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India economic activity remains strong, cenbank governor says, amid growth concerns

investing.com 06/11/2024 - 05:47 AM

Economic Outlook in India

MUMBAI (Reuters) – Economic activity in India remains strong, with the agriculture and services sectors performing well, according to India's central bank governor on Wednesday, who addressed concerns about slowing growth.

Inflation continues to pose a challenge, and decisions regarding interest rates must be considered carefully, stated Shaktikanta Das, governor of the Reserve Bank of India (NS:BOI), at an event.

> "(Economic) data which is coming in is mixed. But the positives outweigh the negatives and, by and large, underlying activities remain strong," Das remarked.

However, corporate earnings for the July-September quarter reflected weakness in urban consumption, particularly with fast-moving consumer goods (FMCG) firms showing flat or declining volume growth.

High-frequency indicators like the purchasing managers index for manufacturing and services experienced a decline in September but showed a rebound in October.

Das emphasized that he would not "rush to say the economy is slowing." The RBI had previously retained its growth forecast for the current financial year at 7.2%. While interest rates were maintained, the monetary policy stance was adjusted to 'neutral' from 'withdrawal of accommodation,' allowing for potential rate cuts in the future.

Recent high food costs have contributed to a rise in inflation—from 3.65% in August to 5.49% in September. Das indicated that the upcoming October inflation print, expected next week, is likely to be "very high."

> "A change in stance doesn't mean there will be a rate cut in the very next meeting," Das clarified.

A Reuters poll indicated that a slight majority of economists anticipate the RBI will implement rate cuts in December.




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