Today, the Reserve Bank released the August 2024 issue of its monthly Bulletin. The Bulletin includes monetary policy statement, five speeches, seven articles, and current statistics.
Highlights:
The persistence of food inflation – in terms of the time taken to return to normalcy after a shock – has increased mainly on account of rising expectations driven by repeated supply shocks due to adverse climatic incidents of rising intensity.
Persistent food inflation is spilling over through general inflation expectations to costs, services charges and output prices, although this fuller impact is offset by monetary policy.
Monetary policy vigil is warranted so as to prevent the generalisation of inflationary pressures, in order to achieve overall price stability and thereby preserve and strengthen the foundations of a high growth trajectory.
In 2024-25, the gross fiscal deficit is budgeted to fall to 4.9 per cent of GDP from 5.6 per cent of GDP in 2023-24 (Provisional Accounts, PA).
Capital expenditure is budgeted to increase to 3.4 per cent of GDP in 2024-25 from an average of 1.7 per cent during 2010-20 while revenue expenditure is budgeted to grow by 6.2 per cent in 2024-25 (Budget Estimate, BE) over 2023-24 (PA).
On the receipts side, gross tax revenue is budgeted to increase by 10.8 per cent, with a buoyancy of 1.1, which is in line with its average during 2010-11 to 2018-19.
The article presents quarterly estimates of spare capacity since January-March 2021 based on the data received through Services and Infrastructure Outlook Survey (SIOS).
The results suggest that the spare capacity of Indian services sector was in the range of 11 to 14 per cent during the 3-year period 2021-24, although it may be noted that the sample period largely coincides with the post-pandemic period.
Information on spare capacity in the services sector along with the capacity utilisation for manufacturing sector can strengthen inputs for the understanding of inflation and output dynamics and for policy formulation.
The analysis suggests that ‘payment systems’ are a priority, both in terms of innovations and regulation by the central banks among different areas of FinTech.
Central bank digital currency (CBDC) and its usage is emerging as the central area of policy discussions and initiatives, with the focus shifting towards modalities of CBDC implementation from the earlier concerns related to applicable technology and financial implications.
FinTech policy considerations at global level have dawned on BigTech firms and the specific technologies (including IoT, DLT and Cloud computing) apart from the entities applying these technologies. The Reserve Bank of India gives due emphasis to consumers, service delivery and financial inclusion. The regulatory focus aims to bring the regulator and the market/innovators together.
The investment intentions of private corporates remained buoyant during 2023-24 as reflected in higher total number of projects as well as the total cost of projects sanctioned by banks/FIs, with green field (new) projects accounting for the lion’s share of about 89 per cent in the total cost of projects financed.
Infrastructure sector continued to attract major share of envisaged capital investment, led by ‘Roads & Bridges’ and ‘Power’ sectors.
Phasing plans indicate that aggregate capex intended by the private corporate sector in 2023-24 increased significantly by about 57 per cent over the preceding year.
The phasing profile of the pipeline projects finances suggests that the envisaged capex is estimated to increase significantly to ₹2,45,212 crore in 2024-25 from ₹1,59,221 crore in 2023-24.