit widened to a 75.9 per cent a month ago (Chart III.13). Petroleum
5-month high of US$ 19.1 billion in April 2024 as products were the largest source of the trade deficit in
April, followed by electronic goods (Chart III.14).
exports contracted more than imports on a sequential
Services exports at US$ 30.0 billion fell by
basis. The non-oil deficit widened to US$ 9.3 billion
1.3 per cent (y-o-y) in March 2024, reflecting a
in April from US$ 3.8 billion in March. The share of
slowdown in business, software and transportation
the oil deficit in the overall merchandise trade deficit, services. Services imports declined by 2.1 per cent
however, declined to 51.5 per cent in April from (y-o-y) to US$ 16.6 billion, primarily led by a decline
Chart III.13: Decomposition of India’s Chart III.14: Commodity-wise Merchandise

Merchandise Trade Deficit Trade Deficit
Note: Coal, coke and briquettes exports in April 2024 are assumed to be at the
same level as in March.
Sources: PIB; and DGCI&S. Sources: PIB; DGCI&S; and RBI staff estimates.

Chart III.15: Services Exports and Imports: Growth Rates
35
25
Per cent (y-o-y)
15
-1 .3
-5 -2 .1
-15
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Exports Imports
Source: RBI.
in transportation services (Chart III.15). As a result, Goods and services tax (GST) collections (Centre
net services exports earnings dropped by 0.4 per cent plus States) in April 2024 recorded a y-o-y growth of
(y-o-y) to US$ 13.4 billion in March 2024. The outlook 12.4 per cent, surpassing the ₹2 lakh crore mark for
for India’s software services, however, remains the first time (Chart III.16). April usually sees the
supportive, with global IT spending estimated to grow highest GST collections for any financial year due to
by 8 per cent to US$ 5.1 trillion in 2024.10 higher year-end economic activity.11
Chart III.16: Monthly GST Revenue
2.5
2.1
2.0
Lakh Crore
1.5
1.0
0.5
0.0
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Source: PIB.
10 Gartner Inc., April 17, 2024.

11 April GST collections pertain to economic activity in March-the last month of the financial year.

Aggregate Supply
Chart III.17: IMD First Stage 2024 SWM Forecast
As per the Indian Meteorological Department’s Below Normal
35 45 55 65 75
(IMD’s) first long-range forecast for the south- Normal

35 45 55 65 75
west monsoon (SWM) season, rainfall during June- Above Normal

35 45 55 65 75
September 2024 is likely to be above normal this

year12 with most parts of the country experiencing
above normal rainfall (Chart III.17). Additionally, as
per IMD13, the SWM is likely to set in over Kerala
on May 31 as against the usual date of June 01. In
its latest release dated May 13, 2024, the National
Oceanic and Atmospheric Administration (NOAA)
has forecasted a transition from El Niño to El Niño-
Southern Oscillation (ENSO) neutral in June 2024
Note: Chart III.17 illustrates the most likely categories of rainfall and their
with La Niña developing by June-August 2024 (with probabilities. The model has no clear signal over the white-shaded areas of the
49 per cent probability) or July-September 2024 (with country.
Source: IMD.
69 per cent probability). This is usually associated
with increased rainfall activity. below the long period average (LPA) as compared to
Low summer/pre-monsoon rainfall, higher than 18 per cent higher than LPA a year ago. The water
normal maximum temperatures and heatwave days storage level in major reservoirs stood at 27 per cent
in summer season14, however, continue to remain as of total reservoir capacity at the all-India level, which
major risk factors (Chart III.18a). As on May 15, 2024, was 20.8 per cent lower than last year and 7.7 per
summer rainfall (March-May) remained 12 per cent cent lower than the decadal average (Chart III.18b).
Chart III.18: Weather Condition and Water level

a. Maximum Temperature Outlook for May 2024 b. Reservoir Level (as on May 09, 2024)
45
Below Normal
35 45 55 65 75
Normal 40
35 45 55 65 75
Above Normal 35
Per cent of full reservoir level
35 45 55 65 75
30
25
20
15
10
Last 10 years average 2023 2024
Note: Chart III.18a illustrates the most likely categories of temperature and their probabilities. The model has no clear signal over the white-shaded areas of the country.
Sources: Central Water Commission; and IMD.
12 Rainfall is likely to be at 106 per cent of the long period average (LPA) with a model error of ±5 per cent, as per the forecast released on April 15, 2024.
13 This is as per IMD’s latest release on May 15, 2024. The forecast has a model error of ± 4 days.
14 As per ‘Monthly Temperature and Rainfall Outlook’ released by IMD on May 1, 2024.

The cumulative procurement of wheat in the rabi

Chart III.19: Progress of Summer Sowing
(as on May 10, 2024) marketing season (RMS) so far (till May 14, 2024) stood
80 12
at 256.4 lakh tonnes, which was marginally lower
70
than the corresponding period last year (Chart III.20a).
10.5
10
60
9.5 To expedite the procurement, select state governments
8.9
8.5
8 such as Rajasthan and Madhya Pradesh have
50
Lakh hectare
relaxed procurement norms in the last week of April.
Per cent
40 6
30 4.2
As on May 01, wheat stock stood at 259.6 lakh
4
20 tonnes which was well above the quarterly buffer
2
10 norm (Apr-Jun 2024) (Chart III.20b). The cumulative
0 0 procurement of rice in the kharif marketing season
Rice Pulses Coarse Oilseeds Total
cereals
so far (October 01, 2023 – May 14, 2024) stood at
2023 2024 2024 growth over 2023 (RHS) 482.8 lakh tonnes. As of May 01, 2024, the public
Source: Ministry of Agriculture and Farmers’ Welfare. stock of rice stood at 508.9 lakh tonnes (3.7 times the
buffer norm).
As of May 10, 2024 75.9 lakh hectares of the Despite a sequential moderation, the headline
summer crop area have been sown, registering an 15
PMI for manufacturing remained in expansionary
increase of 8.9 per cent over a year ago, with higher territory in April 2024, buoyed by new orders
acreage under rice, pulses, coarse cereals and oilseeds and output (Chart III.21a). The PMI for services
(Chart III.19). also continued to expand, albeit at a slower pace,
Chart III.20: Wheat Public Procurement and Stock Position
a. Wheat Procurement (as on May 14) b. Wheat Stock Level (as on May 01)
140 60 600
525.7
120 50
48 500
100
40
Lakh tonnes
Per cent
80 35 400
30 353.5 357.7 259.6
Lakh tonnes
60 28 331.6
303.5 290.3
21 21 20
40 18 300
16 5
20 10
3 3
200
0 0
Uttar Pradesh
Madhya Pradesh
Haryana
Punjab
Rajasthan
100
0
2018
2019
2020
2021
2022
2023
2024
Stock level Norm
Sources: Food corporation of India; and RBI staff estimates.
15 The summer season accounts for around 5 per cent of total food grain production (2022-23) with relatively higher share under few crops viz. moong
(50.3 per cent), bajra (9.5 per cent), urad (8.7 per cent), rice (7.5 per cent) and maize (7.1 per cent).

Chart III.21: Purchasing Managers’ Index (PMI)

a. Manufacturing b. Services
70 70
65 65 62.3
64.3
60.8
50 = No Change
50 = No change
58.8 60
60
55
55
50
50
Jul-23
Apr-23
Jun-23
Oct-23
Sep-23
Feb-24
Apr-24
Aug-23
Dec-23
Nov-23
Mar-24
May-23
Jan-24
Apr-23
Aug-23
Jan-24
Feb-24
May-23
Jun-23
Jul-23
Sep-23
Oct-23
Nov-23
Dec-23
Mar-24
Apr-24
45
45
PMI Future output PMI Future output
Source: S&P Global.
driven by growth in new business and output supported by growth in freight movement of cement
(Chart III.21b). (Chart III.22a). Cargo traffic at major ports increased
by 1.3 per cent in April 2024, led by coking coal and
Indicators of freight transport exhibited a other miscellaneous cargo (Chart III.22b).
mixed picture. Railway freight revenue recorded Construction sector indicators recorded near
a growth of 6.3 per cent (y-o-y) in February 2024, double-digit growth as steel consumption increased
Chart III.22: Railway Traffic and Port Cargo

a. Railway Freight Revenue b. Port Cargo
40
30
30
25
20 20
15 10
Per cent, y-o-y
Per cent, y-o-y
10 0
5 -10
0 -20
-5
-30
-10
-40
-15
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Total POL
Total Coal Pig iron Thermal coal Containerised cargo
Iron ore Cement Others
Source: Rail Drishti. Source: Indian Ports Association.

Chart III.23: Steel Consumption and Cement Production

45 25
40
20
35
15
Million tonnes
Per cent, y-o-y

30
25 10
20 5
15
0
10
-5
5
0 -10
Jul-23
Jan-24
Jun-23
Apr-23
Oct-23
Sep-23
Feb-24
Apr-24
Aug-23
Dec-23
Mar-23
Nov-23
Mar-24
May-23
Steel consumption Steel consumption growth (RHS)

Cement production Cement production growth (RHS)
Source: Rail Drishti.
by 9.4 per cent in April 2024 and cement production Available high frequency indicators for the
increased by 10.6 per cent in March 2024 (Chart services sector reflect resilience in economic activity
III.23). in April 2024 (Table III.1).
Table III.1: Growth (y-o-y, per cent)

Sector Indicator Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24
Urban demand Passenger Vehicles Sales 2.9 11.6 3.1 17.3 4.3 3.2 13.9 5.7 8.9 1.2
Two Wheeler Sales -7.2 0.6 0.8 20.1 31.3 16.0 26.2 30.0 15.3 30.8
Rural demand Three Wheeler Sales 78.9 68.8 47.0 42.1 30.8 30.6 9.5 4.6 4.3 14.5
Tractor Sales 6.1 1.1 -14.7 -4.3 6.4 -19.8 -15.3 -33.0 -23.1 -3.0
Commercial Vehicles Sales 6.9 3.2 -3.8
Railway Freight Traffic 1.5 6.4 6.7 8.5 4.3 6.4 6.4 6.3
Port Cargo Traffic 4.3 4.4 0.3 13.8 16.9 0.6 3.2 -1.4 2.7 1.3
Domestic Air Cargo Traffic* -4.1 6.0 -4.5 10.6 9.0 8.7 10.0 7.6 8.7 -10.1
International Air Cargo Traffic* 1.0 7.4 2.7 15.0 4.9 12.2 19.3 25.7 22.5 20.7
Trade, hotels, Domestic Air Passenger Traffic * 26.3 23.6 19.3 10.7 8.7 8.1 5.0 2.2 4.7 3.3
transport, International Air Passenger Traffic * 23.6 21.5 19.6 17.5 19.8 18.1 17.0 15.2 15.0 15.0
communication GST E-way Bills (Total) 16.4 19.5 9.5 30.5 8.5 13.2 16.4 18.9 13.9 14.5
GST E-way Bills (Intra State) 20.8 22.6 12.4 30.0 22.7 14.2 17.9 21.1 15.8 17.3
GST E-way Bills (Inter State) 9.1 14.4 4.9 31.2 -16.2 11.4 13.8 15.0 10.7 9.6
Hotel occupancy rate@ 60.9 60.9 61.0 62.5 63.0 70.0 66.6 72.5 64.4
Average revenue per room 14.2 13.9 18.3 14.8 15.9 12.8 11.0 4.1 6.7
Tourist Arrivals 13.6 22.6 17.5 19.8 16.8 7.8 10.4 11.8
Steel Consumption 15.8 16.0 18.6 13.6 15.4 6.5 3.8 8.8 9.6 9.4
Construction
Cement Production 6.9 19.7 4.7 17.0 -4.8 3.8 5.7 5.3 10.6
PMI Index# Services 62.3 60.1 61.0 58.4 56.9 59.0 61.8 60.6 61.2 60.8
<< Contraction ------------------------------------- Expansion >>

Note: #: Data in levels. *: April 2024 data are based on the monthly average of daily figures. @: Data in rate, not in y-o-y rate of growth.
The heat-map is constructed for each indicator for the period July-2021 till date.
Sources: CMIE; CEIC; IHS Markit; SIAM; Airports Authority of India; and Joint Plant Committee.

Inflation Fuel and light prices deflation deepened to

Headline inflation, as measured by y-o-y changes around (-) 4.2 per cent in April from (-) 3.4 per cent
in the all-India CPI16, moderated to 4.8 per cent in in March, mainly on account of sharper deflation
April 2024 from 4.9 per cent in March as a positive in LPG prices on a y-o-y basis. Electricity prices,
momentum of 48 bps was more than offset by a however, recorded a y-o-y inflation of 10.2 per cent
favourable base effect of 51 bps (Chart III.24). Among in April 2024.
the major groups, the momentum was positive at
Core inflation eased further to 3.2 per cent (y-o-y)
around 65 bps and 55 bps for food and core groups
in April from 3.3 per cent in March, the lowest in
(i.e., excluding food and fuel) respectively, while the
the current CPI (2012=100) series. The moderation
fuel group recorded negative momentum of around
was mostly broad-based as inflation in pan, tobacco
100 bps.
and intoxicants, clothing and footwear, transport
Food inflation (y-o-y) edged up to 7.9 per cent
and communication, recreation and amusement,
in April from 7.7 per cent in March. In terms of sub-
and education softened, whereas personal care and
groups, inflation firmed up in cereals, meat and fish
effects inflation registered a pick-up (Chart III.26).
and fruits while eggs, milk, vegetables, pulses, sugar,
Inflation in housing, household goods and services,
spices, non-alcoholic beverages and prepared meals
and health prices remained steady.
registered a moderation in inflation (Chart III.25).
Edible oils remained in deflation, albeit at a slower In terms of regional distribution, rural inflation
rate. stood at 5.43 per cent, higher than urban inflation
Chart III.24: Trends and Drivers of CPI Inflation
a. CPI Inflation (y-o-y) b. Contributions
12
7
Contribution in percentage points
10
8 7.9
5 4.8
6
4.8
Per cent
4
3.2
2 3
0
-2 1
-4 -4 .2
-6 -1
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Apr-22
Aug-22
Aug-23
Jun-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Oct-23
Dec-23
Feb-24
Apr-24
Food and beverages CPI excluding food and fuel Food and beverages Fuel and light
CPI Headline (y-o-y, per cent) Fuel and light CPI excluding food and fuel CPI Headline (y-o-y, per cent)
Sources: NSO; and RBI staff estimates.
16 As per the provisional data released by the National Statistical Office (NSO) on May 13, 2024.

Chart III.25: Annual Inflation (y-o-y) and Momentum (m-o-m) across Sub-groups
Inflation (y-o-y, per cent)
Momentum (m-o-m, per cent)

Sources: NSO; and RBI staff estimates
(4.11 per cent) in April 2024. Majority of the High frequency food price data for May so far
states experienced inflation less than 6 per cent (up to 13th) show that cereal prices declined, mainly
(Chart III.27). driven by wheat. Pulses prices registered a broad-
Chart III.26: Annual Inflation across Sub-groups (April 2024 versus March 2024)
Inflation (y-o-y, per cent)

Sources: NSO; and RBI staff estimates

further in May so far. Potato and tomato prices

Chart III.27: Spatial Distribution of Inflation
April 2024 (CPI-Combined, y-o-y, per cent) continue to rise (Chart III.28).
As price pressures in the case of onions

abated, the government shifted onion exports from
‘prohibited’ to ‘free’ category on May 03, with 40 per
cent export duty and with a minimum export price
(MEP) condition of $550 per metric tonne (MT). To
ensure adequate supply of pulses, the government
has extended duty-free imports of yellow peas till
October 31, 2024. Desi chana (Bengal gram) has been
exempted from import duty till March 2025.
Retail selling prices of petrol and diesel in the

<4 4-6 6-8 10-12 four major metros have remained steady in May so
Note: Map is for illustrative purposes only.
Sources: NSO; and RBI staff estimates.
far (up to 13th). Kerosene and LPG prices were also
unchanged (Table III.2).
based increase, while edible oil prices softened. The PMIs for April 2024 indicate that input costs
Amongst key vegetables, onion prices have dropped as well as output prices recorded a faster rate of
Chart III.28: DCA Essential Commodity Prices

a. Cereals b. Pulses
48 175
44 155
40 135
36 115
32 95
28 75
24 55
Jul-23
Nov-23
Jan-24
Mar-24
May-24
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Sep-23
20
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Mar-24
May-24
Urad dal Tur/ Arhar dal Moong dal

Rice Wheat Masoor dal Gram dal
c. Vegetables d. Edible Oils (packed)

80 160 200
60 120 180
40 80 160
20 40 140
0 0 120
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
Sep-23
Nov-23
May-23
Jul-23
Jan-24
Mar-24
May-24
May-22
May-23
May-24
Mar-22
Nov-22
Mar-23
Nov-23
Mar-24
Sep-22
Sep-23
Jan-23
Jan-24
Jul-22
Jul-23
Potato Onion Tomato (RHS) Groundnut oil Mustard oil Sunflower oil
Sources: Department of Consumer Affairs, GoI; and RBI staff estimates.

daily net injection under the liquidity adjustment

Table III.2: Petroleum Products Prices
Item Unit Domestic Prices Month-over-
facility (LAF) [including marginal standing facility
month (per cent) (MSF)] stood at ₹0.80 lakh crore during April 16 to
May-23 Apr-24 May-24^ Apr-24 May-24^ May 15, 2024 as against average daily net absorption
Petrol ₹/litre 102.92 100.91 100.91 0.0 0.0
of ₹0.20 lakh crore during March 16 - April 15, 2024
Diesel ₹/litre 92.72 90.72 90.72 0.0 0.0
Kerosene ₹/litre 47.55 49.57 49.57 0.0 0.0
(Chart IV.1). During April 16 to May 15, 2024 the
(subsidised) Reserve Bank injected liquidity into the banking
LPG (non- ₹/cylinder 1113.25 813.25 813.25 0.0 0.0 system through two main and nine fine-tuning
subsidised)
^: For the period May 1-13, 2024.
variable rate repo (VRR) operations, cumulatively
Note: Other than kerosene, prices represent the average Indian Oil amounting to ₹6.3 lakh crore. The demand for funds
Corporation Limited (IOCL) prices in four major metros (Delhi, Kolkata,
Mumbai and Chennai). For kerosene, prices denote the average of the
was robust as reflected in the high bid-cover ratios
subsidised prices in Kolkata, Mumbai and Chennai. for both main and fine-tuning VRR auctions.
Sources: IOCL; Petroleum Planning and Analysis Cell (PPAC); and RBI
staff estimates. Of the average total absorption at ₹0.80 lakh crore
during the second fortnight of April through May 15,
expansion in the manufacturing sector (Chart III.29). 2024, placement of funds under the standing deposit
In the services sector, the rate of expansion for both facility (SDF) amounted to ₹0.74 lakh crore, down
input and selling prices moderated. from ₹1.18 lakh crore during March 16 to April 15,
2024. The remaining amount of ₹0.06 lakh crore was
IV. Financial Conditions
absorbed through variable rate reverse repo (VRRR)
Build-up of government cash balances because operations conducted during April 16 to May 15,
of advance tax payments and goods and services tax 2024. During this period, the Reserve Bank received
(GST) related outflows led to pressure on system a cumulative total offer of ₹1.63 lakh crore as against
liquidity since April 20, 2024. In response, the average the total notified amount of ₹1.75 lakh crore.
Chart III.29: PMI: Input and Output Prices
a. Manufacturing b. Services
65 65
60 60
Index (50=No change)
Index (50=No change)
55 55
50 50
45 45
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Aug-23
Jun-23
Oct-23
Dec-23
Feb-24
Apr-24
Input prices Output prices Input prices Output prices
Source: S&P Global.

Chart IV.1: Liquidity Operations

3.5
2.5
1.5
0.5
-0.5
-1.5
-2.5
-3.5
4-Oct-23
7-Feb-24
3-Apr-24
6-Sep-23
9-Aug-23
12-Jul-23
26-Jul-23
1-Nov-23
6-Mar-24
1-May-24
10-Jan-24
24-Jan-24
14-Jun-23
28-Jun-23
18-Oct-23
21-Feb-24
17-Apr-24
20-Sep-23
13-Dec-23
27-Dec-23
23-Aug-23
15-Nov-23
29-Nov-23
20-Mar-24
15-May-24
31-May-23
Daily SDF Variable rate reverse repo MSF

Variable rate repo Net LAF Total absorption
Source: RBI.
In the overnight money market, the weighted and 2 bps, respectively, above the policy repo rate
average call rate (WACR) remained within the LAF during April 16 to May 15, 2024 (Chart IV.2b).
corridor and averaged 6.60 per cent during April 16 Across the term money market segment, yields
to May 15, 2024, the same as during March 16 - April on certificates of deposit (CDs) and commercial
15, 2024 (Chart IV.2a). Rates in the collateralised paper (CP) for non-banking financial companies
segment – the triparty and market repo rates – moved (NBFCs) eased, however, that on 3-month treasury
in tandem with the WACR. On an average basis, the bills (T-bills) hardened marginally (Chart IV.2b). The
triparty repo and the market repo rate traded 5 bps average risk premia in the money market (3-month
Chart IV.2: Policy Corridor and Money Market Rates
7.4 8.4
7.2 8.1
7.8
7.0
7.5
Per cent
Per cent
6.8 7.2
6.9
6.6
6.6
6.4
6.3
6.2 6.0
15-May-24
22-Mar-24
18-Apr-24
15-Sep-23
24-Feb-24
12-Oct-23
28-Jan-24
8-Nov-23
5-Dec-23
1-Jan-24
6.0
29-Aug-23
18-Sep-23
8-Oct-23
28-Oct-23
17-Nov-23
7-Dec-23
27-Dec-23
16-Jan-24
5-Feb-24
25-Feb-24
5-Apr-24
25-Apr-24
16-Mar-24
15-May-24
Tri-party repo Market repo

3-month T-bill 3-month CD
Repo rate WACR MSF SDF 3-month CP (NBFC)
Sources: RBI; CCIL; and Bloomberg.

Chart IV.3: Certificates of Deposit (CDs) and Commerical Paper (CPs) - Fortnightly Issuances
75 200
70
180
65
60 160
55
140
50
45 120
40
100
35
30 80
25
60
20
15 40
10
20
5
0 0
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
Certificates of deposit Commercial paper (RHS)
Source: RBI.
CP minus 91-day T-bill) reduced to 79 bps during (Chart IV.3). On the other hand, issuances of CP at
April 16 – May 15, 2024 from 103 bps during March ₹0.84 lakh crore during 2024-25 (up to April 30) were
16 - April 15, 2024. lower than ₹1.11 lakh crore in the corresponding
In the primary market, fund mobilisation period of the previous year.
through issuances of CDs at ₹0.46 lakh crore during The yield on the 10-year Indian benchmark
2024-25 (up to May 3) was higher than ₹0.27 lakh government security (G-sec) closed at 7.08 per cent
crore in the corresponding period of the previous on May 15, 2024, softening from 7.18 per cent on
year in response to sustained demand for credit April 15 (Chart IV.4a). Indian sovereign bonds
Chart IV.4: Developments in the G-sec Market

a. Movement in 10-year G-sec Yield b. G-sec Yield Curve
7.6 5.5 4
7.9
2
7.5 5.0 7.7 0
7.4
4.5 7.5 -2
Basis points
7.3 -4
Per cent
Per cent
7.3
Per cent
4.0
-6
7.2 7.1
3.5 -8
7.1 6.9
-10
7.0 3.0 6.7 -12
6.5 -14
6.9 2.5
2
10
12
14
16
18
20
30-Oct-23
17-Nov-23
5-Dec-23
23-Dec-23
10-Jan-24
28-Jan-24
15-Feb-24
4-Mar-24
22-Mar-24
9-Apr-24
27-Apr-24
15-May-24
Tenor (years)
15-04-2024 15-05-2024
India US (RHS) Change (May 15, 2024 over Apr 15, 2024) (RHS)
Sources: Bloomberg; CCIL; and RBI staff estimates.

remained resilient and insulated from the volatility

Table IV.1: Financial Markets - Rates and Spread
in global markets during this period due to declining Interest Rates Spread (bps)
government borrowings, increasing demand due (per cent)
(Over Corresponding
to global bond index inclusion and a stable rupee. Risk-free Rate)
The yield curve shifted downwards, with relatively Instrument Mar 16, Apr 16, Variation Mar 16, Apr 16, Variation
2024 – 2024 – 2024 – 2024 –
sharper decrease in yields across the mid to the long Apr 15, May Apr 15, May
2024 14, 2024 14,
end of the curve across the term structure (Chart 2024 2024
IV.4b). On May 3, 2024 the Government of India 1 2 3 (4 = 3-2) 5 6 (7 = 6-5)
announced the buyback of its securities through Corporate Bonds
auction for an aggregate amount of ₹40,000 crore. The (i) AAA (1-year) 7.90 7.83 -7 74 66 -8
Reserve Bank accepted offers to buy g-sec aggregating (ii) AAA (3-year) 7.88 8.01 13 67 72 5
₹0.10 lakh crore against bids received worth ₹0.53 (iii) AAA (5-year) 7.75 7.92 17 52 62 10
lakh crore (1.33 times the notified amount of ₹0.40 (iv) AA (3-year) 8.47 8.61 14 126 132 6
lakh crore) at the auction conducted on May 9, 2024. (v) BBB- (3-year) 12.08 12.19 11 488 490 2
Note: Yields and spreads are computed as averages for the respective
Corporate bond yields and risk premia exhibited periods.
Sources: FIMMDA; and Bloomberg.
mixed movements across diverse maturity profiles
and the rating spectrum during April 16 to May 14,
2024 (Table IV.1). Overall, corporate bond issuances Reserve money (RM), excluding the first-
during 2023-24 at ₹8.6 lakh crore were higher than round impact of change in the cash reserve ratio
₹7.5 lakh crore during the same period of the previous (CRR), recorded a growth of 5.0 per cent (y-o-y) as on
year. Growing demand from long-term domestic May 10, 2024 (7.9 per cent a year ago) [Chart IV.5]. The
investors and foreign players has facilitated raising growth in currency in circulation (CiC), the largest
of larger funds at affordable rates in the debt market component of RM, decelerated to 2.9 per cent from
by corporates and banks. 7.6 per cent a year ago, reflecting the withdrawal of
Chart IV.5: Reserve Money and Currency in Circulation

12
10
8
Per cent, y-o-y
0
01-Jul-22
22-Jul-22
12-Aug-22
06-Jan-23
27-Jan-23
21-Apr-23
14-Jul-23
04-Aug-23
25-Aug-23
19-Jan-24
12-Apr-24
20-May-22
10-Jun-22
02-Sep-22
23-Sep-22
14-Oct-22
04-Nov-22
25-Nov-22
16-Dec-22
17-Feb-23
10-Mar-23
31-Mar-23
12-May-23
02-Jun-23
23-Jun-23
15-Sep-23
06-Oct-23
27-Oct-23
17-Nov-23
08-Dec-23
29-Dec-23
09-Feb-24
01-Mar-24
22-Mar-24
03-May-24
Reserve money (CRR adjusted) Currency in circulation
Source: RBI.

Chart IV.6: M3 Growth and Credit Growth of SCBs - Base and Momentum Effect
20 3
18
2
16
1
14
Percentage points
0
Per cent, y-o-y
12
10 -1
8
-2
6
-3
4
2 -4
0 -5
8-Apr-22
6-May-22
26-Aug-22
13-Jan-23
7-Apr-23
5-May-23
25-Aug-23
12-Jan-24
5-Apr-24
3-May-24
3-Jun-22
1-Jul-22
29-Jul-22
23-Sep-22
21-Oct-22
18-Nov-22
16-Dec-22
10-Feb-23
10-Mar-23
2-Jun-23
30-Jun-23
28-Jul-23
22-Sep-23
20-Oct-23
17-Nov-23
15-Dec-23
9-Feb-24
8-Mar-24
SCBs' credit growth M3 growth
SCBs' credit momentum effect (RHS) SCBs' credit base effect (RHS)
Source: RBI.
₹2000 banknotes17 – 97.8 per cent of them has been increased by 12.4 per cent (10.0 per cent a year ago).
returned to the banking system, mostly in the form Scheduled commercial banks’ (SCBs’) credit growth
of deposits (as on May 19, 2024). stood at 15.9 per cent as on May 3, 2024 (15.4 per
cent a year ago) [Chart IV.6].
Money supply (M3) rose by 11.1 per cent (y-o-y) as SCBs’ deposit growth (excluding the impact of
on May 3, 2024 (9.7 per cent a year ago). Aggregate 18
the merger) remained in double digits in April 2024
deposits with banks, the largest component of M3, (Chart IV.7).
Chart IV.7: SCBs’ Aggregate Deposits and Credit Growth - Wedge

20 8
4
15
2
Percentage points
0
Per cent
10
-2
-4
5
-6
-8
0 -10
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Aggregate deposits Credit Wedge (RHS)

Source: RBI.
17 Announced on May 19, 2023.

18 Excluding the impact of the merger of a non-bank with a bank (with effect from July 1, 2023).

Chart IV.8: Incremental Credit-Deposit Ratio

30 140
25 120
100
20
Ratio (per cent)

80
15
60
10
40
5
20
0 0
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Incremental credit Incremental deposit Incremental credit-deposit ratio (RHS)
Source: RBI.
As on April 19, 2024 the system level incremental bps during May 2022 to April 2024. Consequently,
credit-deposit ratio stood at 90.7 per cent (Chart the weighted average lending rate (WALR) on fresh
IV.8). With the statutory requirements for CRR and and outstanding rupee loans increased by 186 bps
statutory liquidity ratio (SLR) at 4.5 per cent and 18 and 113 bps, respectively, during May 2022 to March
per cent, respectively, around 77 per cent of deposits 2024. In the case of deposits, the weighted average
were available with the banking system for credit domestic term deposit rates (WADTDRs) on fresh and
expansion as on April 19, 2024. outstanding deposits increased by 259 bps and 185
bps, respectively, during the same period (Table IV.2).
In response to the 250 bps change in the policy
repo rate since May 2022, the external benchmark- Transmission across bank groups indicates that
based lending rate (EBLR) increased by a similar the increase in deposit and lending rates was higher
magnitude. The 1-year median marginal cost of in the case of public sector banks (PSBs), except for
funds-based lending rate (MCLR) increased by 166 outstanding loans, during May 2022 to March 2024
Table IV.2: Transmission to Banks’ Deposit and Lending Rates

(Variation in bps)
Period Repo Rate Term Deposit Rates Lending Rates
(bps)
WADTDR - WADTDR- EBLR 1-Yr. MCLR WALR- Fresh WALR-
Fresh Deposits Outstanding (Median) Rupee Loans Outstanding
Deposits Rupee Loans
Easing Period
-250 -259 -188 -250 -155 -232 -150
Feb 2019 to Mar 2022
Tightening Period
250 259 185 250* 166* 186 113
May 2022 to Mar 2024
Note: Data on EBLR pertain to 32 domestic banks.
*: Data on EBLR and MCLR pertain to April 2024.
WALR: Weighted Average Lending Rate. WADTDR: Weighted Average Domestic Term Deposit Rate;
MCLR: Marginal Cost of Funds-based Lending Rate; EBLR: External Benchmark based Lending Rate.
Source: RBI.

Chart IV.9: Transmission across Bank-groups (May 2022 to March 2024)
a. Lending Rates b. Deposit Rates
350 317 350

300 295
300 300
265
250 250 222
Basis points
191 190
Basis points
200 176 177 185
163 155 200 169
150
104 114 150
100
100
50
50
0
WALR WALR 1-Year median 0
(fresh rupee (outstanding MCLR WADTDR WADTDR
loans) loans) (fresh deposit) (outstanding deposit)
Public sector banks Private banks Foreign banks Public sector banks Private banks Foreign banks
Source: RBI.
(Chart IV.9). The lending rates of PSBs remained lower Q4:2023-24 from the previous quarter, mainly driven
than those of private banks, while their deposit rates by the manufacturing sector.19 The performance of
were higher. information technology (IT) companies remained
During Q4:2023-24, listed non-government non- subdued during Q4 primarily on account of weakness
financial (NGNF) companies exhibited a modest pick- in banking, financial services and insurance sector,
up in top-line growth. Sales growth of listed NGNF and discretionary spending (Chart IV.10). In line
companies improved to 8.3 per cent (y-o-y) during with revenues, operating profit margin moderated
Chart IV.10: Sales Growth

25
20
Per cent (y-o-y)
15
12.9
9.1 9.1
10 8.2 8.3
5.5 5.4
5 3.2 3.7 4.1
2.4 3.0
Q4:2022-23 Q1:2023-24 Q2:2023-24 Q3:2023-24 Q3:2023-24 Q4:2023-24
Note: Results are based on 596 listed private non-financial companies for Q4:2023-24. The shaded bar indicated the growth of common companies in Q3:2023-24 and
Q4:2023-24.
Sources: Capitaline; and RBI staff estimates.
19 Based on a sample of 596 companies constituting 60.0 per cent of the total market capitalisation of listed non-government non-financial companies.

Table IV.3: Profit Margin

Sector No. of Operating Profit Margin Net Profit Margin
Companies (per cent) (per cent)
Q4: Q3: Q4: Q4: Q3: Q4:

2022-23 2023-24 2023-24 2022-23 2023-24 2023-24
IT 59 23.1 24.2 23.5 17.7 18.9 20.0

Manufacturing 369 14.3 15.2 14.9 11.8 10.8 9.1
Services (non-IT) 119 28.7 29.0 29.8 7.8 8.6 10.0
Aggregate 596 16.8 17.9 17.4 12.6 11.8 11.0
Sources: Capitaline; and RBI staff estimates.
in Q4 (Table IV.3). Staff cost of IT companies rose which includes income from fees, commissions,
modestly, despite reduction in their headcounts, profit, and loss from investments also exhibited
with the top five IT companies reducing their global strong growth for banking and financial sector
headcount by 11,432 during Q4. companies, reflecting the impact of gains from a
specific sale transaction undertaken by a private
Manufacturing companies registered 8.2 per cent
sector bank. Growth in expenditure outpaced growth
growth in sales in Q4:2023-24 (4.1 per cent in Q3). Sales
in revenues amidst an increase in interest expenses;
growth of early reporting non-IT services companies however, growth in operating profit exhibited a
stood at 9.1 per cent during Q4:2023-24 (Chart IV.10). sequential improvement. Furthermore, net profit
In the case of listed banking and financial sector growth remained in double digits during the quarter.
companies20, revenues, which primarily include the Domestic equity market registered gains in the
interest income in case of banks, registered strong fourth week of April 2024, tracking positive global
double-digit growth (Chart IV.11). Other income, cues, strong domestic macroeconomic data releases,
Chart IV.11: Performance of Listed Financial Companies

70.
60.
Y-o-y growth in per cent
50.
40.
30. 25.9 24.8

20.9
20. 13.6 13.6
10.
0.
Jun 2023 Sep 2023 Dec 2023 Mar 2024
Note: Includes the historical standalone figures of HDFC Limited, which was merged with HDFC Bank in July 2023.
Sources: CMIE Prowess; and RBI staff estimates.
20 Based on a sample of 155 companies constituting around 74 per cent of the total market capitalisation of listed banking and financial sector companies.

Chart IV.12: Movement in Indian Equity Market

80000 22
75000 20
18
70000
16
Index
Index
65000
14
60000
12
55000 10
50000 8
15-Jan-23
15-Feb-23
15-Apr-23
15-Mar-23
15-Aug-23
15-Jan-24
15-May-23
15-Jun-23
15-Jul-23
15-Sep-23
15-Oct-23
15-Nov-23
15-Dec-23
15-Feb-24
15-Apr-24
15-Mar-24
15-May-24
Sensex India VIX (RHS)
Source: Bloomberg.
and resilient Q4:2023-24 corporate earnings results. India VIX21 in the past one month (Chart IV.12). In
Equity prices registered some correction thereafter April 2024, there was also a mega mobilisation of
amidst FPI sell-offs, before exhibiting some recovery ₹18,000 crore through follow-on-public offer (FPO)
on positive global cues and further easing of domestic by a telecom company.
CPI inflation. The benchmark BSE Sensex closed Gross inward foreign direct investment (FDI)
at 72,987 on May 15, 2024, with the equity market almost remained stable at US$ 71.0 billion during
recording sharp swings in volatility, as measured by 2023-24 (US$ 71.4 billion a year ago) [Chart IV.13a].
Chart IV.13: Foreign Direct Investment Flows
100 100 10000

84.8
80 71.4 71.0
60 80 8000
10 year gross FDI average
38.6
40 10 year net FDI average
60 6000
US$ billion
Per cent
US$ billion
20 28.0
10.6
0 40 4000
- 28.6 -2 9.3
-20 - 44.4
- 14.0 20 2000
-40 - 17.6
- 16.0
-60
0 0
2011-15 2016-20 2021-23
-80
2021-22 2022-23 2023-24 Share of developing economies in world FDI flows
Net outward FDI Repatriation/Disinvestment Share of developed economies in world FDI flows
Gross FDI Net FDI Global net FDI inflows (RHS)
Sources: RBI; and UNCTAD.
21 India VIX is a volatility index based on the NIFTY Index option prices.

More than 60 per cent of the FDI equity flows were per cent in 2003.23 During 2023, Indian companies
directed towards manufacturing, electricity and other announced over 550 greenfield FDI projects abroad,
energy, computer services, financial services and, the highest in any year before.
retail and wholesale trade. Singapore, Mauritius, the
In April 2024, foreign portfolio investors (FPIs)
US, the Netherlands, Japan and the UAE contributed
turned net sellers in Indian capital markets after two
to more than 80 per cent of the flows. Net FDI
months amidst uncertain global cues over widening
declined to US$ 10.6 billion during 2023-24 from
US$ 28.0 billion a year ago, mainly reflecting higher geopolitical tensions, rising commodity prices and
repatriation. surging US bond yields. Net FPI outflows were to the
tune of US$ 2.7 billion in April 2024, with outflows
Global FDI flows have been impacted by higher
recorded in both equity and debt segments (Chart
borrowing costs, deepening geo-fragmentation and
IV.14a). Indian equities registered net outflows of
rising protectionism in recent years. Nonetheless,
US$ 1.1 billion in April 2024, in line with comparable
India is among the top 10 economies expected to
emerging market peers (Chart IV.14b). Sector-
experience high FDI momentum in 2024, as per
wise, information technology (IT) and financial
fDi Intelligence22. Since the onset of the COVID-19
services registered the highest outflows, while
pandemic, there has been a structural change in
telecommunications and power attracted the largest
global investment patterns, shifting FDI flows from
equity inflows during April 2024. Net FPI outflows in
developed economies towards developing economies
May 2024 (up to 14th) amounted to US$ 3.4 billion.
(Chart IV.13b). have also risen to play a significant
part as sources for global capital. The share of global Non-resident deposits registered higher
FDI capital expenditure originating from G20-EMs accretions to the tune of US$ 14.7 billion during
in 2023 rose to 14.9 per cent as compared with 8.2 2023-24 than US$ 9.0 billion a year ago, with
Chart IV.14: Net Portfolio Investments
12
2
0.8
0.4
8
0.1
0
-0 .1
-0 .4
-0 .5
4
US$ billion
US$ billion
-1 .1
-1 .1
-2
-2 .2
-2 .7 -4
-4
-3 .4
- 4.8
-8 -6
China
Turkey
Thailand
Vietnam
Philippines
South Africa
India
Indonesia
Brazil
Taiwan
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24*
Equity Debt Total
Notes: 1. Debt includes investments under the voluntary retention route and hybrid instruments.
2. *: Data up to May 14, 2024.
Sources: National Securities Depository Limited (NSDL); and Institute of International Finance.
22 A specialist division from the Financial Times that provides a comprehensive offering of services related to foreign direct investment.
23 According to a report by fDi Intelligence.

Chart IV.15: Flows Under Non-Resident Deposit Accounts
Source: RBI.
net accretions to all accounts namely, Foreign quarter. With ECB inflows outpacing outflows, net
Currency Non-Resident [FCNR(B)] accounts, Non- inflows resumed after two quarters. Cumulatively
Resident (External) Rupee Accounts [NR(E)RA] during 2023-24, registrations (at US$ 49.2 billion),
and Non-Resident Ordinary (NRO) accounts disbursements (at US$ 38.4 billion) as well as
(Chart IV.15). net inflows (at US$ 9.5 billion) under ECBs were
substantially higher than the levels recorded in 2022-
During Q4:2023-24, external commercial
23 (Chart IV.16).
borrowings (ECBs) registrations amounted to US$
13.1 billion, 87 per cent higher than the previous More than 70 per cent of ECBs raised during
Chart IV.16: ECBs - Registrations and Flows
50
40
30
20
US $ billion
10
-10
-20
2022-23
2023-24
Q1:2022-23
Q2:2022-23
Q3:2022-23
Q4:2022-23
Q1:2023-24
Q2:2023-24
Q3:2023-24
Q4:2023-24
Registrations Inflows Outflows Net inflows
Source: RBI.

Chart IV.17: ECB Agreements - Hedging Position
50
45
40
35
30
US$ billion
25
20
15
10
5
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2021-22 2022-23 2023-24 2022-23 2023-24
Loans from foreign parent Hedged loans Rupee denominated Other ECBs (including naturally hedged loans)
Source: RBI.
2023-24 were effectively hedged in terms of explicit augurs well for the overall capacity augmentation
hedging, rupee denominated loans or loans from in the economy and is reflective of private sector
foreign parents, limiting the impact of external investment demand (Chart IV.18).
shocks (Chart IV.17).
The overall cost of ECB loans increased during
Even though the end use of ECBs was broad based 2023-24, primarily due to elevated global benchmark
during 2023-24, funds raised for sourcing of capital interest rates (such as the secured overnight
goods, modernisation projects and development of financing rate (SOFR)), reflecting higher global
infrastructure witnessed the largest increases. This interest rates. The other component of the overall
Chart IV.18: End-use of the Registered ECBs
US$ billion
Source: Form ECB, RBI.

Chart IV.19: Overall Cost of ECBs

8
Interest rate and margin (in per cent)
0
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
2022-23
2023-24
Secured overnight financing rate (SOFR) for US dollar Weighted average interest margin
Sources: Form ECB; and RBI staff estimates.
cost – the weighted average margin reflecting the major foreign exchange reserves holding countries.
risk premium – moderated to 159 bps during April – Foreign exchange reserves at US$ 644.2 billion stood
March 2024 from 172 bps a year ago and an average equivalent of more than 10 months of imports
of 181 bps during 2021-22 (Chart IV.19). projected for 2024-25 and more than 99 per cent
of total external debt outstanding at end-December
India’s foreign exchange reserves increased by
2023 (Chart IV.20).
US$ 21.7 billion during the calendar year 2024 so far
(as on May 10, 2024), the highest expansion among The Indian rupee (INR) depreciated by 0.5 per
Chart IV.20: Foreign Exchange Reserves
644.2
Notes: 1. *: Data for May 10, 2024.

2. Import cover of India for March, April, and May 2024 is based on imports projected for 2024-25.
3. Data for forex reserves to external debt ratio for Turkey corresponds to end-September 2023, while all other figures are for end-December 2023.
Sources: RBI; IMF; CEIC; and respective central bank websites.

Chart IV.21: Movements of the Indian Rupee and Major Currencies against the US Dollar
(April 2024 over March 2024)
4 2
1.7
2 1
Per cent
Per cent
0 0
-0 .2 -0 .2 --0 .5
-0 .7 --00.5
.5
-2 -1 .0 -1 .3 -1 .4 -1
-1 .5
-1 .9 -2 .0 -2 .1 -2 .1 -2 .2 -2 .7 -2 .8
-4 -2
South African rand
Mexican peso
Russian ruble
Argentine peso
Philippine peso
Thai baht
Brazilian real
US Dollar (DXY)
Indian rupee
Chinese yuan
Malaysian ringgit
UK pound
Taiwanese dollar
Indonesian rupiah
Japanese yen
EME Currency Index
Euro
Percentage change (+ appreciation/ - depreciation) Volatility (RHS)
Note: US dollar (DXY) measures the movements of the US dollar against a basket of major currencies (Euro, Japanese yen, British pound, Canadian dollar, Swedish krona,
Swiss franc).
Sources: FBIL; Thomson Reuters; and RBI staff estimates.
cent (m-o-m) vis-à-vis the US dollar in April 2024 as In terms of the 40-currency real effective
most EMEs registered pressures from strengthening exchange rate (REER), the INR depreciated by 1.1 per
of the US dollar amidst heightened geopolitical cent (m-o-m) in April 2024 as negative relative price
tensions and waning rate cut expectations. The differentials more than offset the appreciation of the
INR remained one of the least volatile among major INR in nominal effective terms (Chart IV.22).
currencies during the month (Chart IV.21).
Chart IV.22: Movements in the 40-Currency REER
a. Monthly Changes
108 4
106
104 2
Index (2015-16=100)
102
Per cent
100 0
98
-1 .1
96 -2
94
92 -4
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
REER Change in REER (RHS)
Source: RBI.

Payment Systems The BBPS documented the highest value and

volume of transactions during April 2024, partly
Digital transactions continued to expand (y-o-y)
buoyed by the participation of non-bank payment
in April 2024, primarily led by the retail segment,
aggregators (PAs) in the system as operating units
including the Unified Payments Interface (UPI), the
from April 1, 2024. Furthermore, the NPCI Bharat
National Automated Clearing House (NACH) and
BillPay Limited (NBBL), a wholly owned subsidiary of
the Bharat Bill Payment System (BBPS) [Table IV.4].
the NPCI in collaboration with the State Bank of India
Real Time Gross Settlement (RTGS) transactions
(SBI), onboarded the SBI National Common Mobility
showed accelerated growth (y-o-y) while the pace
Card25 (NCMC) on its Bharat BillPay platform for the
of growth of Immediate Payment Service (IMPS)
convenience of travellers.
and National Electronic Toll Collection (NETC)
moderated in April 2024 in both volume and value NPCI’s wholly owned subsidiary – NPCI
terms. The growth in UPI transactions remained International Payments Ltd. (NIPL) – signed an
robust, reflecting increasing digital adoption agreement26 with the Bank of Namibia (BoN) to
across the country on the back of growing range support them in developing an instant payment
of account types that UPI supports − including system like UPI. This initiative aims to strengthen
prepaid payment instruments (PPIs), wallets, Namibia’s financial infrastructure and foster
savings accounts, overdraft accounts, RuPay credit inclusive economic growth. Additionally, India
card accounts and bank credit lines. To expand the and Ghana have committed to working swiftly to
adoption and usage of UPI, the Reserve Bank held a operationalise UPI on Ghana’s Interbank Payment
meeting24 with various stakeholders on May 8, 2024 and Settlement Systems (GHIPSS) in less than
covering issues pertaining to UPI infrastructure six months.27 In its resolve towards customer
upscaling, challenges faced by the UPI ecosystem centricity and ensuring transparency in the credit
along with possible solutions and measures to intermediation process, the Reserve Bank issued
incorporate potential users into the digital payments a draft circular on the regulatory framework for
ecosystem. aggregation of loan products by lending service
Table IV.4: Growth in Select Payment Systems

(y-o-y in per cent)
Payment System Indicators Transaction Volume Transaction Value
Mar-23 Mar-24 Apr-23 Apr-24 Mar-23 Mar-24 Apr-23 Apr-24

RTGS 7.8 12.3 3.2 16.9 11.5 12.4 7.0 21.5
NEFT 26.8 45.2 29.1 45.9 7.4 15.2 10.5 13.4
UPI 60.0 55.3 58.7 50.1 46.3 40.8 43.9 38.8
IMPS 1.0 16.8 5.1 11.0 18.2 16.2 17.2 13.7
NACH 29.8 22.8 -3.7 50.5 35.1 15.8 18.4 23.7
NETC 13.3 10.6 14.9 7.6 23.7 17.2 22.1 8.6
BBPS 56.5 25.4 33.5 45.1 61.6 82.8 51.2 107.5
Note: RTGS: Real Time Gross Settlement, NEFT: National Electronic Funds Transfer, UPI: Unified Payments Interface, IMPS: Immediate Payment Service,
NACH: National Automated Clearing House, NETC: National Electronic Toll Collection, BBPS: Bharat Bill Payment System.
Source: RBI.
24 RBI Press Release. May 8, 2024

25 NPCI Circular. April 18, 2024.
26 NPCI Circular. May 2, 2024.
27 PIB Press Release. May 6, 2024.

providers (LSPs) – ‘Digital Lending: Transparency economy is on a glidepath to a soft landing are
in Aggregation of Loan Products from Multiple now more tempered than before, monetary policy
Lenders’28 – inviting comments and feedback from authorities are reluctant to give up on a Goldilocks
various stakeholders. Additionally, a set of guidelines scenario that avoids a crash landing. Fearing the
in the form of frequently asked questions (FAQs)29 folly of haste, they will likely want to stay patient
on Default Loss Guarantee in Digital Lending were and high for longer than current forecasts. Markets
issued by the Reserve Bank. draw hope from expectations of an eventual slowing
in housing, insurance and medical costs causing a
Conclusion
faster core disinflation. Inflation developments will
In this milieu, recent developments in the global likely not derail the rate cutting cycle, only delay it.
economy sharpen the dilemma for monetary policy Policy divergence may once again rent both sides of
authorities. In the face of lack of progress in bringing the Atlantic apart.
down inflation to its target, high interest rates “may
As the start of monetary policy easing moves
need more time to do their job”.30 Confidence is low
out into the horizon, emerging market central banks
on an inertial easing of the momentum of inflation,
face the pressure of weakening currencies, pass-
given that it has stalled in spite of past aggressive
through to prices of imported goods and services
tightening. Moreover, structural changes in the
and higher inflation. Accordingly, surprise rate
form of rising immigration to advanced economies,
increases, coordinated communication and foreign
the muscular use of industrial policy, fiscal laxity
exchange market interventions are being resorted
and rewiring of supply chains as globalisation
to when monetary policy tightness is increasingly
fragments are whole new dimensions to the conduct
viewed as hobbling the pace of economic recovery.
of monetary policy. Increasingly, national security
Higher borrowing costs are curbing domestic demand
and resilience are prioritised ahead of efficiency and
and posing a threat in countries with high levels of
cost effectiveness. The IMF has reported no less than
household debt. Sharp drops in the yen, yuan and
2500 industrial policy actions worldwide in 2023, of
won have complicated the outlook even further,
which more than two-thirds were trade distorting
prompting both verbal and forex sale defences
as they discriminated against foreign commercial
including to protect the acceleration of exports in the
interests.31 Clearly, the monetary policy dilemma
past three months. Increasingly, market expectations
calls for strategic signalling rather than a cacophony
converge to the view that these central banks will
of communication.
not cut rates ahead of the US Fed in spite of high real
Yet, sustaining a restrictive stance might be interest rates. They state that they will not be ‘Fed-
rendered difficult by economic activity and consumer dependent’, but they will face practical limits on how
sentiment slowing, with fewer jobs being added far they can diverge from the Fed. Consequently, the
than a month or two ago – price pressures have rate easing cycle may turn out to be shallower than
acutely affected “the fundamentals of life”32. Hence, initially anticipated. Meanwhile, the heightened
rate increases to squelch the uptick in inflation global uncertainty is sending emerging market central
are regarded as unlikely. Although hopes that the banks on a spree of gold buying, adding 290 tonnes in
28 RBI Press Release. April 26, 2024.
the first quarter of 2024 and accounting for a quarter
29 RBI FAQs. April 26, 2024. of overall global gold demand. Amidst geopolitical
30 https://www.ft.com/content/d1221cb9-9e5a-4512-9fef-4cc744a307fc
31 https://www.imf.org/en/Blogs/Articles/2024/04/12/industrial-policy-is- developments and a slowing global economy, these
back-but-the-bar-to-get-it-right-is-high central banks are signalling that living in challenging
32 Financial Times (2024, May 2). Jay Powell’s dilemma: the US economy
is too strong to cut rates. times calls for strategic diversification.

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State of the Economy ARTICLE

RBI Bulletin May 2024 13

14 RBI Bulletin May 2024

RBI Bulletin May 2024 15

16 RBI Bulletin May 2024

down the headline inflation in July and August, it AEs

during the course of 2025-26.

RBI Bulletin May 2024 17

Chart II.1: GDP Growth Projections

Source: OECD Economic Outlook, May 2024.

Chart II.2: Global GDP Growth Nowcast (Q-o-Q)

1.0 0.7 0.5

47 countries OECD+ actual 86 countries CEIC nowcast

20 countries OECD+ actual 86 countries CEIC actual

Sources: CEIC; OECD; and RBI staff estimates.

18 RBI Bulletin May 2024

Chart II.3: Trends in Supply Chain Pressures and GPR

-1.5 1500 0.0

Box 1: Impact of Geopolitical Risks on Economic Growth: A Cross Country Analysis

Chart B1: GDP Growth vs Global GPR

AE EME Global GPR index (RHS)

7 This measures frequency of articles in leading newspapers discussing geopolitical tensions.

RBI Bulletin May 2024 19

A panel data regression framework using data for 42

Chart II.4: Consumer Sentiment and Financial Conditions

US Japan UK (RHS) India China Euro zone (RHS)

20 RBI Bulletin May 2024

Chart II.5: Global PMI

Composite Manufacturing Services

Chart II.6: Global PMI: Export Orders

Services Composite Manufacturing

RBI Bulletin May 2024 21

Chart II.7: Commodity and Food Prices

Price Futures as on Apr 15, 2024

c. Food Prices d. Gold

Sources: Bloomberg; World Bank Pink Sheet; and FAO.

22 RBI Bulletin May 2024

Chart II.8: Inflation - AEs and EMEs

Sources: Bloomberg; and OECD.

RBI Bulletin May 2024 23

Sources: Bloomberg; and IIF.

MSCI EME currency index

Dollar index (RHS)

central banks, Brazil and Peru reduced their policy

Chart II.10: Changes in Policy Rates

RBI Bulletin May 2024

rates by 25 bps each in their May meetings while

Chart III.1: Economic Activity and GDP Growth Nowcast

GDP - Actual GDP - Nowcast

RBI Bulletin May 2024 25

Chart III.2: E-way Bills and Toll Collections

a. E-way Bills b. Toll Collections

Per cent, y-o-y

Sources: GSTN; and RBI.

Chart III.3: Automobile Sector Indicators

Motorcycle sales Scooters

Petrol Diesel ATF

26 RBI Bulletin May 2024

Chart III.4: Retail Sales Growth