RBI’s State of the Economy report – INSIGHTSIAS

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GS Paper 3

 

Syllabus: Indian Economy

 Source: IE

 Context: The State Of The Economy report suggests that despite a global slowdown, the Indian economy has likely maintained healthy growth in the first quarter of the current financial year.

 

Key findings of the Report:

RBI’s State of the Economy Report Outcomes
GDP Growth The RBI predicts 8% economic growth for April-June.
Global Recovery Status The global economic recovery is slowing down.
Export Situation: Exports decreased by around 16% in July.
Merchandise exports hit a nine-month low of $32.25 billion.
Positive Economic Indicators: Private consumption and investment activity may counterbalance export decline.
E-way bill volumes showed robust growth.
FMCG sales experienced an increase.
Cargo at major ports and railway freight traffic rose in July.
Steel and cement consumption witnessed growth.
Areas of Economic Concern: Automobile sales, except three-wheelers, are low.
More households/individuals are seeking MGNREGA work compared to last year.
Non-oil imports decreased, indicating weak domestic demand.
Uncertainty surrounds the extent of investment increase.
Investment Intention Study: In 2022-23, plans were made for 982 projects worth over Rs 3 lakh crore.
60% of projects funded by banks and institutions are in infrastructure.
Major areas: power, roads, bridges, SEZs, biotech, and IT parks.
Uttar Pradesh, Gujarat, Odisha, Maharashtra, and Karnataka account for over half the project cost.
Future Investment Cycle: Strong bank and corporate balance sheets suggest a positive future for investment.

 

Inflation:

Retail inflation in India surged to a 15-month high of 7.44% in July, driven primarily by increased prices of vegetables, cereals, pulses, spices, and milk products. The rise in food prices, especially for vegetables, cereals, and dairy products, has contributed to the overall inflationary trend.

 

What is inflation?

Inflation is the rate at which prices rise. A 2% inflation implies the general price level in April this year was 2% more than what it was in April last year.

 

Why is inflation bad?

  • It makes commodities costly.
  • It essentially erodes the basis on which one makes economic decisions– meaning it reduces the value of money.

 

About the report:

A State of the Economy report by the Reserve Bank of India (RBI) provides a snapshot of the country’s economic status. It covers topics such as inflation, economic growth, employment, and the bank’s monetary strategies. The report guides RBI’s decisions on interest rates and economic policies while aiding economists, investors, and the public in understanding the economy and making informed decisions.

 

Insta Links

 

Practice Questions:

In India, which one of the following is responsible for maintaining price stability by controlling inflation? (UPSC CSE 2022)

  1. Department of Consumer Affairs
  2. Expenditure Management Commission
  3. Financial Stability and Development Council
  4. Reserve Bank of India

 

Answer: D

 

  1. Which among the following steps is most likely to be taken at the time of an economic recession? (UPSC CSE 2021)
  2. Cut in tax rates accompanied by an increase in interest rate.
  3. Increase in expenditure on public projects.
  4. Increase in tax rates accompanied by reduction of interest rate.
  5. Reduction of expenditure on public projects.

 

Answer: B

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