A Reserve Bank of India (RBI) document on Monday said contact-intensive sectors will lead India’s recovery.

Besides, elevated inflation will cool from September ``albeit stubbornly’’ on the back of easing momentum and favourable base effects, according to a paper on the state of the economy co-authored by deputy governor Michael Patra, that is part of the October bulletin of the RBI released on Monday. The views expressed in the article are those of the authors and do not represent the views of the RBI.

The paper said India is poised to consolidate and accelerate its recovery over the rest of the year. The momentum of real GDP growth is expected to "shed the drag embedded in the NSO’s estimates for the first quarter of 2022-23’’ and move into positive territory in the remaining quarters, including on a seasonally adjusted basis.

India’s real GDP growth stood at 13.5 per cent in AprilJune 2022-23 which was lower than the RBI’s projection of 16.2 per cent growth.

The paper said though the growth story may not be evident in year-on-year rates because of unfavourable base effects, the sequential rates will reflect the underlying recovery.

"Aggressive and synchronised monetary tightening has further weakened global economic prospects as financial markets sold off, investors took fright and jettisoned risky assets. In India, broader economic activity has remained resilient and poised to expand further with domestic demand accelerating as the contact-intensive sectors are experiencing a bounce-back,’’ the authors said.

They pointed out that domestic demand is accelerating, with auto sales having rebounded and real estate sales on the rise in spite of a pick-up in borrowing costs.

Moreover, bank credit is increasing by double digits and the sustained surge in goods and service tax collections is signalling growing formalisation of the economy.

According to the RBI, the contact-intensive sectors will likely lead the ``rejuvenation’’ as the restraint due to the pandemic have waned.

Inflation worry

The RBI continues to confront the inflation menace which has been above its target band since January

"While the persistence of headline CPI inflation above the tolerance band for three consecutive quarters will trigger mandated accountability processes, monetary policy remains focussed on realigning inflation with the target,’’ the paper said.

Grain price rise fears allayed

New Delhi: The government on Monday said the price rise in wheat and rice has been “normal” and it will intervene in the market to offload the grains if there is any abnormal increase in the rates.

Food secretary Sudhanshu Pandey, in a press briefing, also said the government has surplus stocks of both wheat and rice in its godowns which will be used for making market intervention.

Sudhanshu Pandey. File picture

“Price rise is not abnormal as it has been perceived and projected,” Pandey said.

Citing the example of wheat, he said the “price rise is normal” as the last year’s wholesale price was depressed as the government sold huge quantities under its OpenMarket Sale Scheme (OMSS)to bulk consumers, he said.

The wholesale price of wheat was ruling at Rs 2,331per quintal on October 14,2021, against Rs 2,474 per quintal on the same day in 2020, he added.

PTI