Two reports on the Indian economy released on Monday sounded upbeat on growth, though risks loom on the export front and over uncertainties relating to the weather.

India's growth in the April-June quarter is expected to be driven by private consumption, supported by reviving rural demand and renewed buoyancy in manufacturing, a Reserve Bank article said on Monday.

A finance ministry report, on the other hand, said the economy could see risks to growth and inflation due to challenges in the country's external sector and weather-related uncertainties, but domestic demand remains strong.

The global economy is transfixed in the cross-currents of slowing growth and high inflation, and an uneasy calm prevails in the global financial markets as they await clearer signals from policy authorities on banking regulation and supervision, and contours of deposit insurance, the RBI article said.

In April and the first half of May 2023, domestic economic conditions have sustained the quickening of momentum seen in the last quarter of 2022-23, said the article on 'State of the Economy'. The article has been written by a team led by RBI deputy-governor Michael Debabrata Patra.

Finmin view

The finance ministry in its monthly economic review said: "Going forward, several factors, such as weaker-than-expected oil supply, higher-than-anticipated demand from China, intensification of geo-political tension and unfavourable weather conditions," may pose an upside risk to India's inflation forecasts.

Despite an uncertainty in rainfall, the growth of crops is unlikely to suffer, according to the report. Prices of all commodities, barring precious metals, are also likely to moderate in the current year, though they will remain well above pre-pandemic levels, it said.

Still, prices of commodities sensitive to El Nino weather effects, such as coffee, rice, palm oil, and natural rubber, need to be continuously monitored, the ministry said.

As inflation eases further, demand will become stronger and lay the foundation for a virtuous capex upcycle, it added.

Consumption has shown steady and broad-based growth, while investment in capacity creation and real estate is finding traction.