Tax Relief & Strong Agriculture To Boost India’s Consumption: RBI

New Delhi, Feb 20 (KNN) The Reserve Bank of India has reported a revival in the country's economic momentum, with prospects of strengthening consumption demand supported by moderating inflation and recent tax relief measures, according to its latest monthly bulletin.

The central bank's assessment highlights dual growth drivers, with rural demand expected to benefit from strong agricultural sector performance, while urban consumption is anticipated to improve due to enhanced disposable incomes following tax concessions announced in the recent budget. 

This positive outlook has prompted Goldman Sachs Group to revise India's growth forecast upward by 10 basis points to 6.2 percent for the current financial year ending March, with a projected growth rate of 6.3 percent for the subsequent year. 

However, these estimates remain conservative compared to the government's projections of 6.4 percent for the current fiscal year and 6.3 percent-6.8 percent for the following period.

The RBI's report emphasises favorable agricultural conditions, citing robust monsoon-sown crops, improved winter sowing, and higher reservoir levels as positive indicators for future food inflation trends. 

Nevertheless, the bank acknowledges potential inflationary risks stemming from global financial market uncertainty, energy price volatility, and adverse weather events. 

Looking ahead, the RBI projects average inflation at 4.2 percent for the fiscal year beginning April, closely aligning with its target of 4 percent. 

Regarding financial system liquidity, the RBI has implemented various measures, including open market operations and variable rate repo auctions, to ensure adequate fund injection. 

However, the central bank notes an uneven distribution of liquidity within the banking system, evidenced by the simultaneous occurrence of liquidity deficit and banks' utilisation of the standing deposit facility. 

The report also identifies a notable reluctance among certain banks to participate in uncollateralised call money market lending, suggesting persistent challenges in liquidity distribution.

(KNN Bureau)