RBI: Rural Consumption Drives Aggregate Demand Revival

Mumbai, Aug 19 (PTI) Aggregate demand conditions are gathering momentum with a revival in rural consumption and are expected to reinvigorate the private sector investment, an article published in the RBI's latest Bulletin said.

Persistent geopolitical tensions, rekindled fears of a potential recession in key economies and financial market volatility in response to monetary policy divergence cast a shadow on global economic prospects even as inflation moderated grudgingly across countries, the article on 'State of the Economy' written by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra said.

"In India, aggregate demand conditions are gathering momentum with a revival in rural consumption on the back of growing incomes. This stimulus to demand is expected to reinvigorate the hitherto subdued participation of the private sector in total investment," the article said.

It also noted that headline inflation moderated from its spike in June to 3.5 per cent in July, but this was primarily due to the downward statistical pull of base effects.

The central bank, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.