RBI studies on economic momentum
- Two RBI studies suggest that economic momentum is sustaining.
- State of The Economy report examines a range of high-frequency indicators.
- Another study by conducted by economists at the central bank, looks at investment intentions financed through various sources, providing some indications.
Key findings of State of the Economy Report
- The economy is likely to have grown at 8 per cent during the April-June period.
- The economic momentum (on a quarter-on-quarter basis) is likely to have remained healthy even as the global recovery is slowing down as per the State of the Economy report by the RBI.
Export Contraction Impact
- Contraction in exports will drag down growth.
- Merchandise exports declined by around 16 per cent, falling to a nine-month low $32.25 billion.
- Growth in private consumption and investment activity is expected to offset the decline in growth due to contraction in exports.
Signs of Growth:
- Several indicators of both demand and supply show healthy signs.
- E-way bill volumes have registered growth.
- Fast-moving consumer goods (FMCG) sales have also improved.
- Cargo at major ports, as well as railway freight traffic, has picked up pace.
- Steel and cement consumption have registered healthy growth.
Signs of weakness in the economy:
- Automobile sales, with the exception of three-wheelers, remain weak.
- Demand for work by households/individuals under MGNREGA is higher.
- Non-oil imports are lower indicating weak domestic demand.
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Gross fixed capital formation (GFCF):
- GFCF is a component of the expenditure on gross domestic product (GDP) that indicates how much of the new value added in an economy is invested rather than consumed.
- It measures the value of acquisitions of new or existing fixed assets by the business sector, governments, and "pure" households (excluding their unincorporated enterprises) minus disposals of fixed assets.
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Key findings of Study on Private Investment Intentions
- Investment intentions closely track actual investments (as measured by the gross fixed capital formation of private corporates), this serves as a useful indicator of gauging the private investment cycle.
- In 2022-23, investment plans were made for 982 projects with a capital outlay of Rs 3.5 lakh crore.
- In comparison, in 2021-22, plans were drawn up for 791 projects worth Rs 1.96 lakh crore.
- Around 60 per cent of these projects financed by banks and financial institutions are in the infrastructure sector power, roads and bridges, SEZs, industrial biotech and IT park.
- Most are for investment in green field projects.
- Uttar Pradesh, Gujarat, Odisha, Maharashtra and Karnataka account for more than half of the total project cost.
While greater clarity on the extent of a pick in the investment cycle will emerge in the quarters ahead, stronger bank and corporate sector balance sheets, improving demand conditions and rising capacity utilisation rates, do bode well for the capex cycle.
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