Govt’s infra focus to revive investment cycle, says RBI

Mumbai, April 11: The government’s focus on infrastructure development, coupled with buoyant business optimism, could nurture a sustained revival in the investment cycle, according to a Reserve Bank report.

According to the RBI’s Monetary Policy ReportApril 2024, domestic economic activity, backed by strong fundamentals, remained robust in the first half of 2023-24, weathering challenges from muted global demand.

The report further said that while the fixed investment and the lower drag from net external demand propelled real GDP growth, private consumption received support from steady urban demand.

On supply side, it added, manufacturing activity strengthened further, benefiting from lower input costs and improvement in global supply chains.

Construction activity remained firm on the back of buoyant housing demand and the government’s thrust on infrastructure. “Going ahead, private consumption will get support from improved prospects for rural demand and rising consumer confidence,” RBI report said.

It further said that the impact of a lower fiscal impulse on growth could be offset by higher growth-inducing capital expenditure.

The economy’s medium and long-term growth potential “is rising, propelled by structural drivers; development of digital and payments technology; ease of doing business; enhanced labour force participation; and improved quality of fiscal spending, it said.

As per a RBI survey, consumer confidence one year ahead reached a new high. The survey reflected that the prospects of investment activity remain bright owing to an upturn in the private capex cycle.