RBI report: The pace of the economy to increase in the new year

New Delhi| The pace of the economy is expected to increase in the new year due to increase in investment along with rural and government consumption. The economic growth rate in the current financial year is estimated to be 6.6 per cent. Strong services exports, in addition to higher consumer and business confidence, are expected to improve the economy’s prospects in 2025, the RBI’s financial stability report released on Monday said.

In the introduction to the report, RBI Governor Sanjay Malhotra said, despite the recent recession, the drivers of structural growth remain intact. Therefore, despite global uncertainties, domestic GDP is expected to pick up pace in the second half of the current financial year after slowing down in the first half. This will be supported by increased government consumption-investment and financial conditions. Malhotra has said this amid criticism from RBI for giving priority to inflation over economic growth.

The growth rate declined to 6 per cent in the first half of the current financial year. In the first and second half of 2023-24, it was 8.2 per cent and 8.1 per cent respectively.

The report said returns on assets and equity are at decade highs. Most banks and non-banking financial companies (NBFCs) have higher capital levels than the regulator’s minimum limit despite adverse circumstances. Financial sector regulators in India are also accelerating reforms, Malhotra said. The financial system has been strengthened by strong income, reduction in NPAs and strong capital reserves.

We will continue to safeguard public trust and confidence to support India’s aspirational goals, the RBI Governor said. We are committed to developing a modern financial system that is customer centric, technologically advanced and financially inclusive.

RBI Governor said, in future, prices of food items are expected to soften due to bumper Kharif and Rabi crops. Inflation will continue to decline and will be in line with the target in the coming year, which will improve purchasing power. On the other hand, increasing adverse weather events is posing a risk to the dynamics of food inflation. Persistent tensions and conflicts between many countries can also put upside pressure on global supply chains and commodity prices.

RBI said, amid increasing digital transactions, there is a need to increase awareness among people about cyber fraud and accelerate efforts to identify accounts opened with the intention of creating irregularities. The number of bank fraud cases increased to 18,461 on an annual basis in the first half of the current fiscal year. The amount involved was eightfold to Rs 21,367 crore.