The key driver of this optimism lies in the strength of domestic consumption and investment demand. Improved rural demand, fueled by a strong agricultural outlook, is underpinning private consumption. Additionally, government's focus on capital expenditure and supportive policies for manufacturing are bolstering investment activity.
The services sector is also expected to contribute significantly to growth, with urban demand remaining resilient. The RBI highlights the positive impact of healthy corporate and bank balance sheets on investment sentiment.
While the first quarter of the fiscal year witnessed a slightly slower-than-expected growth of 6.7%, the subsequent quarters are projected to see stronger momentum. The central bank expects factors such as above-normal monsoon, improved Kharif sowing, and lower input costs to further support growth.
However, the RBI remains cautious about global economic uncertainties and inflationary pressures. While the central bank maintains its inflation projection of 4.5% for the year, it acknowledges the recent spike in September and expects it to moderate in the coming months.
In conclusion, India's economy is well-positioned to weather global storms, thanks to its strong domestic fundamentals and supportive government policies.
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