RBI's December Bulletin Unveiled: Insights and Analyses

The Reserve Bank of India (RBI) has published its monthly bulletin for December 2023, encompassing diverse facets of the economy, including the Monetary Policy Statement issued on December 8, 2023. This latest bulletin comprises two speeches, seven illuminating articles, and an array of current statistics, offering profound insights into the economic landscape.

State of the Economy: Global Growth Concerns and India's Optimism

Amid the prospects of a potential global growth deceleration in 2024, the RBI foresees varied rates of disinflation across geographies, possibly paving the way for interest rate cuts. However, in India, a robust expansion in economic activities is expected to persist, supported by reduced input costs and amplified corporate profitability. 

November witnessed a surge in CPI inflation to 5.6%, attributed to food price spikes, but a projected easing to 4.6% in the first three quarters of 2024-25 aligns with the positive momentum. The resilience of domestic financial markets finds sustenance in the enduring strength of the real economy.

Government Finances: An Analytical Review for 2023-24

A comprehensive half-yearly review of the Government's finances for 2023-24 has been presented. The analysis encompasses an evaluation of receipts, expenditures, deficit indicators, and financing at both the Centre and State levels. Noteworthy is the impressive growth in major Central taxes—such as income tax, corporation tax, and GST—during H1:2023-24. 

Despite modest revenue expenditure, robust growth in capital expenditure and improved revenue mobilization has contained the gross fiscal deficit within 7% of GDP in Q1 and Q2 of 2023-24.

Mitigating Stagflation Risk: India's Analysis

An article examining the risk of stagflation—economic stagnation coupled with high inflation—utilizes empirical evidence spanning over two decades. The study highlights supply-side shocks, such as commodity price spikes and financial constraints, as pivotal determinants of stagflation risk in India. 

Despite historical episodes of elevated risks during crises like the Asian and Global Financial crises, the latest estimates reveal a mere 1% probability of stagflation risk up to Q2:2023-24.

Note: The following paragraphs will continue to outline the insights from the rest of the articles in the RBI bulletin.