Urban Demand Is Growing Strongly, and Domestic GDP Growth Is Stable: SBI

The biggest commercial lender in the country, State Bank of India (SBI), said on Friday that although rural demand is underperforming, domestic GDP growth is now on solid ground with urban demand showing excellent pace. SBI has also slightly increased the GDP growth estimate for the current fiscal year from 6.4% to 6.5%. According to SBI’s “Ecowrap” research report, the RBI’s GDP growth prediction for the current fiscal year has changed somewhat since April 2023.

As of the most recent Monetary Policy Committee (MPC) meeting, which ended on June 8 (Thursday), the RBI’s GDP growth projection for the current fiscal year has been marginally revised up from its April estimate of 6.4% to 6.5%. The top bank has estimated inflation for the current fiscal year at 5.1%, which is thought to be higher than the RBI’s tolerance zone of 4%.

According to the study, the unemployment rate has decreased as a consequence of recent rate increases, showing that the apex bank was able to reduce the market’s surplus demand for labor without causing a decline in employment.

It went on to say that the central bank would be able to manage the pace of price growth by a sequence of past rate rises having their lagged effect, within the tolerance range, as a result of both dropping current inflation and falling inflationary expectations for the future financial year.

The regional variance of the monsoon and potential development of the EL Nino impact now depend on the inflation trajectory. The paper said that food price dynamics are expected to influence the headline inflation trajectory, which is a gauge of an economy’s overall inflation.

The research claims that, despite challenges to growth prospects posed by advanced countries slowing down, sluggish external demand, tight financial conditions, and high levels of debt, the future for the global economy is obscured by sideways movement in most indicators.

For the second time since April, the MPC, which is led by RBI Governor Shaktikanta Das, paused the repo rate, which is presently at 6.5 percent, on Thursday. According to the paper, supply-side factors accounted for more than 50% of the inflation in January 2023, but that percentage fell to 46% as a result of a relaxation of supply-side limitations.