OCTOBER 2024

VOLUME LXXVIII NUMBER 10

Chair
Michael Debabrata Patra

Editorial Committee
Muneesh Kapur
Ajit R. Joshi
Rekha Misra
Praggya Das
Sunil Kumar
Snehal Herwadkar
Pankaj Kumar
V. Dhanya
Shweta Kumari
Anirban Sanyal
Sujata Kundu

Editor
G. V. Nadhanael

The Reserve Bank of India Bulletin is issued

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CONTENTS

Monetary Policy Statement (October 7-9) 2024-25

Governor’s Statement: October 9, 2024 1
Resolution of the Monetary Policy Committee (MPC) October 7 to 9, 2024 9
Statement on Developmental and Regulatory Policies 11
Monetary Policy Report – October 2024 13

Speeches
Central Banking at Crossroads
Shri Shaktikanta Das 109
Central Banking in the 21st Century: Changing Paradigm
Shri Shaktikanta Das 113
Assessing Inflation Targeting
Michael Debabrata Patra 119
Central Banks and Financial Stability
Shri Swaminathan J. 125
Governance in SFBs - Driving Sustainable Growth and Stability
Shri Swaminathan J. 127
Reaching the Unreached – Ensuring Last Mile Connectivity of
Banking Services
Shri Swaminathan J. 131

Articles
State of the Economy 135
Monetary Policy Transmission in India: The Recent Experience 189
Nowcasting Food Inflation in India: Leveraging Price and
Non-Price Signals through Machine Learning 203
How Indian Banks are Adopting Artificial Intelligence? 219
COVID-19 and Performance of MSME Clusters in India 235
Cash Usage Indicator for India 255
New Digital Economy and the Paradox of Productivity 271

Current Statistics 281

Recent Publications 335

MONETARY POLICY STATEMENT
(OCTOBER 7-9) 2024-25

Governor’s Statement
Governor’s Statement MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25

Governor’s Statement* 6.25 per cent and the marginal standing facility (MSF)
rate and the Bank Rate at 6.75 per cent. Further, the
Shaktikanta Das MPC decided unanimously to change the stance to
‘neutral’ and to remain unambiguously focused on a
The flexible inflation targeting (FIT) framework durable alignment of inflation with the target, while
has completed 8 years since its introduction in 2016. supporting growth.
This is a major structural reform of 21st century in
The MPC noted that currently the macroeconomic
India. It stands out for its committee approach to
parameters of inflation and growth are well balanced.
decision making; transparency of policy making
Headline inflation is on a downward trajectory,
process and communication; accountability hinging
though its pace has been slow and uneven. Going
upon quantitatively defined inflation target; and
forward, the moderation in headline inflation is
operational independence. Over the years, the
expected to reverse in September and likely to remain
framework has matured across various interest rate
elevated in the near-term due to adverse base effects,
cycles and monetary policy stances.
among other factors. Food inflation pressures could
When I look back, I can say with confidence that see some easing later in this financial year on the back
FIT has served us well over the years and has proved of strong kharif sowing, adequate buffer stocks and
its mettle. It brought about an era of price stability
good soil moisture conditions which are conducive for
in the pre-COVID-19 period, with inflation averaging
rabi sowing. Adverse weather events continue to pose
around the target rate of 4 per cent. Thereafter, despite
contingent risks to food inflation. Core inflation, on
continuing global turmoil from multiple sources in the
the other hand, appears to have bottomed out.1 Fuel
last four years or so, the flexibility embedded in the FIT
component of CPI remains in contraction.2
framework has helped us to effectively address these
unprecedented challenges, while supporting growth. Domestic growth has sustained its momentum,
Monetary policy in India was able to respond to the with private consumption and investment growing in
economic slowdown decisively and swiftly in the tandem. Resilient growth gives us the space to focus
wake of COVID-19 pandemic and again pre-emptively on inflation so as to ensure its durable descent to the
during the build-up of inflationary pressures after the 4 per cent target. In these circumstances, the MPC
war began in Ukraine in early 2022. The prevailing well decided to remain watchful of the evolving inflation
balanced growth-inflation dynamics is a testimony to outlook in the coming months. Keeping in view the
the success of the FIT framework. prevailing inflation and growth conditions and the
Decisions and Deliberations of the Monetary Policy outlook, the MPC considered it appropriate to change
Committee (MPC) the stance to ‘neutral’ and to remain unambiguously
focused on a durable alignment of inflation with the
The Monetary Policy Committee (MPC), with new
target, while supporting growth.
external members, met on 7th, 8th and 9th October,
2024. After assessing the evolving macroeconomic and 1
Core (CPI excluding food and fuel) inflation increased during July-August
2024 to 3.4 per cent on an average with pick up in core services inflation,
financial conditions and the outlook, the MPC decided reflecting the impact of the revision in mobile phone tariffs.
by a majority of 5 out of 6 members to keep the policy 2
CPI fuel inflation has remained in deflation for twelfth consecutive
month since September 2023. In August 2024, deflation in CPI fuel was at
repo rate unchanged at 6.50 per cent. Consequently,
(-)5.3 per cent as compared to (-)5.5 per cent in July and (-)3.6 per cent in
the standing deposit facility (SDF) rate remains at June. This was on account of moderation in electricity prices inflation and
LPG prices remaining in the deflationary zone, reflecting the cumulative
* Governor’s Statement - October 9, 2024. impact of price cut in August 2023 and March 2024.

RBI Bulletin October 2024 1

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Governor’s Statement

Assessment of Growth and Inflation surpassing GDP growth, aided by strong industrial and
services sector activities.10
Global Growth
High frequency indicators available so far suggest
The global economy has remained resilient since
that domestic economic activity continues to be
the last meeting of the MPC,3 although downside
steady. The main components from the supply side
risks from increasingly intense geopolitical conflicts,
– agriculture, manufacturing and services – remain
geoeconomic fragmentation, financial market resilient. Agricultural growth has been supported
volatility and elevated public debt continue to play by above normal south-west monsoon rainfall11 and
out. Manufacturing is showing signs of slowdown, better kharif sowing12. Higher reservoir levels13 with
while services activity is holding up.4 World trade good moisture conditions of soil augur well for the
is exhibiting improvement.5 Inflation is softening, ensuing rabi crop. Manufacturing activity is gaining on
supported by lower energy prices. Growing divergence the back of improving domestic demand, lower input
in inflation-growth dynamics across countries has costs14 and a supportive policy environment.15 Eight
resulted in varying monetary policy responses.6 core industries output fell by 1.8 per cent in August
on a high base.16 Excess rainfall also dampened
Domestic Growth
production in certain sectors such as electricity, coal
Real gross domestic product (GDP) grew by 6.7 and cement in August. The purchasing managers’
per cent in Q1:2024-25, led by a revival in private index (PMI) for manufacturing at 56.5 for September
consumption7 and improvement in investment. The remained elevated. The services sector continues
share of investment in GDP reached its highest since 10
Gross value added (GVA) growth rose sequentially in Q1:2024-25, but the
2012-13.8 Government expenditure, on the other increase in subsidies – 3.6 per cent by the Union government and 30.9 per
cent by the states – offset the gains from showing up in GDP growth. As
hand, contracted during the quarter.9 On the supply a result, net taxes on products increased by 4.1 per cent in Q1:2024-25 as
side, gross value added (GVA) expanded by 6.8 per cent against 22.2 per cent in Q4:2023-24.
11
During the current Southwest Monsoon season, the cumulative rainfall
has been 8 per cent above the Long Period Average (LPA), compared to 6
3
The OECD in its Interim Economic Outlook (September 2024) revised up per cent below LPA during the corresponding period last year.
global growth forecast for 2024 by 10 bps to 3.2 per cent from May 2024 12
The total area sown under kharif crops, as of September 27, 2024, at
projections and retained it at 3.2 per cent for 2025.
1108.6 lakh hectares is 101.1 per cent of the full season normal area. It is
4
Global manufacturing PMI remained in contraction in September 2024 1.9 per cent and 1.7 per cent higher than last year and the normal area as
at 48.8 from 49.6 in August. The global services sector continued to on date, respectively. Further, the area under major crops viz. rice, pulses,
expand with the PMI remaining in the expansion zone for the twentieth coarse cereals, oilseeds, and sugarcane is higher over last year; however, it
consecutive month at 52.9 in September. is lower in the case of cotton.
5
World merchandise trade volume growth remained positive during April- 13
All-India water storage in 155 major reservoirs stood at 88 per cent of the
July 2024 vis-à-vis contraction in the corresponding months in 2023. total capacity as of October 3, 2024, as against 74 per cent a year ago and
6
Since the last MPC meeting, the US, Euro Area, New Zealand, Sweden, decadal average of 77 per cent. The current storage level translates into
Canada, Czech Republic, Switzerland, Iceland among advanced economies 18.3 per cent above the level in the corresponding period of last year and
(AEs) and Mexico, Colombia, Peru, Chile, Hungary, Philippines, Indonesia 14.0 per cent over the last ten years’ average.
and South Africa among emerging market economies (EMEs) have cut their 14
In Q2:2024-25, the World Bank commodity price index declined by 3.8
policy rates. Russia and Brazil, on the other hand, raised their benchmark per cent on quarter-on-quarter (q-o-q) basis and 4.1 per cent on year-on-
rates. year (y-o-y) basis. Brent crude oil prices also declined by 5.6 per cent (q-o-q)
7
Private final consumption expenditure (PFCE) growth accelerated to a and 7.6 per cent (y-o-y) during the quarter. Firms polled in the Reserve
seven-quarter high of 7.4 per cent in Q1:2024-25. Bank enterprise surveys expect input cost pressures to ease.
8
Growth in gross fixed capital formation (GFCF) was 7.5 per cent in 15
Government schemes such as Production Linked Incentive (PLI)
Q1:2024-25 (6.5 per cent in Q4:2023-24) and the share of GFCF in GDP scheme, Pradhan Mantri Awas Yojana (PMAY) [expanded to construct 3
stood at 34.8 per cent – the highest since Q2:2012-13. crore additional houses], Pradhan Mantri Gram Sadak Yojana (PMGSY)
9
Government final consumption expenditure (GFCE) contracted by 0.2 per [launching of phase IV], National Infrastructure Pipeline (NIP) and viability
cent during Q1:2024-25. Revenue expenditure net of interest payments gap funding would provide impetus to capital formation.
and subsidies of central government contracted by 1.5 per cent, while that 16
Index of eight core industries had recorded high growth of 13.4 per cent
of state governments grew marginally by 0.9 per cent during the quarter. during August 2023.

2 RBI Bulletin October 2024

Governor’s Statement MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25

to grow at a strong pace.17 PMI services at 57.7 in investment intentions.27 On the external front,
September indicates robust expansion.18 services exports is supporting overall growth.28

On the demand side, rural demand19 is trending Looking ahead, India’s growth story remains
upwards while urban demand20 continues to hold firm. intact as its fundamental drivers – consumption
Government consumption is improving.21 Investment and investment demand – are gaining momentum.
activity remains buoyant,22 with government capex Prospects of private consumption, the mainstay of
rebounding from a contraction observed in the aggregate demand, look bright on the back of improved
first quarter.23 Private investment continues to gain agricultural outlook and rural demand. Sustained
steam24 on the back of expansion in non-food bank buoyancy in services would also support urban
demand. Government expenditure of the centre and
credit,25 higher capacity utilisation26 and rising
the states is expected to pick up pace in line with the
17
E-way bills increased by 18.5 per cent in September 2024. GST revenues Budget Estimates. Investment activity would benefit
at Rs. 1.73 lakh crore rose by 6.5 per cent and toll collections expanded by from consumer and business optimism, government’s
6.5 per cent during September. Port cargo posted a healthy growth 6.7 per
cent in August 2024. Aggregate bank credit and deposits registered robust continued thrust on capex and healthy balance sheets
growth of 14.4 per cent and 12.0 per cent, respectively, as on September of banks and corporates. Taking all these factors
20, 2024.
into consideration, real GDP growth for 2024-25 is
18
India continues to record the highest PMI reading among major
projected at 7.2 per cent, with Q2 at 7.0 per cent; Q3 at
economies for both manufacturing and services since July 2022 and April
2023, respectively. 7.4 per cent; and Q4 at 7.4 per cent. Real GDP growth
19
Wholesale two-wheeler sales expanded by 10.7 per cent in July-August for Q1:2025-26 is projected at 7.3 per cent. The risks
2024. The demand under Mahatma Gandhi National Rural Employment are evenly balanced.
Guarantee Act (MGNREGA) declined by 16.6 per cent during July-
September, reflecting improvement in farm sector employment. Rural Inflation
areas are recording higher FMCG sales growth than the urban areas since
Q4:2023-24. As anticipated, headline CPI inflation softened
20
Consumer durables posted a growth of 8.2 per cent in July 2024. significantly in July and August29, with base effect
Domestic air passengers rose by 7.6 per cent in July 2024 and 6.7 per cent playing a major role in July. Food inflation experienced
in August.
a certain degree of correction during these two
21
Central government revenue expenditure (net of interest payments and
subsidies) grew by 9.6 per cent in July-August, after contracting by 1.5 per months.30 Considerable divergence, however, was
cent in the previous quarter. This will boost Government consumption
which was lagging in Q1.
27
As per RBI Surveys, manufacturers’ investment intentions for 2024-
25 improved, with most firms planning similar or higher investments
22
Steel consumption rose by 10.0 per cent in August 2024, while cement compared to last year.
production increased modestly by 1.0 per cent in July-August. Imports of 28
India’s merchandise exports contracted by 9.3 per cent (y-o-y) to US$
capital goods expanded by 8.7 per cent during August 2024, while capital 34.7 billion mainly due to unfavourable base effect, while imports rose by
goods production increased sharply by 12.0 per cent in July 2024. 3.3 per cent to US$ 64.3 billion in August 2024. Non-oil non-gold imports
23
Central government capex increased by 25.8 per cent in July-August 2024 expanded by 5.4 per cent during August 2024. Services exports grew by
after contracting by 35 per cent in Q1:2024-25. 10.9 per cent and services imports expanded by 12.1 per cent, in July-
August 2024.
24
The interest coverage ratio for corporates in Q1:2024-25 touched a 29
Headline inflation moderated sharply to 3.6 per cent in July from 5.1 per
nine-quarter high due to sustained operating profit growth and lower
cent in June by 1.5 percentage points due to base effect of 2.9 per cent,
interest expenses. Furthermore, the working capital cycle has significantly which more than offset a momentum (month-over-month) increase of 1.5
shortened, indicating a positive outlook. per cent. Headline inflation edged up by 5 bps to 3.65 per cent in August
25
Bank credit to food processing, textiles, chemicals, base metal, and from 3.60 per cent in July. With index remaining flat (zero momentum),
engineering goods increased y-o-y by 14.4 per cent, 6.4 per cent, 15.9 a modest unfavourable base effect of 5 bps pushed up headline inflation.
per cent, 16.1 per cent, and 16.6 per cent respectively in August 2024.
30
Food inflation moderated to an average of 5.2 per cent during July-August
Among infrastructure sectors, bank credit recorded growth of 4.1 per from an average of 8.0 per cent during the previous 8 months (November
cent, 4.2 per cent and (-) 1.7 per cent, respectively, in power, roads, and 2023 to June 2024). Vegetable price inflation corrected to 6.8 per cent in
July from 29.3 per cent in June. Vegetables inflation, however, increased
telecommunication during August 2024.
to 10.7 per cent in August. As a result, the contribution of food to headline
26
Seasonally adjusted capacity utilisation (CU) increased to 75.8 per cent in inflation fell to an average of around 68 per cent during July and August as
Q1:2024-25 from 74.6 per cent in Q4:2023-24. compared to 76.3 per cent in June.

RBI Bulletin October 2024 3

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Governor’s Statement

observed within the food sub-groups.31 Deflation in Bank price indices for September, if sustained, can
fuel group deepened on softening electricity and LPG add to the upside risks.38 Taking into account all these
prices.32 Core inflation, on the other hand, edged up factors, CPI inflation for 2024-25 is projected at 4.5
in July and August.33 per cent, with Q2 at 4.1 per cent; Q3 at 4.8 per cent;
and Q4 at 4.2 per cent. CPI inflation for Q1:2025-
The CPI print for the month of September is
26 is projected at 4.3 per cent. The risks are evenly
expected to see a big jump due to unfavourable base
balanced.
effects34 and pick up in food price momentum,35 caused
by the lingering effects of a shortfall in the production What do these Inflation and Growth Conditions
of onion, potato and chana dal (gram) in 2023- mean for Monetary Policy?
24, among other factors.36 The headline inflation The developments since the August meeting of
trajectory, however, is projected to sequentially the MPC indicate further progress towards realising
moderate in Q4 of this year due to good kharif harvest, a durable disinflation towards the target. Despite the
ample buffer stocks of cereals and a likely good crop in near-term upsides to inflation from food prices, the
the ensuing rabi season. Unexpected weather events evolving domestic price situation signals moderation
and worsening of geopolitical conflicts constitute in headline inflation thereafter. The agricultural crop
major upside risks to inflation. International crude oil outlook is turning out to be favourable, with improving
prices have become volatile in October.37 The recent prospects of kharif and rabi output. These factors could
uptick in food and metal prices, as seen in the Food lead to an easing of food inflation pressures, but this
optimism is subject to weather related shocks, if any.
and Agricultural Organisation (FAO) and the World
Core inflation is likely to remain broadly contained
31
Price inflation in vegetables at 10.7 per cent and pulses inflation at 13.6
per cent (in double-digits since June 2023) in August was in sharp contrast
on continuing transmission of past monetary policy
to a deflation of (-)4.4 per cent in spices and (-)0.9 per cent in oils and fats. actions unless, of course, there are surprises in global
32
Deflation in fuel group was at (-)5.3 per cent in August, with LPG and commodity prices.
electricity prices, on a year-on-year basis, at (-)24.6 per cent and per cent
4.9 per cent, respectively. The prevailing and expected inflation-growth
33
Core inflation from an all-time low of 3.1 per cent in the 2012=100
series in June edged up to 3.4 per cent in July. In August, core inflation was
balance have created congenial conditions for a
at 3.3 per cent. Services inflation from a historic low of 2.7 per cent in June change in monetary policy stance to neutral. Even as
increased to 3.4 per cent in August 2024. CPI ‘telephone charges: mobile’,
on a year-on-year basis, increased from 1.0 per cent in June 2024 to 10.5
there is greater confidence in navigating the last mile
per cent in August 2024. of disinflation, significant risks – I repeat significant
34
CPI headline inflation would experience an unfavourable base effect of risks – to inflation from adverse weather events,
1.1 percentage points in September 2024.
accentuating geopolitical conflicts and the very recent
35
Sharp increase in edible oil prices was seen since the second half of
September. Firmness in prices was also seen in wheat, gram and key increase in certain commodity prices continue to stare
vegetables like onion and tomato. at us. The adverse impact of these risks cannot be
36
As per the third advance estimate of horticultural production for 2023-
24 released on September 20, 2024, vegetables production declined by (-)
underestimated.
3.2 per cent over 2022-23, majorly due to decline in production of onions
by (-) 19.7 per cent and potatoes by (-) 5.1 per cent, while production of It is with a lot of effort that the inflation horse
tomatoes and non-TOP vegetables increased by 4.4 per cent and 1.4 per has been brought to the stable, i.e., closer to the target
cent, respectively. As per final crop production estimates for 2023-24, the
rabi chana dal (gram) production registered a decline by (-) 10.0 per cent 38
The FAO food price index for September released on October 4,
over 2022-23. 2024showed an increase of 3.0 per cent (month-on-month) with all
37
Indian basket crude oil prices registered a month-on-month decline categories including meat, dairy, cereals, oils and sugar registering a pick
of around (-) 7.0 per cent and (-) 5.8 per cent in August and September, up. Even though the World Bank’s international commodity price index
respectively. However, in October so far, the Indian basket crude oil prices (released on October 2) for September declined by (-) 3.8 per cent over
increased by 7.6 per cent and was at USD 78.84 per barrel as on October August, driven mainly by a decline in energy prices by (-)7.1 per cent, food
7, 2024. prices increased by 3.1 per cent and metal prices by 1.8 per cent.

4 RBI Bulletin October 2024

Governor’s Statement MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25

within the tolerance band compared to its heightened commercial papers (CPs) issued by non-banking
levels two years ago. We have to be very careful about financial companies (NBFCs) eased, while that on
opening the gate as the horse may simply bolt again. certificates of deposit (CDs) firmed up marginally.43 The
We must keep the horse under tight leash, so that 10 year G-Sec yield softened in August-September on
we do not lose control. Going forward, we need to global and domestic cues, including policy pivot in the
closely monitor the evolving conditions for further US and in some major economies, improved global
confirmation of the disinflationary impulses. investor sentiment, benign domestic inflation and
accelerated fiscal consolidation.44 The term premium
Liquidity and Financial Market Conditions
(10 year G-Sec yield minus 3-month T-bill yield) has
System liquidity remained in surplus during remained stable in recent months.45 Transmission to
August-September and early October, with a pickup the credit market has been satisfactory.46
in government spending and decline in currency
Moving forward, the Reserve Bank will continue
in circulation.39 Liquidity conditions, however, had
to be nimble and flexible in its liquidity management
turned into deficit for a brief period during the latter
operations. We will deploy an appropriate mix of
half of September with the build-up of government
instruments to modulate both frictional and durable
cash balances on account of tax related outflows.40 In
liquidity so as to ensure that money market interest
sync with the shifting liquidity conditions, the Reserve
rates evolve in an orderly manner.
Bank proactively conducted two-way operations41 to
ensure alignment of inter-bank overnight rate with During the current financial year (up to October 8),
the policy repo rate.42 the exchange rate of the Indian rupee (INR) remained
largely range-bound.47 The INR also continued to be
Across the term money market segments,
the least volatile among peer EME currencies. This was
the yields on 3-month treasury bills (T-bills) and
so even during the high volatility episode, following
39
Government cash balances with the Reserve Bank, on an average,
declined to ₹2.8 lakh crore during August-October (up to October 7) from
43
Average yields on T-bills and CPs moderated to 6.58 per cent and 7.67
₹3.6 lakh crore during June-July. Notes in circulation reduced by ₹0.19 lakh per cent, respectively, in August – October (up to October 7) from 6.77 per
crore during the period August-October (up to October 7). cent and 7.77 per cent, respectively, during June - July, while that on CDs
firmed up to 7.25 per cent from 7.13 per cent during the same period.
40
System liquidity, as measured by the net position under the liquidity
adjustment facility (net LAF) was, on an average, in surplus of about ₹1.3
44
The 10-year G-Sec yield averaged 6.83 per cent during August – September
lakh crore during August-September. System liquidity turned into deficit 2024 as compared to 6.98 per cent during June – July 2024. The 10-year
of about ₹0.18 lakh crore for a brief period during September 21-25, G-Sec yield further moderated to an average of 6.79 per cent in October
2024. While higher government spending eased liquidity during August- (up to October 7).
September (up to September 15), the build-up of government cash balances 45
On an average, the term premium was 25 bps during August-October (up
because of advance tax payments and goods and services tax (GST) related to October 7) as compared to 21 bps during June-July.
outflows exerted pressure on liquidity in the latter half of September. 46
In response to the cumulative policy repo rate hike of 250 bps since
Average system liquidity is in surplus of about ₹2.3 lakh crore in October May 2022, the weighted average lending rates (WALRs) on fresh and
(up to October 7). outstanding rupee loans of SCBs have increased by 190 bps and 119 bps,
41
During August-October (up to October 7), four main and 30 fine-tuning respectively, during May 2022 to August 2024, while the weighted average
variable rate reverse repo (VRRR) auctions (1 to 7 days maturity) mopped domestic term deposit rate (WADTDR) on fresh and outstanding deposits
up surplus liquidity cumulatively amounting to ₹11.5 lakh crore. During of SCBs increased by 243 bps and 190 bps, respectively, during the same
September 17-24, 2024, one main and 3 fine-tuning variable rate repo period.
(VRR) operations (1 to 3 days maturity) injected liquidity to the extent of 47
On a financial year basis (up to October 8), the Indian rupee (INR)
₹2.1 lakh crore. registered lower depreciation (-0.7 per cent) against the US dollar as
42
The weighted average call rate (WACR) averaged 6.53 per cent during compared to some of its emerging market peers like Philippine peso,
August – September as against 6.55 per cent during June – July. The Russian ruble, Turkish lira, Brazilian real, Argentine peso and Mexican
weighted average call rate (WACR) averaged 6.44 per cent during October peso. During 2024-25 (up to October 8), the INR was the least volatile (in
(up to October 7). Rates in the collateralised segment – the triparty and terms of coefficient of variation) amongst peer EME currencies including
market repo rates – although relatively softer, moved in tandem with the Chinese yuan, Vietnamese dong, Philippine peso, Turkish lira and Chilean
WACR. peso.

RBI Bulletin October 2024 5

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Governor’s Statement

the unwinding of yen carry trade in early August i. First, it is observed that some NBFCs are
2024.48 The lower volatility of the INR reflects India’s aggressively pursuing growth without
strong macroeconomic fundamentals and improved building up sustainable business practices
external sector outlook. and risk management frameworks,
Financial Stability commensurate with the scale and complexity
of their portfolio. An imprudent ‘growth
The health parameters of banks and NBFCs
at any cost’ approach would be counter
continue to be strong.49 There has been some recent
productive for their own health.
commentary on likelihood of stress buildup in a few
unsecured loan segments like loans for consumption ii. Second, driven by the significant accretion
purposes, micro finance loans and credit card to their capital from both domestic and
outstandings. The Reserve Bank is closely monitoring overseas sources, and sometimes under
the incoming information and will take measures, as pressure from their investors, some NBFCs
may be considered necessary. Banks and NBFCs, on – including microfinance institutions (MFIs)
their part, need to carefully assess their individual and housing finance companies (HFCs) – are
exposures in these areas, both in terms of size and chasing excessive returns on their equity.
quality. Their underwriting standards and post- While such pursuits are in the domain of
sanction monitoring have to be robust. Continued the Boards and Managements of NBFCs,
attention also needs to be given to potential risks concerns arise when the interest rates
from inoperative deposit accounts, cybersecurity charged by them become usurious and get
landscape, mule accounts, etc. combined with unreasonably high processing
fees and frivolous penalties. These practices
NBFCs, in particular, have registered an impressive
are sometimes further accentuated by what
growth over the last few years. This has resulted
appears to be a ‘push effect’, as business
in more credit flow to the remote and underserved
targets drive retail credit growth rather than
segments, bolstering financial inclusion. While the
its actual demand. The consequent high-cost
overall NBFC sector remains healthy, I have a few
and high indebtedness could pose financial
messages to the outliers.
stability risks, if not addressed by these
48
The Bank of Japan’s decision to raise interest rates on July 31, 2024 NBFCs.
resulted in a meltdown in US stocks followed by world-wide volatility;
however, the turmoil was short-lived and financial markets recovered
iii. Third, the NBFCs may review their prevailing
quickly.
49
Gross non-performing assets (GNPA) ratio of banks was 2.7 per cent as at compensation practices, variable pay and
end-June 2024, the lowest since end-March 2011. The annualised slippage incentive structures some of which appear
ratio, which measures new NPA accretions as a percentage of standard
advances, was at 1.3 per cent as at end-June 2024, as against 1.6 per cent a to be purely target driven in certain NBFCs.
year ago. The provision coverage ratio, capital to risk-weighted assets ratio, Such practices may result in adverse work
and liquidity coverage ratio were 76.5 per cent, 16.8 per cent, and 130.1 per
cent, respectively in June 2024. The annualized return on assets (RoA) and culture and poor customer service.
return on equity (RoE) stood at 1.4 per cent and 14.5 per cent, respectively,
in June 2024. The net interest margin moderated to 3.5 per cent in June To sum up, it is important that NBFCs, including
2024 vis-à-vis 3.7 per cent in June 2023.
MFIs and HFCs, follow sustainable business goals; a
Key health parameters of NBFC sector are also moving in tandem with
the banking sector. GNPA and NNPA ratios of NBFC sector (excluding ‘compliance first’ culture; a strong risk management
NBFCs under resolution) in June 2024 were 2.6 per cent and 1.1 per cent,
framework; a strict adherence to fair practices code;
respectively, as compared with 3.2 per cent and 1.2 per cent in the same
quarter of the previous year. and a sincere approach to customer grievances. The

6 RBI Bulletin October 2024

Governor’s Statement MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25

Reserve Bank is closely monitoring these areas and will Additional Measures
not hesitate to take appropriate action, if necessary.
I shall now announce certain additional measures.
Self-correction by the NBFCs would, however, be the
desired option. Responsible Lending Conduct – Levy of Foreclosure
Charges/ Pre-payment Penalties on Loans
External Sector
The Reserve Bank has taken several measures over
India’s current account deficit (CAD) widened to
the years to safeguard consumer’s interest. As part of
1.1 per cent of GDP in Q1:2024-25 on account of a higher
these measures, Banks and NBFCs are not permitted
trade deficit.50 Buoyancy in services exports51 and
to levy foreclosure charges/ pre-payment penalties on
strong remittance receipts52 are expected to keep CAD
any floating rate term loan sanctioned to individual
within the sustainable level.
borrowers for purposes, other than business. It is now
On the external financing side, foreign portfolio proposed to broaden the scope of these guidelines to
investment (FPI) flows have seen a turnaround from include loans to Micro and Small Enterprises (MSEs).
net outflows of US$ 4.2 billion in April-May 2024 to net A draft circular in this regard shall be issued for public
inflows of US$ 19.2 billion during June-October (till consultation.
October 7, 2024). Foreign direct investment (FDI) flows
remain strong in 2024-25 as both gross and net FDI Discussion Paper on Capital Raising Avenues for
inflows improved in April-July 2024.53 While external Primary (Urban) Co-operative Banks
commercial borrowings moderated, non-resident The Reserve Bank has undertaken several
deposits recorded higher net inflows compared to initiatives in recent years to strengthen the Urban
last year.54 India’s foreign exchange reserves have Co-operative Banking (UCB) Sector. Such initiatives
already crossed a new milestone of US$ 700 billion. include issuance of regulatory guidelines in 2022 for
Overall, India’s external sector remains resilient as issue and regulation of share capital and securities
key external sector vulnerability indicators continue by UCBs. To provide more flexibility and avenues for
to improve.55 We remain confident of meeting our UCBs to raise capital, a Discussion Paper on Capital
external financing requirements comfortably. Raising Avenues for UCBs will be issued for feedback
50
India’s current account deficit (CAD) widened to US$ 9.7 billion (1.1 per
and suggestions from stakeholders.
cent of GDP) in Q1:2024-25 from US$ 8.9 billion (1.0 per cent of GDP) in
Q1:2023-24 and against a surplus of US$ 4.6 billion (0.5 per cent of GDP)
Creation of Reserve Bank Climate Risk Information
in Q4:2023-24. System (RB-CRIS)
51
As per provisional figures, India’s services exports grew by 10.9 per cent
during July-August 2024. Net services exports grew by 9.6 per cent during Climate change is emerging as a significant risk
July-August 2024. to the financial system world over. This makes it
52
Inward remittances to India increased by 8.9 per cent in Q1:2024-25 to
US$ 29.5 billion from US$ 27.1 billion in Q1:2023-24. necessary for regulated entities to undertake robust
53
Gross foreign direct investment (FDI) inflows grew by around 23 per climate risk assessment, which is sometimes hindered
cent to US$ 27.5 billion in April-July 2024-25 from US$ 22.4 billion during by gaps in high quality climate related data. To bridge
the same period a year ago. Net FDI inflows increased by 28.9 per cent to
US$ 4.9 billion in April-July 2024-25 from US$ 3.8 billion a year ago. these data gaps, the Reserve Bank proposes to create
54
Net inflows under external commercial borrowings to India moderated a data repository, namely, the Reserve Bank – Climate
to US$ 3.6 billion during April-August 2024-25 as compared with US$ 4.3
billion a year ago. Non-resident deposits recorded a higher net inflow of Risk Information System (RB-CRIS).
US$ 5.8 billion in April-July 2024-25 than US$ 3.0 billion a year ago.
UPI - Enhancement of Limits
55
India’s CAD/GDP ratio stood at 0.7 per cent in 2023-24 (2.0 per cent
during 2022-23), and 1.1 per cent during Q1:2024-25 (1.0 per cent in
Q1:2023-24). India’s external debt to GDP ratio declined marginally to 18.8
UPI has transformed India’s financial landscape
per cent at end-June 2024 from 18.9 per cent at end-March 2024. by making digital payments accessible and inclusive

RBI Bulletin October 2024 7

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Governor’s Statement

through continuous innovation and adaptation. To and growth is well-poised. India’s growth story remains
further encourage wider adoption of UPI and make intact. Inflation is on a declining path, although we
it more inclusive, it has been decided to (i) enhance still have a distance to cover. The external sector
the per-transaction limit in UPI123Pay from ₹5,000 demonstrates the strength of the economy. Forex
to ₹10,000; and (ii) increase the UPI Lite wallet limit reserves are scaling new peaks. Fiscal consolidation
from ₹2,000 to ₹5,000 and per-transaction limit from
is underway. The financial sector remains sound and
₹500 to ₹1,000.
resilient. Global investor optimism in India’s prospects
Introduction of Beneficiary Account Name Look-up is perhaps at its highest ever. We are, however, not
Facility complacent, especially amidst rapidly evolving global
At present, UPI and Immediate Payment Service conditions.
(IMPS) provide a facility for the remitter of funds to
The monetary policy action today reflects the
verify the name of the receiver (beneficiary) before
MPC’s assessment that, at the current juncture, it
executing a payment transaction. It is now proposed
would be appropriate to have greater flexibility and
to introduce such a facility for the Real Time Gross
Settlement System (RTGS) and the National Electronic optionality to act in sync with the evolving conditions
Funds Transfer (NEFT) system. This facility will enable and the outlook. We stand unambiguously committed
the remitter to verify the name of the account holder to ensure durable alignment of inflation with the
before effecting funds transfer to him/her through target, while supporting growth. In the prevailing
RTGS or NEFT. This will also reduce the possibility of macroeconomic conditions and the outlook, Mahatma
wrong credits and frauds. Gandhi’s words remain highly relevant: “When the
Conclusion method is good, ... Success is bound to come in the
end. …”56
Today, the Indian economy presents a picture of
stability and strength. The balance between inflation Thank you. Namaskar.

56
The Collected Works of Mahatma Gandhi, Volume 82; Harijan,19.04.1942.

8 RBI Bulletin October 2024

MONETARY POLICY STATEMENT
(OCTOBER 7-9) 2024-25

Resolution of the Monetary Policy Committee (MPC)

October 7-9, 2024
Resolution of the Monetary Policy Committee (MPC) MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25
October 7 to 9, 2024

Monetary Policy Statement, is expected to perform well on the back of above

normal rainfall and robust reservoir levels, while
2024-25 Resolution of the manufacturing and services activities remain steady.
Monetary Policy Committee On the demand side, healthy kharif sowing, coupled
with sustained momentum in consumer spending in
(MPC) October 7 to 9, 2024* the festival season, augur well for private consumption.
Consumer and business confidence have improved.
Monetary Policy Decisions The investment outlook is supported by resilient non-
After assessing the current and evolving food bank credit growth, elevated capacity utilisation,
macroeconomic situation, the Monetary Policy healthy balance sheets of banks and corporates, and
Committee (MPC) at its meeting today (October 9, the government’s continued thrust on infrastructure
2024) decided to: spending. External demand is expected to get support
from improving global trade volumes. Taking all these
• Keep the policy repo rate under the liquidity
factors into consideration, real GDP growth for 2024-
adjustment facility (LAF) unchanged at 6.50
25 is projected at 7.2 per cent with Q2 at 7.0 per cent;
per cent.
Q3 at 7.4 per cent; and Q4 at 7.4 per cent. Real GDP
Consequently, the standing deposit facility (SDF) growth for Q1:2025-26 is projected at 7.3 per cent
rate remains unchanged at 6.25 per cent and the (Chart 1). The risks are evenly balanced.
marginal standing facility (MSF) rate and the Bank
Headline inflation declined sharply to 3.6 and 3.7
Rate at 6.75 per cent.
per cent in July and August respectively from 5.1 per
• The MPC also decided to change the cent in June. Going forward, the September inflation
monetary policy stance to ‘neutral’ and to print may see a significant pick-up as base effects
remain unambiguously focused on a durable turn adverse and food prices register an upturn. Food
alignment of inflation with the target, while inflation, however, is expected to ease by Q4:2024-25
supporting growth. on better kharif arrivals and rising prospects of a good
rabi season. Sowing of key kharif crops are higher
These decisions are in consonance with the
than last year and the long-period average. Sufficient
objective of achieving the medium-term target for
buffer stocks for cereals are available for ensuring food
consumer price index (CPI) inflation of 4 per cent
security. Adequate reservoir levels, the likelihood of
within a band of +/- 2 per cent, while supporting
a good winter and favorable soil moisture conditions
growth.
augur well for the ensuing rabi season, though
Growth and Inflation Outlook adverse weather events remain a risk. Firms polled in
The global economy has remained resilient and is the Reserve Bank enterprise surveys expect input cost
expected to maintain stable momentum over the rest pressures to ease; however, the very recent upturn in
of the year, amidst downside risks from intensifying key commodity prices, especially metals and crude
oil needs to be closely monitored. Taking all these
geopolitical conflicts. In India, real gross domestic
factors into consideration, CPI inflation for 2024-25 is
product (GDP) registered a growth of 6.7 per cent
projected at 4.5 per cent with Q2 at 4.1 per cent; Q3 at
in Q1:2024-25, driven by private consumption and
4.8 per cent; and Q4 at 4.2 per cent. CPI inflation for
investment. Looking ahead, the agriculture sector
Q1:2025-26 is projected at 4.3 per cent (Chart 2). The
* Released on October 9, 2024. risks are evenly balanced.

RBI Bulletin October 2024 9

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Resolution of the Monetary Policy Committee (MPC)
October 7 to 9, 2024

Rationale for Monetary Policy Decisions global geo-political risks, financial market volatility,
adverse weather events and the recent uptick in
The MPC noted that the domestic growth outlook
global food and metal prices. Hence, the MPC has
remains resilient supported by domestic drivers –
to remain vigilant of the evolving inflation outlook.
private consumption and investment. This provides
Accordingly, the MPC decided to keep the policy repo
headroom for monetary policy to focus on the goal
rate unchanged at 6.50 per cent in this meeting.
of attaining a durable alignment of inflation with the
target. The MPC reiterates that enduring price stability Shri Saugata Bhattacharya, Professor Ram Singh,
strengthens the foundations of a sustained period of Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri
high growth. After a transient spike in the near term, Shaktikanta Das voted to keep the policy repo rate
headline inflation is expected to moderate as projected unchanged at 6.50 per cent. Dr. Nagesh Kumar voted
above. With better prospects for both kharif and rabi to reduce the policy repo rate by 25 basis points.
crops and ample buffer stocks of foodgrains, there is Dr. Nagesh Kumar, Shri Saugata Bhattacharya,
now greater confidence on the disinflation path later in Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Michael
the financial year. Keeping in view the prevailing and Debabrata Patra and Shri Shaktikanta Das voted for a
expected inflation-growth dynamics, which are well change in stance from withdrawal of accommodation
balanced, the MPC decided to change the monetary to ‘neutral’ and to remain unambiguously focused on
policy stance from withdrawal of accommodation to a durable alignment of inflation with the target, while
‘neutral’ and remain unambiguously focused on a supporting growth.
durable alignment of inflation with the target, while
The minutes of the MPC’s meeting will be
supporting growth. The change in stance provides
published on October 23, 2024.
flexibility to the MPC while enabling it to monitor
the progress on disinflation which is still incomplete. The next meeting of the MPC is scheduled during
Risks stem from uncertainties relating to heightened December 4 to 6, 2024.

10 RBI Bulletin October 2024

MONETARY POLICY STATEMENT
(OCTOBER 7-9) 2024-25

Statement on Developmental and Regulatory Policies

Statement on Developmental and Regulatory Policies MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25

Statement on Developmental A Working Group was constituted in RBI to further

operationalise the broad-based recommendations of
and Regulatory Policies the Expert Committee on the newly enabled capital
related provisions. Based on the recommendations
This Statement sets out various developmental
of the Working Group, a Discussion Paper on Capital
and regulatory policy measures relating to (i)
Raising Avenues for Primary (Urban) Co-operative
Regulations; and (ii) Payment Systems. Banks will be issued for eliciting feedback and
I. Regulations suggestions from stakeholders.

1. Responsible Lending Conduct – Levy of 3. Creation of Reserve Bank Climate Risk

Foreclosure Charges/ Pre-payment Penalties on Information System (RB-CRIS)
Loans Climate change is emerging as one of the
In terms of extant guidelines, banks and NBFCs significant risks to the financial system. It is crucial
are not permitted to levy foreclosure charges/ pre- for regulated entities to undertake climate risk
payment penalties on any floating rate term loan assessments for ensuring stability of their balance
sanctioned to individual borrowers with or without sheets and that of the financial system. Such an
co-obligant(s), for purposes other than business. With assessment requires, among other things, high
a view to safeguard customers’ interest through better quality data relating to local climate scenarios,
transparency and customer centricity by lenders, it has climate forecasts, and emissions. The available
been decided to broaden the scope of such regulations climate related data is characterised by various gaps
to cover loans to Micro and Small Enterprises (MSEs) such as fragmented and varied sources, differing
extended by the Regulated Entities of the Reserve formats, frequencies and units. To bridge these gaps,
the Reserve Bank proposes to create a data repository
Bank. A draft circular in this regard shall be issued for
namely, the Reserve Bank – Climate Risk Information
public consultation.
System (RB-CRIS) comprising of two parts. The first
2. Discussion Paper on Capital Raising Avenues for part will be a web-based directory, listing various data
Primary (Urban) Co-operative Banks sources, (meteorological, geospatial, etc.) which will
The initial set of guidelines on issue and regulation be publicly accessible in the RBI website. The second
of share capital and securities for Primary (Urban) part will be a data portal comprising of datasets
Co-operative Banks (UCBs) to ensure alignment with (processed data in standardised formats). The access
the Banking Regulation (Amendment) Act, 2020 were to this data portal will be made available only to the
issued in 2022. However, these guidelines did not regulated entities in a phased manner.
cover the newly enabled capital related provisions II. Payment Systems
such as issuance of special shares, issuance of shares
4. UPI - Enhancement of limits:
at a premium, etc., which are new to co-operative
banking sector. The Report of the Expert Committee In order to encourage wider adoption of UPI, it has
on Primary (Urban) Co-operative Banks chaired by been decided to enhance the limits for the following
Shri. N.S. Vishwanathan, former Deputy Governor, products of UPI:
RBI, had provided broad guiding principles through i)  UPI123Pay: UPI123 was launched in March
its recommendations on these provisions. 2022, with a view to enable feature-phone

RBI Bulletin October 2024 11

 MONETARY POLICY STATEMENT (OCTOBER 7-9) 2024-25 Statement on Developmental and Regulatory Policies

users to use UPI. This facility is now available 5. Introduction of beneficiary account name look-
in 12 languages. Currently, the per-transaction up facility
limit in UPI123Pay is capped at ₹5000. In Payment Systems like UPI and IMPS provide
order to widen the use-cases, in consultation a facility to the remitter to verify the name of the
with the stakeholders, it has been decided to receiver (beneficiary) before initiating a payment
enhance the per-transaction limit to ₹10,000. transaction. There have been requests to introduce
Necessary instructions will be issued to NPCI such a facility for Real Time Gross Settlement System
shortly. (RTGS) and National Electronic Funds Transfer (NEFT)
ii)  UPI Lite: A limit of ₹500 per transaction and systems.
an overall limit of ₹2000 per UPI Lite wallet, Accordingly, to enable remitters in RTGS and NEFT
is presently applicable, with the facility of to verify the name of the beneficiary account holder
auto-replenishment. To widen the scope before initiating funds transfer, it is now proposed
of usage of this product, it has now been to introduce a ‘beneficiary account name look-up
decided to increase the UPI Lite wallet limit facility’. Remitters can input the account number and
to ₹5,000 and per-transaction limit to ₹1,000. the branch IFSC code of the beneficiary, following
The Framework for facilitating small value which the name of the beneficiary will be displayed.
payments in offline digital mode, issued by This facility will increase customer confidence as it
the Reserve Bank, under which UPI Lite has would reduce the possibility of wrong credits and
been enabled, will be suitably amended. frauds. Detailed guidelines will be issued separately.

12 RBI Bulletin October 2024

MONETARY POLICY STATEMENT
(OCTOBER 7-9) 2024-25

Monetary Policy Report - October 2024

Monetary Policy Report OCTOBER 2024

I. Macroeconomic Outlook and energy, however, price pressures have increased

recently amidst heightened geopolitical tensions.
The outlook for domestic economic activity remains Brent crude oil prices, that were hovering around US
resilient buoyed by strong consumption and investment dollar (US$) 90 per barrel in April 2024, have since
activities. Geopolitical conflicts, uncertain global declined – ­even dipping below US$ 70 briefly – ­due
outlook, volatile global financial markets amidst to slowdown in demand and the Organization of the
changing perceptions on monetary policy trajectories, Petroleum Exporting Countries (OPEC) plus’ intent
and climate shocks are the key risks to the outlook. to gradually restore supplies. Of late, the US dollar
Monetary policy remains steadfast on aligning index, sovereign bond yields and crude oil prices have
inflation with the target on a durable basis, setting inched up. International prices of most agricultural
strong foundations for a sustained period of high commodities have risen due to increase in prices of
growth. vegetable oil, dairy and meat.

I.1 Key Developments since the April 2024 MPR Turning to the domestic economy, real gross domestic
product (GDP) grew by 6.7 per cent in Q1:2024-25
Since the release of the April 2024 Monetary Policy
as per the National Statistical Office (NSO). Private
Report (MPR), global economic activity has shown
consumption expenditure registered a growth of
resilience in the face of continuing geopolitical
7.4 per cent, contributing 63 per cent to overall GDP
tensions and intermittent financial market volatility.
growth. Consumption spending has been robust in
Disinflation in headline inflation has been slow due
Q1:2024-25, supported by rural demand which is
to stubborn services inflation which is keeping core
expected to improve further on the back of favourable
inflation (i.e., CPI inflation excluding food & fuel)
monsoon, higher sowing activity and moderating
elevated, relative to the headline. Several central
banks have started easing monetary policy while inflation. Investment activity also maintained its
others have maintained a restrictive stance, leading to momentum in Q1, supported by high capacity
divergence in policy pathways. utilisation, continued buoyancy in steel consumption
and capital goods imports. On the supply side, real
Financial markets have been on edge, with incoming
gross value added (GVA) expanded by 6.8 per cent in
data shifting expectations about the direction of
Q1, with industry and services sectors being the key
monetary policy. Sovereign bond yields have trended
drivers.
downwards on anticipation of policy pivots. Global
equity markets have exhibited resilience, recovering Headline consumer price index (CPI) inflation
quickly and regaining risk-taking appetite in spite of moderated to 4.4 per cent in April-August 2024 from
stretched valuations and still high leverage. Capital 5.2 per cent in H2:2023-24. Base effects continue to
flows to emerging market economies (EMEs) have have an outsized role in monthly inflation prints.
resumed albeit amidst heightened volatility. The Consequently, the moderation in headline inflation
US dollar index peaked in mid-June and receded has been uneven. Core inflation was on a steadily
thereafter on signs of cooling labour market conditions declining path–­in May 2024, it fell to its lowest level of
and easing inflation. Supply chain pressures have 3.1 per cent in the current series (since January 2012)
inched up since May driven by conflicts in the Middle before increasing in July-August. Food price inflation,
East. Global commodity prices declined on the back of on the other hand, remained elevated, averaging 6.9
softening prices of base metals, agricultural products, per cent over the last five months (April-August 2024),

RBI Bulletin October 2024 13

OCTOBER 2024 Monetary Policy Report

and contributing 72.5 per cent of headline inflation steadfast and data-dependent in their fight against
during the period. Recognising the risks from volatile inflation, acknowledging that the final leg of
and elevated food prices and its likely adverse impact disinflation might be tough. High frequency indicators
on inflation expectations and spillovers to core for domestic economic activity showed resilience, with
inflation, the Monetary Policy Committee (MPC) expectations of above normal monsoon brightening
kept the policy repo rate unchanged at 6.5 per cent the prospects of agriculture sector and rural demand.
through H1 and remained resolute in its commitment Investment demand in the private sector was buoyed
to aligning inflation with the target, while supporting by high capacity utilisation and healthy balance
growth. sheet of banks and corporates while improving world
trade was expected to support external demand. The
Monetary Policy Committee Meetings: April 2024 -
projection of real GDP growth for 2024-25 was revised
September 2024
upwards by 20 basis points from the previous meeting
When the MPC met in April 2024, global economy to 7.2 per cent. In India, headline CPI inflation
was showing resilience and inflation was trending moderated for three successive months to 4.8 per
down. Financial markets were responding to the cent in April 2024. Food inflation was persistently
timing and pace of monetary policy trajectories, with high while core inflation had fallen to historic lows.
heightened uncertainty pushing up gold prices on safe Nevertheless, the future inflation trajectory remained
haven demand. The domestic economic momentum uncertain due to supply shocks, input cost pressures
appeared strong, supported by healthy bank and and crude oil price volatility. The projection of CPI
corporate sector balance sheets and upbeat business inflation for 2024-25 was retained at 4.5 per cent. The
and consumer sentiments. Hence, the real GDP MPC noted that while the growth-inflation balance
growth projection for 2024-25 was retained at 7 per had moved favourably since its previous meeting,
cent. CPI headline inflation had softened in January- risks to inflation remain from recurring food price
February 2024 from its December high although food shocks and monetary policy has to stay watchful of
inflation edged up. The MPC noted the uncertainties the spillovers of food price pressures to core inflation
around the inflation trajectory stemming from and inflation expectations. Accordingly, the MPC
weather-driven food price shocks, cost push pressures, decided by a majority of 4-2 to keep the policy rate
firming crude oil prices due to geopolitical tensions unchanged at 6.5 per cent. The MPC voted with a 4-2
and volatility in financial markets, and retained the majority to continue with the stance of withdrawal of
projection of CPI inflation for 2024-25 at 4.5 per cent. accommodation.
The MPC observed that food price pressures have
In the run up to August 2024 meeting, headline
been interrupting the ongoing disinflation process,
inflation, after remaining steady at 4.8 per cent
posing challenges for the final descent of inflation to
during April and May 2024, increased to 5.1 per cent
the target. Considering that the path of disinflation
in June 2024, primarily driven by the food component
has to be sustained till inflation reaches the 4 per cent
even though fuel prices remained in deflation
target on a durable basis, MPC also decided, by a 5-1
and core inflation touched new lows. Assuming a
majority, to keep the policy repo rate unchanged at
normal monsoon, CPI inflation projection for 2024-
6.5 per cent. The MPC decided by a majority of 5-1 to
25 was retained at 4.5 per cent. Domestic economic
remain focused on withdrawal of accommodation so
activity was strengthening, with the pick-up in
as to ensure that inflation progressively aligns with southwest monsoon rainfall and improved spatial
the target, while supporting growth. spread translating into higher kharif sowing. Other
At the time of June 2024 meeting, global growth high frequency indicators suggested expansion in
was sustaining momentum. Central banks remained services activity. A revival in private consumption

14 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

has been underway with rural demand catching up April 2024 while two major advanced economies (AEs)
with urban consumption. The pickup in investment the US and the United Kingdom - have begun their
activity gathered strength as reflected by expansion in policy pivot in the second half of 2024.
steel consumption, high capacity utilisation and the Macroeconomic Outlook
government’s thrust on infra-spending. The projection
Chapters II and III analyse macroeconomic
of real GDP growth for 2024-25 was retained at 7.2
developments relating to inflation and economic
per cent. The MPC observed that risks from volatile
activity during H1:2024-25 (April-September 2024).
and elevated food prices remain high, which may
Turning to the baseline assumptions, international
adversely impact inflation expectations and result
crude prices exhibited sizeable two-way movements
in spillovers to core inflation. Accordingly, the MPC
in H1, receding from their five-month peak of US$
decided by a majority of 4-2 to keep the policy repo
dollar (US$) 91 per barrel in early April 2024 to US$
rate unchanged at 6.5 per cent while retaining the
77 per barrel by early June 2024 on slowing demand
stance of withdrawal of accommodation.
in Organization for Economic Cooperation and
The MPC’s voting pattern reflects the diversity in Development (OECD) countries and easing supply
individual members’ assessments, expectations and conditions. In September 2024, they were settling
policy preferences - a characteristic also reflected in around US$ 71-78 per barrel. While global growth
voting patterns of other central banks (Table I.1). With uncertainties on the demand side and geopolitical
the emerging view that the disinflation process is in its tensions on the supply side impart significant
final leg, a larger number of central banks have begun
volatility to the outlook (Charts I.1a and I.1b), easing
an easing cycle while others have retained policy rates
at restrictive levels. EME central banks that began Table I.2: Baseline Assumptions for Projections
policy rate easing have undertaken larger cuts since Indicator MPR April 2024 MPR October 2024
Crude Oil (Indian basket) US$ 85 per barrel US$ 80 per barrel
during 2024-25 during H2:2024-25
Table I.1 Monetary Policy Committees and
Exchange rate ₹ 83/US$ during ₹ 83.5/US$ during
Policy Rate Voting Patterns 2024-25 H2:2024-25
Country Policy Meetings: April 2024 - September 2024 Monsoon Normal for 2024-25 Normal for 2025-26
Total Meetings Meetings Variation Global growth 3.1 per cent in 2024 3.2 per cent in 2024
meetings with full without in policy 3.2 per cent in 2025 3.3 per cent in 2025
consensus full rate (basis
Fiscal deficit To remain within BE To remain within BE
consensus points)
(per cent of GDP) 2024-25 2024-25
Brazil 4 3 1 0 Centre: 5.1 Centre: 4.9
Combined: 7.7 Combined: 7.3
Chile 5 4 1 -175
Domestic macroeconomic/ No major change No major change
Colombia 4 0 4 -200
structural policies during
Czech Republic 4 2 2 -150 the forecast period
Hungary 5 5 0 -150 Notes: 1. The Indian basket of crude oil represents a derived numeraire
comprising sour grade (Oman and Dubai average) and sweet
India 3 0 3 0 grade (Brent) crude oil.
Japan 4 3 1 15 2. The exchange rate path assumed here is for the purpose of
generating the baseline projections and does not indicate any
South Africa 3 2 1 -25 ‘view’ on the level of the exchange rate. The Reserve Bank is
guided by the objective of containing excess volatility in the
Sweden 4 4 0 -75 foreign exchange market and not by any specific level of and/or
Thailand 3 0 3 0 band around the exchange rate.
3. BE: Budget estimates.
UK 4 0 4 -25 4. Combined fiscal deficit refers to that of the Centre and States
taken together.
US 4 3 1 -50
Sources: RBI estimates; Budget documents; and International Monetary
Sources: Central bank websites. Fund (IMF).

RBI Bulletin October 2024 15

 OCTOBER 2024 Monetary Policy Report

Chart I.1: Crude Oil Prices

Sources: Bloomberg; US Energy Information Administration (EIA); and Petroleum Planning & Analysis Cell.

global demand-supply refinery divergences have forecast for 2025 to 3.3 per cent in its July World
reduced the wedge between global petroleum product Economic Outlook (WEO) compared with April 2024
prices and crude prices (Chart I.1c). Considering these update. With modest recovery on the global front,
factors, crude prices (Indian basket) are assumed at the projection for global growth in 2024 and 2025 is
US$ 80 per barrel in the baseline as compared with still below the historical annual average1 of 3.8 per
US$ 85 in the April 2024 MPR (Table I.2). cent. Inflation is projected to fall from 5.9 per cent in
Second, the nominal exchange rate of the Indian rupee 2024 to 4.4 per cent in 2025. The pace of decline in
(₹) saw two-way movements in the range of ₹83-84 per inflation to targets, however, is likely to be faster in
US$ in H1, with a depreciating bias since July 2024. Chart I.2: Global GDP Growth and Inflation
Taking into consideration the uncertainty around US
dollar movements, the ebbs and flows of global capital
flows and international crude oil prices, the exchange
rate is assumed at INR 83.5 per US dollar in the baseline
as against INR 83 in the April 2024 MPR.
Third, repeated geopolitical tensions, rekindled fears
of a potential recession in key economies and financial
market volatility in response to monetary policy
divergence weigh heavily on global growth prospects.
The global composite purchasing managers' index
(PMI) has exhibited moderation since May 2024 with
PMI manufacturing in contraction zone since July
2024. The IMF retained the global growth estimate for
Source: World Economic Outlook July 2024 Update, IMF.
2024 at 3.2 per cent and revised upwards its growth
1 Historical annual average during 2000 - 2019.

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Monetary Policy Report OCTOBER 2024

AEs vis-à-vis EMEs (Chart I.2). Global trade growth is

Chart I.3: Inflation Expectations of Households
estimated to rebound to 3.1 per cent in 2024 from 0.8
per cent in 2023, notwithstanding the surge in cross-
border trade restrictions that pose risks to the global
trade outlook.
I.2 The Outlook for Inflation
In H1:2024-25 (up to August), headline inflation
remained within the tolerance band while food
inflation remained elevated and persistent (Chapter
II). In the September 2024 round of the Reserve
Bank’s survey2, the three months and one year ahead
median inflation expectations of urban households
reduced by 20 and 10 bps to 9.2 per cent and 10.0
per cent, respectively, vis-à-vis the previous round.
The proportion of respondents expecting the general
price level to increase by more than the current rate Source: Inflation Expectations Survey of Households, RBI.

declined for both horizons vis-à-vis the previous

round (Chart I.3). growth momentum to continue in Q3:2024-25 (Chart
I.4a).3 Services sector companies and infrastructure
Manufacturing firms polled in the July - September
2024 round of the Reserve Bank’s industrial outlook firms expect input cost pressures to persist and selling
survey expect pressures from cost of raw materials prices growth to moderate in Q3:2024-25 (Charts
to continue, with some softening and selling price I.4b and I.4c).4 In the PMI surveys for September

Chart I.4: Expectations for Cost of Raw Materials/Inputs and Selling Prices

Note: Net response is the difference between the share of respondents reporting optimism and those reporting pessimism. The range is -100 to 100. A positive/ negative
value of net response is considered as optimistic/pessimistic from the view point of respondent firms. Therefore, higher positive values of selling prices indicate increase
in output prices while lower values for the cost of raw materials/cost of inputs indicate higher input price pressures and vice versa.
Sources: Industrial Outlook Survey and Services and Infrastructure Outlook Survey, RBI.

2 The Reserve Bank’s inflation expectations survey of households is being conducted in 19 cities since March 2021 (18 cities in the previous rounds) and
the results of the September 2024 round are based on responses from 6,076 households.
3 The results of the July- September 2024 round of the industrial outlook survey are based on responses from 1,300 companies.
4 Based on 622 services companies and 139 infrastructure firms polled in the July-September 2024 round of the services and infrastructure outlook survey.

RBI Bulletin October 2024 17

 OCTOBER 2024 Monetary Policy Report

Chart I.5: Inflation Expectations of Professional Forecasters

Sources: Survey of Professional Forecasters, RBI; and National Statistical Office.

2024, input price indices of both manufacturing and for the inflation outlook. Nevertheless, rising global
services firms increased vis-à-vis the previous month supply chain pressures, adverse weather events,
while output prices decreased for both firms.
Table I.3: Projections - Reserve Bank and
Professional forecasters surveyed by the Reserve Bank Professional Forecasters
(Per cent)
in September 2024 expect headline CPI inflation to
2024-25 2025-26
increase from 4.0 per cent in Q2:2024-25 to 4.6 per
Reserve Bank’s Baseline Projections
cent in Q3, 4.4 per cent in Q4 and 4.2-4.5 per cent in
Inflation, Q4 (y-o-y) 4.2 4.1
H1:2025-26 (Chart I.5a and Table I.3).5 Core inflation Real GDP growth 7.2 7.1
(i.e., CPI excluding food and beverages, pan, tobacco Median Projections of Professional Forecasters
and intoxicants, and fuel and light) is expected to Inflation, Q4 (y-o-y) 4.4 -

successively increase from 3.5 per cent in Q2:2024- Real GDP growth 6.9 6.7
Gross domestic saving (per cent of GNDI) 30.0 30.3
25 to 3.9 per cent in Q3 and is expected to remain Gross capital formation (per cent of GDP) 33.5 33.5
between 4.2-4.3 per cent in the next three quarters.In Credit growth of scheduled commercial banks 13.5 13.0
the September 2024 round, their 5-year ahead expected Combined gross fiscal deficit (per cent of GDP) 7.9 7.4
Central government gross fiscal deficit
inflation remained unchanged at 4.5 per cent, while (per cent of GDP)
4.9 4.5

their 10-year ahead expectations moderated to 4.3 per Repo rate (end-period) 6.25 -
cent as compared to 4.5 per cent in the previous round Yield on 91-days treasury bills (end-period) 6.4 6.2
Yield on 10-year central government securities
(Chart I.5b). (end-period)
6.6 6.5

Overall balance of payments (US$ billion) 48.8 37.1

Looking ahead, evolving food inflation dynamics will
Merchandise exports growth 3.4 5.5
impinge upon the outlook for inflation. The above Merchandise imports growth 4.6 5.9
normal south-west monsoon rainfall, significantly Current account balance (per cent of GDP) -1.0 -1.0
higher reservoir levels as compared to decadal average Note: GNDI: Gross National Disposable Income.
Sources: RBI staff estimates; and Survey of Professional Forecasters
and higher kharif sowing vis-a-vis last year bode well (September 2024).

5 47 panellists participated in the September 2024 round of the Reserve Bank’s survey of professional forecasters.

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Monetary Policy Report OCTOBER 2024

Chart I.6: Projection of CPI Inflation (y-o-y) uneven distribution of rainfall; prolonged geopolitical
conflicts and resultant supply disruptions; recent
uptick in food and metal prices; volatility of crude oil
prices; and adverse weather events. The downside
risks could materialise from an early resolution of
geopolitical conflicts; weakening of global demand
accompanied by further easing of global food
and commodity prices; improvement in supply
conditions; and proactive supply side measures by the
government.
I.3 The Outlook for Growth

Note: The fan chart depicts uncertainty around the baseline projection path. The Domestic economic activity remains resilient.
baseline projections are conditioned upon the assumptions set out in Table I.2.
The thick red shaded area represents 50 per cent confidence interval, implying
Improved performance of industrial sector, upturn
that there is 50 per cent probability that the actual outcome will be within in investment activity, above normal monsoon, pick
the range given by the thick red shaded area. Likewise, for 70 per cent and 90
per cent confidence intervals, there is 70 per cent and 90 per cent probability, up in rural demand, high capacity utilisation, healthy
respectively, that the actual outcomes will be in the range represented by the
respective shaded areas. balance sheets of banks and corporates, and the
Source: RBI staff estimates.
government’s continued thrust on infrastructure
spending augur well for the growth outlook.
volatile food prices and continuing geopolitical strife
Uncertain global economic outlook, lingering
remain key risks. Taking into account the initial
geopolitical conflicts, rising supply chain pressures,
conditions, signals from forward-looking surveys and
and volatile global financial conditions, however,
estimates from time-series and structural models6,
weigh heavily on the outlook to the downside.
CPI inflation is projected to average 4.5 per cent
in 2024-25 – 4.1 per cent in Q2, 4.8 per cent in Q3 Turning to the key messages from forward-looking
and 4.2 per cent in Q4, with risks evenly balanced surveys, consumer confidence (the current situation
(Chart I.6). The 50 per cent and the 70 per cent index) improved in the September 2024 survey round
confidence intervals for headline inflation in Q4:2024- vis-à-vis the previous round on account of better
25 are 3.2-5.2 per cent and 2.6-5.8 per cent, respectively. perceptions about the general economic, employment,
For 2025-26, assuming a normal monsoon, and no and income conditions. Consumers’ optimism for
further exogenous or policy shocks, structural model the year ahead, measured by the future expectations
estimates indicate that inflation will average 4.1 per index, also improved in the latest round vis-à-vis the
cent with 4.3 per cent in Q1, 3.7 per cent in Q2, 4.2 previous one (Chart I.7).7
per cent in Q3 and 4.1 per cent in Q4. The 50 per cent Optimism in the manufacturing sector for Q3:2024-25
and the 70 per cent confidence intervals for headline improved in the July- September 2024 round of the
inflation in Q4:2025-26 are 2.8-5.4 per cent and 2.1-6.1 Reserve Bank’s industrial outlook survey (Chart I.8a).
per cent, respectively. Services and infrastructure companies continue to
The baseline forecasts are subject to several upside maintain a highly optimistic outlook for Q3:2024-25
and downside risks. The upside risks emanate from (Charts I.8b and I.8c).
6 J. John, Kumar D., George A.T., Mitra P., Kapur M., & Patra, M.D. (2023). “A Recalibrated Quarterly Projection Model (QPM 2.0) for India”. RBI Bulletin,
February 2023, Vol. 77(2).
7 The Reserve Bank’s consumer confidence survey is being conducted in 19 cities since March 2021 (13 cities in the previous rounds) and the results of
the September 2024 round are based on responses from 6,087 respondents.

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OCTOBER 2024 Monetary Policy Report

Chart I.7: Consumer Confidence Table I.4: Business Expectations Surveys

Item NCAER FICCI Dun and CII
Business Overall Bradstreet Business
Confidence Business Composite Confidence
Index (July Confidence Business Index
2024) Index (May Optimism (October
2024) Index (July 2024)
2024)
Current level of
149.8 73.7 78.9 68.2
the index
Index as per
70.9 75.9 67.3
previous survey 138.2
% change (q-o-q)
8.4 3.9 3.9 1.3
sequential
% change (y-o-y) 17.0 18.1 12.6 1.6
Notes: 1. NCAER: National Council of Applied Economic Research.
2. FICCI: Federation of Indian Chambers of Commerce & Industry.
3. CII: Confederation of Indian Industry.
4. Dun and Bradstreet Composite Business Optimism Index and
CII Business Confidence Index are for Q2:2024-25, NCAER
Source: Consumer Confidence Survey, RBI. Business Confidence Index is for Q1:2024-25, and FICCI Overall
Business Confidence Index pertain to Q4:2023-24.
Recent surveys by other agencies report sequential Sources: NCAER, FICCI, CII and Dun & Bradstreet Information Services
India Pvt. Ltd.
improvement in business expectations relative to
the previous round (Table I.4). Manufacturing and
services firms in the PMI surveys for September 2024 growth at 6.9-7.0 per cent during 2024-25 and 6.6-6.7
remained upbeat for the year ahead though a marginal per cent during H1:2025-26 (Chart I.9 and Table I.3).
deceleration in expectations is observed vis-à-vis the Real GDP growth exceeded 8 per cent growth in
previous month for manufacturing firms. the first three quarters of 2023-24 before dipping
Professional forecasters polled in the September 2024 marginally to 7.8 per cent in Q4. Real GDP growth
round of the Reserve Bank’s survey expected real GDP of 6.7 per cent in Q1:2024-25 is reflective of the

Chart I.8: Business Assessment and Expectations

Sources: Industrial Outlook Survey and Services and Infrastructure Outlook Survey, RBI.

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Monetary Policy Report OCTOBER 2024

Chart I.9: Professional Forecasters' Projection of Chart I.10: Projection of Growth in Real GDP (y-o-y)
Real GDP Growth

Note: The fan chart depicts uncertainty around the baseline projection path. The
baseline projections are conditioned upon the assumptions set out in Table I.2.
The thick green shaded area represents 50 per cent confidence interval, implying
that there is 50 per cent probability that the actual outcome will be within the
range given by the thick green shaded area. Likewise, for 70 per cent and 90
per cent confidence intervals, there is 70 per cent and 90 per cent probability,
respectively, that the actual outcomes will be in the range represented by the
Sources: Survey of Professional Forecasters, RBI and National Statistical Office. respective shaded areas.

underlying momentum in key drivers of the economy and earlier than anticipated easing of global financial
viz., private consumption and investment. Taking conditions. On the contrary, further escalation in
into account the baseline assumptions, survey geopolitical tensions; volatility in international
indicators and model forecasts, real GDP growth is financial markets and geoeconomic fragmentation;
expected at 7.2 per cent in 2024-25 with 7.0 per cent deceleration in global demand; frequent weather-
in Q2; 7.4 per cent both in Q3 and Q4 - with risks related disturbances due to climate change; and
evenly balanced around the baseline (Chart I.10 and supply chain disruptions pose downside risks to the
Table I.3). For 2025-26, assuming a normal monsoon baseline growth path.
and no major exogenous or policy shocks, structural
model estimates indicate real GDP growth at 7.1 per I.4 Balance of Risks
cent, with Q1 at 7.3 per cent, Q2 at 7.2 per cent, Q3 The baseline projections of growth and inflation
and Q4 both at 7.0 per cent. are conditional on assumptions of the future path
There are upside and downside risks to this baseline of key domestic and global macroeconomic variables
growth path. The upside risks emanate from robust set out in Table 1.2. These baseline assumptions are,
government capex and revival in private investment; however, subject to uncertainties emanating from
improved prospects of agricultural sector due prolonged geopolitical conflicts, volatility in global
to favourable monsoon rainfall; strengthening financial markets and recurrent adverse climate
manufacturing and services sector activity sustained events. In this context, this section explores the
by strong domestic demand; retreating global and plausible alternative scenarios to assess the balance
domestic inflation; improvement in global trade; of risks around the baseline projections.

RBI Bulletin October 2024 21

OCTOBER 2024 Monetary Policy Report

(i) Global Growth Uncertainties growth and inflation could turn out to be higher
by around 15 bps and 7 bps, respectively (Charts
Global economic activity is subject to uncertainties
I.11a and I.12a).
going forward. Policy divergence among major central
banks could trigger heightened volatility in global (ii) International Crude Oil Prices
financial markets, with spillovers to emerging market Global crude oil prices have exhibited some
economies. Services price and wage inflation remain moderation, with Brent crude falling from a high
areas of concern for the last mile of disinflation which of US$ 93 per barrel in mid-April 2024 to US$73 per
might keep global interest rates higher for longer, barrel by end-September. Global growth recovery,
with adverse impact on global growth prospects. continuation of geo-political tensions and non-
The global economic outlook is also subject to reversal of production cut by OPEC plus may put
headwinds from prolonged geopolitical and trade upward pressure on crude oil prices. In this scenario,
tensions, supply chain disruptions and swings assuming crude oil price to be 10 per cent above the
in economic policies resulting from impending baseline and full pass-through to domestic product
elections in major economies. In case these downside prices, domestic inflation could be higher by 30 bps
risks materialise, and, if global growth is 100 bps and growth weaker by around 15 bps, respectively.
lower than the baseline, domestic growth and Conversely, early resolution of geopolitical tensions,
inflation could be lower than baseline projections by weak global demand, higher production from non-
around 30 bps and 15 bps, respectively. If, however, OPEC economies along with unwinding of production
there is faster convergence in global disinflation cuts by OPEC plus may soften crude oil prices. If
and alignment in monetary policy paths going crude oil prices fall by 10 per cent relative to the
forward, recovery in global trade and resolution of baseline, inflation could ease by around 30 bps with
geopolitical tensions, there can be an upside to global a boost of 15 bps to India’s real GDP growth (Charts
growth. If global growth is higher by 50 bps, domestic I.11a and I.12a).

Chart 1.11: Impact of Risk Scenarios on the Baseline Inflation Path

Source: RBI staff estimates.

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Monetary Policy Report OCTOBER 2024

Chart 1.12: Impact of Risk Scenarios on the Baseline Growth Path

Source: RBI staff estimates.

(iii) Exchange Rate (iv) Food Inflation

The Indian Rupee (INR) has remained steady against Food inflation remained persistently high in H1:2024-
the US dollar, being least volatile among major EME 25, driven by high prices in cereals and pulses along
currencies in recent months. Going ahead, restrictive with large shocks to vegetable prices triggered by
monetary policy by major AEs to achieve the last mile recurrent adverse climate events of rising intensity.
of disinflation could limit attractiveness of EME assets Further, food prices may be subject to extreme
and trigger reversal of capital flows. Crude oil and weather events such as excess rains and floods
other global commodity prices could also harden in affecting kharif crops, unseasonal rains typically
associated with extreme La Niña conditions, which
comparison with the baseline. In this scenario, if INR
may result in damage of winter crops and perishables.
depreciates by 5 per cent over the baseline, inflation
In such a scenario, there could be upward pressures
could be higher by around 35 bps while GDP growth
on food prices and could raise headline inflation by
could edge up by around 25 bps through short term
around 50 bps over the baseline. Persistent shocks
stimulation of exports. On the other hand, the Indian
to food inflation warrant a cautious approach by
economy remains the fastest growing major economy
monetary policy to contain spillover effects (Box I.1).
globally and is poised to play an important role in On the other hand, kharif sowing remained robust,
revival of global growth. These developments, along with higher acreage for major crops. Reservoir levels,
with robust domestic macroeconomic fundamentals, too, are higher than both last year’s levels and the
inclusion of government bonds in global indices, and decadal average, which augurs well for the rabi
faster than anticipated monetary policy easing by AEs season. These developments along with effective
would attract foreign investors. In this scenario, if the supply management measures may result in easing
INR appreciates by 5 per cent relative to the baseline, of food inflation pressures and could lower headline
inflation and GDP growth could moderate by around 35 inflation by 50 bps compared with the baseline
bps and 25 bps, respectively (Charts I.11b and I.12b). (Charts I.11b and I.12b).

RBI Bulletin October 2024 23

 OCTOBER 2024 Monetary Policy Report

Box I.1: Monetary Policy Response to Food Inflation Under Alternative Scenarios
The implications of food inflation for monetary policy no policy response. In the event of repeated shocks
are conditional on the size and duration of shocks to food to food inflation, however, there may be spillover to
prices and their transmission to headline inflation. The core inflation through elevated second round effects,
direct or first round impact of food inflation shocks is requiring substantive monetary policy action to stabilise
observed as a change in headline CPI inflation, given the prices.
dominant share of food items in the average household Scenario 2 illustrates the relative effect of repeated
consumption basket. In the event of repeated and/ food inflation shocks (from scenario 1) in the presence
or persistent food price shocks, price pressures may of buoyant aggregate demand conditions as against a
spillover to other components through shifts in inflation situation with slack in demand. In the event of robust
expectations (Das, 2024; Patra, et.al., 2024) and correction demand conditions, the spike in core inflation will be
in relative prices. These are the indirect or second-round compounded, warranting more aggressive monetary
effects of food inflation. policy action. In case of slack demand conditions, the
While the first-round effects are largely invariant to pass-through of repeated shocks from food to core
monetary policy, the second-round effects fall within inflation will be moderate, meriting lesser urgency for
its ambit. Therefore, prudent monetary policy must monetary policy tightening.
assess persistence of shocks to food inflation, their Finally, Scenario 3 illustrates the impact of a series of
direct and indirect effects, and the relative efficacy of repeated food inflation shocks (from scenario 1) in the
interest rate changes in moderating these impulses. case of a perfectly credible central bank. Higher credibility
This assumes importance in the broader macroeconomic leads to better anchoring of inflation expectations of
context that accounts for contemporaneous aggregate economic agents, which may lead to restricted pass-
demand conditions as well as the credibility of the through of higher costs to prices and therefore warranting
central bank in anchoring inflation expectations. This less tightening of monetary policy. If the central bank
general equilibrium approach are modelled by using the credibility is low, economic agents may develop adaptive
Quarterly Projection Model 2.0 (John et. al., 2023) . 8
expectations and therefore inflationary shocks may pass-
through without friction, warranting more aggressive
Scenario 1 models the impact of a transitory shock
policy rate action to stabilise the economy.
compared to repeated shocks to food inflation.
Transitory shocks may largely be seen through as they These simulations suggest that while transitory shocks to
tend not to pass through to core inflation, warranting food inflation can largely be ignored by monetary policy,
(Contd.)

8 Core inflation ( ) is postulated as a function of one quarter ahead expected y-o-y core inflation ( ), its own past ( ), non-agricultural
output gap ( ), real exchange rate gap ( ) and spillovers from fuel and food components.

Inflation expectation is represented as a weighted sum of one-quarter lagged core inflation and model-based one quarter ahead rational expectation. The
weights depend on the stock of policy credibility ( ). can range between 0 and 1; 0 indicates no credibility, in which case expectations are completely
backward looking; and 1 indicates perfect credibility, in which case inflation expectations are perfectly forward looking.

The policy repo rate equation follows an inflation-forecast based Taylor-type reaction function with an interest rate smoothing parameter.

where is the policy repo rate, is the natural rate of interest, is the inflation target, and are the three quarters ahead core
and headline inflation forecasts, respectively.
The above three equations are a part of the entire system of equations described the Quarterly Projection Model (QPM 2.0).

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Monetary Policy Report OCTOBER 2024

repeated shocks do pose a challenge. If monetary policy expectations and consequently a more durable upward
does not respond to the second-round effects of repeated drift in core inflation, warranting more aggressive
shocks to food inflation, it risks unanchoring of inflation monetary policy to achieve disinflation in the future.

Chart I.1.1: Impact of food inflation shocks

Scenario 1: Transitory shock versus repeated shocks to food inflation

Scenario 2: Repeated shocks to food inflation in a buoyant versus slackening economy

Scenario 3: Repeated shocks to food inflation with a perfectly credible and with imperfect central bank crediblity

References:
S. Das (2024). “Governor’s Statement: Monetary Policy Statement (August 6-8) 2024-25”. RBI Bulletin, August 2024, Vol.
78(8).
John, J., Kumar, D., George, A.T., Mitra, P., Kapur, M., and Patra, M.D. (2023). “A Recalibrated Quarterly Projection
Model (QPM 2.0) for India”. RBI Bulletin, February 2023, Vol. 77(2).
Patra, M.D., John, J., and George, A.T. (2024). “Are Food Prices Spilling Over?”. RBI Bulletin, August 2024, Vol. 78(8).

RBI Bulletin October 2024 25

OCTOBER 2024 Monetary Policy Report

I.5 Conclusion downward trajectory and is expected to moderate

further in 2024-25, though the pace may be slow and
Domestic economic activity is expected to remain
uneven. Core inflation has bottomed out but remains
robust on the back of strong fundamentals. The
subdued, supported by disinflationary monetary
revival of private consumption is buoyed by receding
policy. The last mile of disinflation is contingent
inflation and pick-up in rural demand is expected
upon reining in food inflation and checking its
to be its mainstay. The Government’s capex push spillover impact on inflation expectations and
on infrastructure, upturn in investment activity, core inflation. Monetary policy remains steadfast
improved prospects of agricultural sector, strong on aligning inflation with the target. Geopolitical
corporate and bank balance sheets and improved conflicts, uncertain global outlook, volatile global
outlook of global growth and trade are further aiding financial markets, and climate shocks remain key
the growth momentum. Headline inflation is on a risks to the growth and inflation outlook.

26 RBI Bulletin October 2024

 Chapter II Prices and Costs

II. Prices and Costs series so far. The wedge between headline and core
inflation widened, from 1.7 percentage points in

Headline CPI inflation after remaining sticky till February 2024 to 2.0 percentage points in June. In
June 2024, fell sharply thereafter buoyed by favourable July-August 2024, headline CPI inflation fell sharply
base effects. The wedge between headline and core to 3.6-3.7 per cent, buoyed by large favourable base
inflation widened further in June, before moderating effects in July, which also pulled food inflation down
in July-August. Input costs have remained subdued to 5.1-5.3 per cent. Core inflation edged up to around
while rural wages and manufacturing staff cost growth 3.4 per cent in July-August, primarily on account of a
decelerated. pick-up in core services inflation, while deflation in
fuel prices intensified (Chart II.1).
Headline consumer price index (CPI) inflation1
remained sticky at around 5 per cent during March to The Reserve Bank of India (RBI) Act enjoins the RBI
June 2024, with key groups displaying considerable to set out deviations of actual inflation outcomes
divergence. Food inflation edged up from an elevated from projections, if any, and explain the underlying
level of 7.8 per cent in February 2024 to 8.4 per cent reasons thereof. The April 2024 MPR had projected
by June under the impact of repeated supply-side inflation at 4.9 per cent in Q1:2024-25 and 3.8 per
shocks. Deflation in fuel prices deepened from (-)0.8 cent in Q2:2024-25 (Chart II.2). Actual inflation
per cent in February to (-)3.6 per cent in June. Core outcomes have largely mirrored these projections.
2
(CPI excluding food and fuel) inflation softened from The projections of a significant softening of inflation
3.4 per cent to 3.1 per cent over the same period, the in Q2 (July to September), induced by large favourable
lowest reading recorded in the current CPI (2012=100) base effects in July, was also confirmed by actual

Chart II.1: CPI Inflation (y-o-y) Chart II.2: CPI Inflation (y-o-y):
Projection versus Actual

*: Projections for entire Q2:2024-25 vis-à-vis actual average inflation for July-
August 2024.
Sources: National Statistical Office (NSO); and RBI staff estimates. Sources: NSO; and RBI staff estimates

1 Headline inflation is measured by year-on-year (y-o-y) changes in the all-India consumer price index (CPI) produced by the National Statistical Office
(NSO).
2 Core CPI, i.e., CPI excluding food and fuel is worked out by eliminating the groups ‘food and beverages’ and ‘fuel and light’ from the headline CPI.

27
Monetary Policy Report October 2024

inflation outcomes. The projections for Q2 (July- food and core groups, while statistical gains from
September) had also factored in a likely pick-up in favourable base effects pulled down headline CPI
inflation in September due to adverse base effects. inflation by 1.5 percentage points to 3.6 per cent. In
II.1 Consumer Prices August, the modest increase in headline inflation by 5
basis points (bps) to around 3.7 per cent reflected base
Inflation dynamics in 2024-25 so far (April to August)
effects only as the overall prices remained unchanged
have undergone two distinct phases. First, after
(Chart II.3).
moderating to 4.9 per cent in March from 5.1 per cent
in February, on favourable base effects and a sharp The distribution of CPI inflation in 2024 so far
fall in fuel price momentum3, headline inflation (January-August) reflects a lower median and mean
remained steady at 4.8 per cent in April-May and along with lower standard deviation than a year
edged up thereafter to 5.1 per cent in June due to a ago when large and multiple food price shocks had
sharp pick up in price momentum triggered by an played an outsized role (Chart II.4). Stickiness in
increase in food prices, notwithstanding significant headline inflation between January-June 2024 was
favourable base effects. In the second phase from accompanied by a considerable divergence in food,
July, CPI price momentum remained firm across fuel and core inflation trajectories. In July-August,

Chart II.3: CPI Inflation – Momentum and Base Effects

Sources: NSO; and RBI staff estimates.

3 A change in CPI year-on-year (y-o-y) inflation between any two months is the difference between the current month-on-month (m-o-m) change in the
price index (momentum) and the m-o-m change in the price index 12 months earlier (base effect). For more details, see Box I.1 of the MPR, September
2014.

28
 Chapter II Prices and Costs

Chart II.4: Average CPI Inflation (y-o-y) Chart II.5: CPI Sub-Group/Group Inflation Range
(Kernel Density Estimates) (y-o-y)

Sources: NSO; and RBI staff estimates. Sources: NSO; and RBI staff estimates.

a fall in food inflation led to narrowing of these March 2024, headline CPI DI dipped in April-May
divergences (Chart II.5). across both goods and services components. During
Diffusion indices (DIs)4 remained in high expansionary June-August 2024, headline CPI DI edged up due to
zone between March and August 2024, indicative of wider dispersion of price increases, first in goods and
positive price increases across a broad spectrum of thereafter in services (Chart II.6a). Threshold DI5 –
the CPI basket. After recording a transient uptick in for price increases in excess of 4 per cent as well as

Chart II.6: CPI Diffusion Indices (M-o-M Seasonally Adjusted)

Sources: NSO; and RBI staff estimates.

4 The CPI diffusion index, a measure of dispersion of price changes, categorises items in the CPI basket according to whether their m-o-m seasonally
adjusted prices have risen, remained stagnant or fallen over the previous month. The higher the reading above 50, the broader is the expansion or
generalisation of price increases; the further is the reading below 50, the broader is the price decline across items.
5 Threshold diffusion indices capture the dispersion of price increases in CPI basket beyond the specified saar thresholds of 4 per cent and 6 per cent.

29
Monetary Policy Report October 2024

6 per cent on a seasonally adjusted annualised rate to overall inflation - after being the major driver of
(saar) basis – continued to remain well below the 50 inflation in the last four successive quarters - and
level mark, indicating little incidence of any broad- from the disinflationary impact of past monetary
basing of such price momentum (Chart II.6b). policy actions (Chart II.7a).
Goods inflation (with a weight of 76.6 per cent in the
II.2 Drivers of Inflation
overall CPI) contributed around 88 per cent of headline
A historical decomposition of inflation using a inflation between March and June 2024 and around
vector autoregression (VAR)6 model indicates that 82 per cent in July and August 2024 (Chart II.7b). The
the moderation in inflation in Q2:2024-25 stemmed contribution of services (with a weight of 23.4 per
from the negative contribution of supply side shocks cent) edged up over this period due to the pick-up

Chart II.7: Drivers of CPI Inflation

Sources: NSO; and RBI staff estimates.

6 Historical decomposition estimates the contribution of each shock to the movements in inflation over the sample period (Q4:2010-11 to Q4:2024-25)
based on a vector autoregression (VAR) with the following variables (represented as the vector Yt) – crude oil prices (US$ per barrel); exchange rate (INR
per US$), asset price (BSE Sensex), CPI; the output gap; rural wages; the policy repo rate; and money supply (M3). All variables other than policy repo rate
are y-o-y growth rates. The VAR can be written in reduced form as: Yt = c + A Yt-1 + et; where et represents a vector of shocks. Using Wold decomposition,
Yt can be represented as a function of its deterministic trend and sum of all the shocks et. This formulation facilitates decomposition of the deviation of
inflation from its deterministic trend into the sum of contributions from various shocks.

30
 Chapter II Prices and Costs

in mobile tariffs. The increase in the contribution of CPI Food Group

perishable items (non-durable with a 7-day recall7),
Food and beverages (weight of 45.9 per cent in the
which include vegetables, spices, fruits and other
CPI basket) inflation exhibited distinct phases during
food items such as milk, meat and fish and prepared
the year so far. It averaged 8.0 per cent during April-
meals, contributed to the stickiness in inflation
June 2024, as weather disturbances such as heatwave
in Q1. The contribution of semi-perishables (non-
conditions and uneven rainfall distribution, as well as
durable goods with a 30-day recall) to overall inflation
tight supply conditions led to inflationary pressures in
remained broadly unchanged with cereals, pulses, and
vegetables, cereals, and pulses. There was, however, a
personal care items being the main inflation drivers.
The contribution of durable items (goods with a 365- sharp moderation in food inflation to 5.1 per cent in
day recall) to overall inflation edged up during April- July 2024, as favourable base effects more than offset
August 2024, primarily reflecting the uptick in gold a significant pickup in momentum. In August, despite
prices. a decline in food price momentum, food inflation
increased to 5.3 per cent due to unfavourable base
The contribution of imported components8 to
effects (Chart II.8).
headline inflation turned positive from April 2024
and increased gradually to 0.5 percentage points by The food price build-up during 2024-25 so far (up to
August 2024, driven by higher gold and silver prices August) has been substantial, although lower than
(Chart II.7c). last year and the long-term historical average. High

Chart II.8 CPI Food Inflation

*: Includes meat & fish, egg, milk and pulses.

**: Includes fruits, sugar, non-alocoholic beverages and prepared meals.
Note: Figures in parentheses indicate weights in CPI food and beverages.
Sources: NSO; and RBI staff estimates.

7 The CPI weighting diagrams use the modified mixed reference period (MMRP) data based on the 2011-12 Consumer Expenditure Survey conducted by
the National Sample Survey Office (NSSO). Under MMRP, data are collected on expenditure incurred during the last seven days for frequently purchased
items like edible oil, eggs, fish, meat, vegetables, fruits, spices, beverages, processed foods, pan, tobacco and intoxicants; expenditure incurred during the
last 365 days for items like clothing, bedding, footwear, education, medical (institutional), durable goods; and expenditure incurred in the last 30 days for
all other food, fuel and light, miscellaneous goods and services including non-institutional medical services, rents and taxes.
8 Global commodities that drive domestic prices include petroleum products; coal; electronic goods; gold; silver; chemical products; metal products;
textiles; cereals; milk products, and vegetables oils – these together have a weight of 36.4 per cent in the CPI basket.

31
Monetary Policy Report October 2024

Chart II.9: Financial Year Price Build-up Chart II.10: Cereals Inflation (y-o-y)
(August 2024 over March 2024)

Note: Figures in parentheses indicate weights in CPI - food and beverages.

Sources: NSO; and RBI staff estimates. Sources: NSO; and RBI staff estimates.

vegetable prices contributed a disproportionately ban on exports of non-basmati white rice subject to
large share to this build-up for the second successive a minimum export price (MEP) of $490/tonne, while
year in a row (Chart II.9). removing the MEP on Basmati rice in September 2024
Cereals (weight of 9.7 per cent in the CPI and 21.1 to support farmers’ price realisation. Wheat inflation,
per cent in the food and beverages group) inflation on the other hand, was moderating till February 2024,
but it hardened thereafter to reach 6.6 per cent in
remained elevated at an average of 8.3 per cent during
August, reflecting lower buffer stocks (0.9 times the
April-August 2024 (Chart II.10). Within cereals, rice
norm as of September 16, 2024) and lower mandi
inflation remained in double digits, despite export
arrivals than in 2023-24. Wheat inflation was elevated
restrictions, reflecting tight supply conditions due
despite higher production and price stabilisation
to lower rabi and summer production [(-)2.4 per cent
measures, including the imposition of stock limits
year-on-year (y-o-y) in 2023-24]. For effective supply for traders/wholesalers and retailers till March 2025,
management and price stabilisation, government the likely offloading of stocks under the OMSS and
has announced several measures including the retail continued restrictions on wheat exports.
sale of ‘Bharat Rice’ and allowing rice-deficient states
Vegetables (weight of 6.0 per cent in the CPI and 13.2
to directly purchase rice from the Food Corporation
per cent in the food and beverages group) inflation
of India at a fixed price of ₹2800/quintal under the
remained elevated till June 2024, but witnessed a sharp
Open Market Sale Scheme (OMSS) from August
correction in July primarily because of favourable base
2024. The buffer stocks of rice (3.0 times the norm effect (Chart II.11). The price momentum, however,
as of September 16, 2024) are comfortable and kharif remained firm in July, reflecting lower production
sowing has been higher by 2.5 per cent in 2024-25 as [(-)3.2 per cent in 2023-24 over 2022-23 as per 3rd advance
on September 27, 2024 compared to the corresponding estimates (AE) 2023-24] and supply disruptions due to
period of last year, which are likely to improve supply heatwave conditions in parts of northern India, excess
conditions and contain price pressures. With signs of rains in parts of central and southern India and the
easing of supply conditions, government has lifted the resultant lower market arrivals. As supplies resumed,

32
 Chapter II Prices and Costs

producing states of Uttar Pradesh, West Bengal,

Chart II.11: Drivers of Vegetables Inflation (y-o-y)
and Bihar. Onion prices moderated during January-
February 2024, but started rising again, recording
a y-o-y inflation of 60.6 per cent in July 2024 and
54.1 per cent in August due to deficient production
[(-)19.7 per cent in 2023-24 over 2022-23 as per 3rd
AE 2023-24]. For effective supply management, onion
exports were allowed and 40 per cent export duty
with a MEP of $550 per metric tonne was imposed
in May 2024. Subsequently, in September 2024, the
export duty was reduced to 20 per cent, and MEP was
removed, allowing free shipments of onion. Tomato
price increase, which averaged around 37 per cent
during December 2023-June 2024 on a y-o-y basis,
Note: Figures in parentheses indicate items' weights in CPI-vegetables. was on account of tight supply conditions induced
Sources: NSO; and RBI staff estimates.
by heatwaves and unseasonal rainfall. Prices declined
vegetable prices declined in August, particularly from by (-)43.0 per cent, on a y-o-y basis, in July 2024 as
a sharp correction in tomato prices. a strong favourable base effect outweighed the
substantial increase in price momentum. Softening
Among key vegetables, potato prices, on a y-o-y basis,
in prices in August further pulled down tomato
increased sequentially in 2024, reaching 65 per cent inflation to (-)47.9 per cent. Vegetables excluding TOP
in July-August, driven by production shortfalls [(-)5.1 (tomato; onion; and potato), particularly garlic, also
per cent in 2023-24 over 2022-23 as per 3rd AE 2023- witnessed considerable price build-up in Q1:2024-
24] due to unseasonal rains and prolonged spells of 25, emerging as another major driver of vegetables
fog and cold conditions during winter in the major inflation (Chart II.12).

Chart II.12: Price build-up in CPI Vegetables

*: TOP denotes tomato, onion and potato.

Sources: NSO; and RBI staff estimates.

33
Monetary Policy Report October 2024

Inflation in fruits (weight of 2.9 per cent in the CPI supply conditions through imposition of stock limits
and 6.3 per cent within the food and beverages group) on tur and gram (till September 30, 2024), extension
eased in July on a strong favourable base effect, of free import policy for yellow peas (till December 31,
after rising during April-June 2024 to 6.3 per cent on 2024), and tur and urad (till March 31, 2025), weekly
average. In August, it rose to 6.5 per cent despite higher stock disclosure requirements for five major pulses,
production (2.3 per cent in 2023-24 over 2022-23 as per and sale of chana dal under the brand ‘Bharat Dal’. As
the 3rd AE), with price increases primarily driven by a result, the stock-to-use ratio improved to 6.8 per cent
bananas, apples and mangoes. Inflation in groundnut during April-August 2024 from 6.5 per cent during the
prices, however, moderated from around 10.4 per cent corresponding period of 2023 (Chart II.14).
in December 2023 to 1.7 per cent in July 2024 before
Animal-based protein items exhibited high and volatile
falling into the deflationary zone at (-)1.5 per cent in
inflation movements during April-August 2024.
August 2024, on account of higher kharif production
Inflation in prices of meat and fish (weight of 3.6 per
(1.1 per cent in 2023-24).
cent in the CPI and 7.9 per cent in the food and beverages
Pulses, the primary source of plant-based protein group) averaged 6.2 per cent during April-August 2024.
(weight of 2.4 per cent in the CPI and 5.2 per cent in Inflation in the price of eggs (weight of 0.43 per cent
the food and beverages group), continued to record in the CPI and 0.9 per cent in the food and beverages
double-digit inflation due to deficient kharif and rabi group) exhibited considerable volatility, falling from
production [(-)7.0 per cent in 2023-24 over 2022-23] on 10.3 per cent in March to 4.1 per cent in June before
top of a decline in production in 2022-23. Within pulses, increasing to 7.1 per cent in August. Inflation in milk
lower production of gram [(-)10 per cent in 2023-24], and products (weight of 6.6 per cent in the CPI and
urad [(-)11.9 per cent] and moong [(-)15.6 per cent] as 14.4 per cent within the food and beverages group)
well as subdued production in tur (3.2 per cent increase has remained range bound at around 3 per cent during
in 2023-24 over 2022-23 against 21.5 per cent decline in April-August. Although milk price hikes by several
2022-23) were the primary drivers of price pressures cooperatives, including Amul and Mother Dairy, in
(Chart II.13). Inflation in pulses prices moderated to June 2024 led to higher price momentum in June, it
13.6 per cent in August 2024 on interventions to ease was offset by favourable base effects (Chart II.15).

Chart II.13: CPI Pulses and Products Chart II.14: Pulses Inflation and
(Cumulative Financial Year Price Build-up) Stock-Use Ratio

Sources: NSO; and RBI staff estimates. Sources: MOSPI; DGCI&S; CACP; Ministry of Agriculture; and RBI staff estimates.

34
 Chapter II Prices and Costs

Chart II.15: Drivers of Animal Protein Inflation Chart II.16: Edible Oil Prices: Domestic and Global
(H1:2024-25 over H2:2023-24) 10 40

5 20

0 0

Y-o-y, per cent

Y-o-y, per cent
-5 -20

-10 -40

-15 -60

-20 -80

Apr-23

Apr-24
Aug-22

Oct-22

Dec-22

Oct-23

Dec-23
Jun-23

Aug-23

Jun-24

Aug-24
Feb-23

Feb-24
CPI oils and fats Global oils and meals (right scale)
Note: Figures in parentheses indicate weights in CPI-animal protein group.
Global palm oil (right scale)
H1: 2024-25 refers to April-August.
Sources: NSO; and RBI staff estimates. Sources: World Bank Pink Sheet; NSO; and RBI staff estimates.

Prices of oils and fats (weight of 3.6 per cent in the CPI 25 compared to H2:2023-24 despite lower sugarcane
and 7.8 per cent within the food and beverages group) production [(-)7.6 per cent in 2023-24 over 2022-23].
remained in deflation during April-August 2024 on Measures to augment domestic availability of
higher imports and lower international prices of major sugar include extension of export restrictions, and
edible oils (Chart II.16). The pace of deflation, however, imposition of 50 per cent export duty on molasses
moderated, with continued positive momentum used for ethanol production as well as restriction
reflecting pick-up in international edible oil prices as on the use of sugarcane juice and syrup for ethanol
well as lower domestic production of oilseeds in the production since December 2023. The restrictions on
2023-24 season [(-)4.1 per cent in 2023-24 over 2022- sugar diversion for ethanol production were, however,
23]. The current kharif season sowing of oilseeds eased in August 2024.
has been encouraging, particularly for groundnut. Among other food items, inflation in spices moderated
In January 2024, the regime of lower import duties on a sustained basis since April 2024 and slipped
on crude palm, sunflower and soyabean oil were into deflation since July after recording double-digit
extended till March 2025. To improve domestic price inflation for a 22-month period till March 2024. The
realisation, however, the import duty on crude and recent decline was led by jeera and dry chillies, on
refined edible oils has been hiked by 20 percentage account of higher spices production (5.5 per cent as
points in September 2024. Among other items in the per 3rd AE in 2023-24 over 2022-23). Inflation in prices
oils and fats sub-group, inflation in ghee and butter of prepared meals has moderated gradually, reflecting
prices continued to moderate. the pass-through of lower input costs.

Inflation in prices of sugar and confectionery (weight Retail Margins

of 1.4 per cent in the CPI and 3.0 per cent in the Retail price margins – the difference between retail
food and beverages group) has moderated in 2024- and wholesale prices9 – in the case of cereals edged
9 Item level retail and wholesale prices are aggregated at respective subgroups using item level CPI weights. Data for January-March 2021 have been
excluded due to changes in price collection mechanism and item varieties by DCA.

35
Monetary Policy Report October 2024

Chart II.17: Retail, Wholesale Prices and Margin

Sources: Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution; and RBI staff estimates.

up during March-May 2024 and thereafter started

Chart II.18: CPI Food Inflation (y-o-y):
to decline from June 2024 onwards to ₹4.3 per kg, Urban and Rural
the lowest since December 2020. After recording a
sustained increase between September 2023 and
January 2024, pulses price margins witnessed a
sustained decrease during February-September 2024.
Retail price margins in edible oils continued to soften
since June 2024, primarily due to the moderation in
the margin of refined oils. Retail price margins of
TOP vegetables started firming up from March 2024
onwards (Chart II.17).
Sectoral and Spatial Distribution of Food Inflation
Heightened CPI food inflation pressures were seen
across both rural and urban areas, with average rural
food inflation during April to August 2024 outpacing
Sources: NSO; and RBI staff estimates.
its urban counterpart (Chart II.18).

36
 Chapter II Prices and Costs

CPI Fuel Group

Table II.1: Distribution of food inflation across
States/UTs: Number of states# The deflation in fuel prices deepened from (-)0.8 per
2023-24 2024-25 cent in February 2024 to (-)5.3 per cent in August
Food Inflation Range
(Apr-Aug) (Apr-Aug)
Less than 2 per cent 1 1
2024, reflecting the cumulative impact of the LPG
Between 2 to 4 per cent 8 2 price reduction in August 2023 and March 2024.
Between 4 to 6 per cent 11 13
Fuel deflation was also aided by softening of price
Greater than 6 per cent 16 20
#
Accounted for the unification of Daman and Diu with Dadra & Nagar pressures, on a y-o-y basis, in kerosene, reflecing
Haveli and the formation of Ladakh as a Union Territory (UT).
the pass-through of lower international prices,
Sources: NSO; and RBI staff estimates.
as well as in firewood and chips, and dung cake.
Spatially, food inflation pressures have heightened –
the number of states/UTs with food inflation higher Electricity prices also moderated sharply from a
than 6.0 per cent in the period April-August 2024 record high of 13.5 per cent in August 2023, on a
has increased to 20 vis-à-vis 16 in the corresponding y-o-y basis, to 4.8-4.9 per cent in July-August 2024
period a year ago (Table II.1). (Chart II.19).

Chart II.19: CPI Fuel Group Inflation

Notes: (1) The international price for LPG is based on spot prices for Saudi Butane and Propane, combined in the ratio of 60:40, respectively. These international product
prices are indicative import prices. Further details are available at www.ppac.org.in.
(2) The indicative international price for kerosene is the Singapore Jet Kero spot price.
(3) The domestic prices of LPG and kerosene represent the average prices of four and three metros, respectively, as reported by Indian Oil Corporation Limited (IOCL).
(4) Figures in parentheses indicate items' weights in CPI-fuel group.
Sources: NSO; Bloomberg; IOCL; and RBI staff estimates.

37
Monetary Policy Report October 2024

Core CPI (CPI excluding Food and Fuel Groups)

Table II.2: Exclusion-based Measures of Inflation
Core (CPI excluding food and fuel) disinflation (y-o-y)
Period CPI excluding CPI excluding CPI excluding food
continued during H1 of 2024-25 (April-August) as
food and fuel food fuel petrol fuel petrol diesel
it softened to 3.1 per cent by May-June 2024. This (47.3) diesel (45.0) gold silver (43.8)
sustained sequential softening observed for more Aug-23 4.9 5.1 4.8

than a year (since June 2023) was disrupted in July- Sep-23 4.5 4.7 4.4
Oct-23 4.2 4.4 4.1
August 2024 with core inflation averaging 3.4 per
Nov-23 4.1 4.2 3.9
cent, primarily reflecting the impact of mobile tariff
Dec-23 3.8 3.9 3.6
revisions. Exclusion-based measures of underlying
Jan-24 3.5 3.7 3.4
inflation, which remove volatile items such as petrol, Feb-24 3.4 3.5 3.3
diesel, gold, and silver in addition to food and fuel, Mar-24 3.3 3.4 3.2
also witnessed similar movements during this period Apr-24 3.2 3.4 3.0
(Chart II.20 and Table II.2). May-24 3.1 3.3 2.8
Jun-24 3.1 3.3 2.8
While diffusion index for CPI excluding food, fuel,
Jul-24 3.4 3.6 3.1
petrol, diesel, gold and silver indicated positive Aug-24 3.3 3.5 3.0
price increases across much of its consitutents, a Notes: (1) Figures in parentheses indicate weights in CPI.
vast majority of these price increases were less than (2) Derived as residual from headline CPI.
Sources: NSO; and RBI staff estimates.
6 per cent (m-o-m saar) and 4 per cent (m-o-m saar),
as indicated by the steep fall in threshold DIs to well (April-August) with contribution from all sub-groups/
below the 50 level mark. Threshold DIs for CPI core, groups (Chart II.22).
however, exhibited a sustained pick-up during June- Out of the 2.9 percentage points moderation in core
August 2024, indicating a likely bottoming out of inflation from its peak in January 2023 till August 2024,
muted price momentum (Chart II.21). around 90 bps was contributed by the clothing and
Both core goods and services experienced significant footwear sub-group. In addition, housing accounted
easing of inflationary pressures in 2024-25 so far for 42 bps, while household goods and services, and

Chart II.20: CPI Inflation excluding Food and Chart II.21: CPI excluding Food, Fuel, Petrol,
Fuel: Persistence Diesel, Gold and Silver: Diffusion Indices by
Thresholds (M-o-M Seasonally Adjusted)

Sources: NSO; and RBI staff estimates. Sources: NSO; and RBI staff estimates.

38
 Chapter II Prices and Costs

Chart II.22: Contribution to CPI Inflation Chart II.23: Decline in CPI Core Inflation
excluding Food Fuel (Percentage points) (Aug-24 over Jan-23): Contributions

* Others include Pan, tobacco and intoxicants; and Recreation and amusement.
* Others include Pan, tobacco and intoxicants, and discrepancies.
Note: Figures in parentheses indicate weights in CPI excluding food and fuel.
Sources: NSO; and RBI Staff estimates.
Sources: NSO; and RBI Staff estimates.

transport and communication contributed 38 bps and CPI) and services (weight of 23.0 per cent) components
33 bps, respectively (Chart II.23). shows a sequential softening of around 65 bps in core
goods from 3.5 per cent in February 2024 to 2.9 per
Decomposing core inflation – CPI excluding food, cent in August. The key drivers of this softening were
fuel, petrol, diesel, gold, and silver inflation – into its clothing and footwear, transport and communication,
goods (with a weight of 20.7 per cent in the headline household goods, and health items (Chart II.24a).

Chart II.24: Contributions to CPI Inflation excluding Food, Fuel, Petrol, Diesel, Gold, and Silver

* Represent balancing item to reconcile divergence in CPI index between CPI items indices aggregated vertically, across items and the published sub-group/group/overall
CPI index.
Note: Figures in parentheses indicate weights in CPI.
Sources: NSO; and RBI staff estimates.

39
Monetary Policy Report October 2024

Core services inflation, on the other hand, fell mobile operators resulting in a rise in prices of
from 3.2 per cent in February 2024 to 2.6 per cent communication services (Chart II.24b). An analysis
in May, primarily driven by housing (house rent), of the determinants of house rent inflation indicate
transport (such as railway charges and porter fares), that demand and supply conditions and inflation
and education (tuition fee and other educational expectations have a significant role in shaping house
expenses) services. It rose to 3.3 per cent during rent inflation (Box II.I).
July-August due to tariff hikes across major private

Box II.1: What Drives Housing (Rent) Inflation in India?

10
CPI housing (rent ) inflation (y-o-y) has moderated from the Reserve Bank’s Inflation Expectations Survey of
sequentially during March-August 2024 (Chart II.1.1). Households – has a positive and statistically significant
An analysis of the determinants of housing (rent) inflation impact on CPI housing (rent) inflation. Demand conditions
(seasonally adjusted annualised quarter-on-quarter rate, represented by the unemployment rate (UMP) from
ΔHR) in an autoregressive distributed lag (ARDL) model the Periodic Labour Force Surveys11 (proxying aggregate
reveals that inflation expectations – i.e., one-year ahead demand) and the night light index12 gap variable (NLG)13
inflation expectations of Indian (urban) households (proxying housing demand) – were also seen to have a

Chart II.1.1: Evolution of CPI Housing (Rent) Inflation (y-o-y)

Note: Sub-groups weights are displayed in brackets. The yellow shaded area represents the period of the 7th Central Pay Commission (CPC), and
the blue shaded area represents the onset of the COVID-19 pandemic.
Sources: NSO; and RBI staff estimates.

(Contd.)

10 Housing is a major component in the CPI basket with a weight of 10.07 per cent, with house rent contributing 9.51 per cent and other housing services
0.56 per cent. Housing has a weight of 21.3 per cent in the CPI excluding food and fuel (core). The National Statistics Office (NSO) compiles the housing
index for urban areas, considering both rented and self-owned dwellings. The NSO uses a rental equivalent approach for self-owned properties, applying
market rent rates for similar rented homes. Actual rents are collected for private rentals, while government accommodation rents include the license fee
and HRA foregone, adjusted by the occupant rank.
11 Sourced from Ministry of Statistics and Programme Implementation, Government of India.
12 Sourced from Indian Space Research Organisation (ISRO) Annual Night Light dataset. This has been interpolated to quarterly frequency using Denton-
Cholette method with output gap as the proxy variable.
13 Night light gap (NLG) has been estimated as the gap between the night light index and its trend, using the Hodrick-Prescott filter.

40
 Chapter II Prices and Costs

Table II.1.1: Determinants of Housing (Rent) Inflation

Dep: Δ HR (1) (2) (3) (4)
Δ HR (-1) 0.10** 0.10** 0.09** 0.09**
(0.00) (0.00) (0.00) (0.00)
IE (-1) 0.13* 0.14* 0.12* 0.13*
(0.08) (0.07) (0.06) (0.06)
UMP (-1) -0.12** -0.11**
(0.00) (0.01)
NLG (-1) 0.06** 0.06*
(0.04) (0.08)
Δ NLT (-1) -0.24** -0.23** -0.24** -0.24**
(0.00) (0.00) (0.00) (0.00)
ΔHP (-1) # 0.06 0.05
(0.13) (0.23)
7CPC 0.16** 0.15** 0.16** 0.16**
(0.00) (0.00) (0.00) (0.01)
Constant 4.85** 3.63** 4.68** 3.56**
(0.00) (0.00) (0.00) (0.00)
R-squared 0.682 0.680 0.685 0.680
LM test for autocorrelation (p-value) 0.131 0.159 0.075 0.054
ARCH LM test (p-value) 0.991 0.876 0.812 0.645
#
Similar results were obtained on using the quarterly House Price Index published by RBI, instead of NHB-RESIDEX.
Notes: 1. Figures in parentheses indicate p-values. ** and * indicate significance at 5 and 10 per cent levels, resepectively.
2. Inflation (y-o-y) is calculated after obtaining quarterly averages of monthly CPI Housing indices.
3. The variable 7CPC represents an interactive dummy to capture the HRA adjustments linked to the 7th Central Pay Commission.
Source: RBI Staff Estimates.
positive and significant influence, suggesting that the prices, on the other hand, are also found to be affected by
shock to demand conditions induced by the onset of the aggregate and housing demand, inflation expectations as
pandemic has had an impact on house rentals. An increase well as housing supply, i.e., the same covariates explain
in housing supply, measured by changes in the trend of housing prices and rent.
the night light index (NLT), is seen to have a negative
effect on housing rent inflation (Table II.1.1). Reference:

The changes in housing price (ΔHP) as measured using Mohan, R., Hasan, S., Roy, S., and Sarkar, S. (2024).
RESIDEX14 from National Housing Bank (NHB) do not seem Deciphering the Drivers of CPI Housing Inflation in India.
to have a significant impact on rent inflation. Housing mimeo.

Trimmed mean measures15 also indicate an easing of 2024 reflecting the impact of higher food inflation,
underlying inflation pressures since March 2024, with which has a relatively higher weight in CPI-AL and
weighted median inflation moderating from 3.3 per CPI-RL. CPI inflation for industrial workers (CPI-IW),
cent in March 2024 to 2.9 per cent in June (Table II.3). on the other hand, was below the headline CPI during
Other Measures of Inflation the same period, primarily on account of double-digit
CPI inflation for agricultural labourers (CPI-AL) and fuel deflation, despite higher food inflation in CPI-
rural labourers (CPI-RL) were substantially higher IW vis-à-vis headline CPI. After remaining subdued
than the CPI headline inflation during March-August till end of 2023-24, wholesale price index (WPI)
14 HPI@Assesment Prices accessible through https://residex.nhbonline.org.in/.
15 While exclusion-based measures drop a fixed set of volatile items (for example, food and fuel) in each period, trimmed measures exclude items located
in the tails of the inflation distribution - items displaying changes more than the specified threshold in prices each month are excluded, and the items
dropped differ from month to month.

41
Monetary Policy Report October 2024

of deflation. Thereafter, WPI inflation softened in

Table II.3: Trimmed Mean Measures of Inflation
(y-o-y) July, primarily due to favourable base effects. The
Month 5% 10% 25% Weighted softening continued in August on account of negative
trimmed trimmed trimmed Median
price momentum mainly coming from the food group.
Aug-23 5.7 5.6 5.3 5.2
Sep-23 4.7 5.0 4.9 4.7
With overall WPI recording sequential increase since
Oct-23 4.5 4.9 4.7 4.4 April 2024, inflation measured by deflators for gross
Nov-23 4.6 4.8 4.5 4.1 value added (GVA) and gross domestic product (GDP)
Dec-23 4.8 4.7 4.2 4.1
hardened in Q1:2024-25 (Chart II.25a).
Jan-24 4.7 4.5 3.9 3.7
Feb-24 4.6 4.4 3.7 3.6 Similar sub-groups/items across CPI and WPI
Mar-24 4.7 4.4 3.6 3.3 exhibited varying inflation movements. While WPI
Apr-24 4.6 4.2 3.5 3.0
inflation in major food sub-groups (particularly
May-24 4.5 4.2 3.4 2.9
Jun-24 4.3 3.9 3.4 2.9
cereals, pulses, milk, sugar, fruits and spices)
Jul-24 3.8 3.7 3.3 3.0 ruled above corresponding CPI groups/subgroups,
Aug-24 3.9 3.7 3.3 3.0 inflation in vegetables and egg prices, and clothing
Sources: NSO; and RBI staff estimates.
and footwear was higher in the CPI than in the WPI.
inflation picked up during April-June 2024 with food Similarly, deflation in petrol was lower in the WPI
inflation registering a sharp uptick along with fuel vis-à-vis CPI, while the same was higher for diesel in
and non-food manufactured products moving out the former (Chart II.25b).

Chart II.25: Alternative Measures of Inflation

Note: For Q1:2024-25, implicit GDP and GVA deflators are used.
Sources: NSO; Labour Bureau; Ministry of Commerce and Industry; and RBI staff estimates.

42
 Chapter II Prices and Costs

II.3 Costs
Chart II.26: Farm and Non-farm Input Cost
Costs, as measured by WPI inflation in industrial raw Inflation (y-o-y)
materials and farm inputs, remained subdued during
April-August 2024. While the prices of farm inputs
remained in deflation, those of industrial inputs
entered positive territory in June 2024, but turned
negative again in August, mirroring movements
in international commodity prices (Chart II.26).
Prices of industrial inputs such as high-speed
diesel (HSD), bitumen and petroleum coke were
mostly in deflation during April-August 2024. The
other contributory factors were non-food articles,
particularly raw cotton and oilseeds, whose prices
also recorded deflation during this period. Minerals
price inflation, however, remained positive during
*: Comprise primary non-food articles, minerals, coal, aviation turbine fuel, high
April-August 2024, primarily driven by iron ore, speed diesel, naphtha, bitumen, furnace oil, lube oil, petroleum coke, electricity,
cotton yarn and paper and pulp from WPI.
due to increased global demand. Farm input prices $: Comprise high speed diesel, fodder, electricity, fertilisers, pesticides, and
remained in deflation, driven by those of high-speed agricultural and forestry machinery from WPI.
Sources: Ministry of Commerce and Industry; and RBI staff estimates.
diesel (HSD), electricity, and fodder and pesticides.
(Chart II.27). On a month-on-month basis, however,
Moving from input costs to wage costs, nominal
rural wage growth (y-o-y) decelerated to 4.9 per cent both agricultural and non-agricultural wages
in July 2024 from 5.7 per cent in March 2024 driven sustained a steady growth of around 0.45 per cent and
by both non-agricultural and agricultural occupations 0.4 per cent during the same period, respectively. The

Chart II.27: Wage Growth (y-o-y) and Inflation in Rural Areas (y-o-y)

*: Comprise ploughing, sowing, harvesting, picking, horticulture workers, fishermen, loggers and wood cutters, animal husbandry, packaging, general agriculture labourers,
plant protection workers.
**: Comprise carpenter, blacksmith, mason, weavers, beedi makers, bamboo-cane basket weavers, handicraft workers, plumbers, electrician, construction workers, LMV &
tractor drivers, sweeping/cleaning workers, and other non-agricultural labourers.
Sources: NSO; Labour Bureau; and RBI staff estimates.

43
Monetary Policy Report October 2024

month-on-month increase in agricultural wage was prices are expected to soften across manufaturing,
mainly driven by ploughing/tilling workers, followed services and infrastructure sectors in Q3:2024-25.
by loggers and woodcutters, plant protection workers, The pace of salary outgo is expected to moderate for
and general agricultural labourers, while the increase services and infrastructure in Q3:2024-25 while it is
in non-agricultural wages was on account of masons, anticipated to rise for manufacturing (Chart II.29).
electricians, and light motor vehicle and tractor
One year ahead business inflation expectations17
drivers in the rural sector. Despite the deceleration
declined to 4.05 per cent in August 2024 from
in nominal rural wages, real rural wages (deflated
4.21 per cent in the previous month on account of
using CPI rural inflation) recorded a marginal growth
moderation in cost pressures with ‘somewhat less
of 0.8 per cent in July from 0.2 per cent in March
than normal’ or lower sales and subdued profit
2024, primarily reflecting the sharp fall in CPI rural
margin expectations.
inflation in July.
As per the purchasing managers’ index (PMI),
In the organised sector, staff cost growth (y-o-y)
manufacturing firms, which had been reporting
decelerated for manufacturing firms among listed
increasing input price pressures since March 2024,
companies in Q1:2024-25, while it remained steady
pointed to a moderation in the rate of input cost
for services firms. The share of staff cost in the
expansion during August-September 2024. In tandem
value of production increased for manufacturing but
with input prices, pace of output price increases
stayed stable for services in Q1 (Chart II.28).
across manufacturing also rose before decelerating
Firms polled in the Reserve Bank’s enterprise in September 2024. This turned the input-output
surveys16 indicate that in Q3:2024-25, the cost of price gap for manufacturers marginally positive
inputs are expected to soften for manufacturing in September 2024. In case of services sector, the
while remaining elevated for services and rate of expansion in input costs remained elevated
infrastructure sectors. On the other hand, selling during March-May 2024, before it saw a softening

Chart II.28: Staff Cost in Manufacturing and Services

a: Manufacturing Sector b: Services Sector

6 30 40
14 5.7
12 25 35
10 5 20
10.3 27.8 30
8
15
25
Per cent

Per cent
Per cent

Per cent

6
4 8.7
4 10
20
2 5
3 15
0 0
-2 10
2 -5
-4
-10 5
-6
-8 1 -15 0
Q4-21-22

Q1-22-23

Q2-22-23

Q3-22-23

Q4-22-23

Q1-23-24

Q2-23-24

Q3-23-24

Q4-23-24

Q1-24-25

Q4-21-22

Q1-22-23

Q2-22-23

Q3-22-23

Q4-22-23

Q1-23-24

Q2-23-24

Q3-23-24

Q4-23-24

Q1-24-25

Base Effect Staff cost growth (y-o-y) Quarterly Momemtum Staff cost/value of production (right scale)

Sources: Capitaline database; and RBI staff estimates.

16 Industrial Outlook Survey; and Services and Infrastructure Outlook Survey.

17 Based on the monthly Business Inflation Expectations Survey (BIES) of the Indian Institute of Management, Ahmedabad. The survey polls a panel of
business leaders primarily from the manufacturing sector about their inflation expectations in the short and medium term.

44
 Chapter II Prices and Costs

Chart II.29: Expectations of Cost and Price Conditions

Note: ‘Net response’ is the difference between the percentage of respondents reporting an increase in prices and those reporting decrease.
Sources: Reserve Bank’s Industrial Outlook Survey; Services & Infrastructure Outlook survey; and RBI staff estimates.

during June-September. The prices charged across rising labour and material costs. Subsequently, with
services firms, which had been lagging behind input cost pressures moderating, the rate of expansion in
price increases during March-June 2024, quickened prices charged receded in August-September 2024
in July 2024 on the back of pent up pass-through of (Chart II.30).

Chart II.30: PMI Input-Output Price Gap

Sources: S&P Global; and RBI staff estimates.

45
Monetary Policy Report October 2024

II.4 Conclusion muted with the continuing impact of disinflationary

monetary policy stance and softening bias in
The disinflation process in H1 of 2024-25 so far (April-
international commodity prices. Recent pickup in
August) has been characterised by interruptions on
global metals and crude oil prices and uncertainties
account of persistent food inflation pressures from
on account of geopolitical developments need to be
adverse weather events, despite steady softening of
monitored. In the context of the apparent rigidities
core inflation. Food inflation could see an easing in
to the last mile of disinflation in the recent period, a
H2 of 2024-25, benefiting from normal monsoons steadfast commitment to alignment of inflation with
and improvements in agricultural output on the back the target is imperative to preserve and build upon
of a likely good kharif production and healthy rabi the credibility gains in monetary policy achieved
sowing, although occurrences of adverse weather during the pre- and post-COVID flexible inflating
events and recent uptick in global food prices, if targeting (FIT) period. A durable low inflation
sustained, could impinge upon the food inflation environment will strengthen the foundations of a
outlook. Core inflation pressures have remained sustained high growth trajectory.

46
Monetary Policy Report OCTOBER 2024

III. Demand and Output buoyant with construction, education, health and
other services supporting growth.

Domestic economic activity in H1:2024-25 was III.1 Aggregate Demand

supported by a strong performance from the two main Aggregate demand conditions witnessed some
drivers of aggregate demand – private consumption moderation as real gross domestic product (GDP)
and investment activity. Improved agriculture growth decelerated to 6.7 per cent (y-o-y) in
prospects, sustained buoyancy in services, consumer and Q1:2024-25 from 7.8 per cent in the previous
business optimism, government’s continued thrust on
quarter (Table III.1 and Chart III.1). The momentum
capex, and healthy balance sheets of banks and
of GDP – quarter-on-quarter (q-o-q) seasonally
corporates brighten the outlook. Geopolitical tensions,
adjusted annualised growth rate (saar) – slowed
geoeconomic fragmentation, unseasonal rains and
down in relation to the previous quarter (Chart
weather disturbances, and volatility in financial
III.1b).
markets pose downside risks.
GDP Projections versus Actual Outcomes
Domestic economic activity remained resilient in
H1:2024-25. Private consumption rebounded, driven The Monetary Policy Report (MPR) of April 2024
by the turnaround in rural demand and sustained had projected real GDP growth at 7.1 per cent for
urban demand. Investment activity held firm despite Q1:2024-25. Actual growth turned out to be lower,
lower government capex. Government consumption mainly on account of lower government consumption
contracted (year-on-year, y-o-y) during Q1:2024-25. expenditure as election-related restrictions were in
On the supply side, industry and services remained place (Chart III.2).

Chart III.1: GDP Growth and its Constituents

Note: saar – Seasonally adjusted annualised rate.

Sources: National Statistical Office (NSO); and RBI staff estimates.

RBI Bulletin October 2024 47

 OCTOBER 2024 Monetary Policy Report

Table III.1: Real GDP Growth

(y-o-y, per cent)
Item 2022-23 2023-24 Weighted 2022-23 2023-24 2024-25
Contribution*
(FRE) (PE) 2022-23 2023-24 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Private final consumption expenditure 6.8 4.0 3.9 2.3 18.5 8.2 1.8 1.5 5.5 2.6 4.0 4.0 7.4
Government final consumption expenditure 9.0 2.5 0.9 0.2 9.8 3.4 7.1 13.9 -0.1 14.0 -3.2 0.9 -0.2
Gross fixed capital formation 6.6 9.0 2.2 3.0 13.9 4.7 5.0 3.8 8.5 11.6 9.7 6.5 7.5
Exports 13.4 2.6 3.0 0.6 19.1 11.7 10.9 12.4 -6.6 5.0 3.4 8.1 8.7
Imports 10.6 10.9 2.5 2.7 26.1 16.1 4.1 -0.4 15.2 11.6 8.7 8.3 4.4
GDP at market prices 7.0 8.2 7.0 8.2 12.8 5.5 4.3 6.2 8.2 8.1 8.6 7.8 6.7
Notes: *: Component-wise contributions to growth do not add up to GDP growth because change in stocks, valuables and discrepancies are not included.
FRE: First revised estimates; PE: Provisional estimates.
Sources: NSO; and RBI staff estimates.

III.1.1 Private Final Consumption Expenditure industrial production (IIP) for consumer durables
was robust at 10.6 per cent in Q1:2024-25 and 8.2
Private final consumption expenditure (PFCE) –
per cent in July 2024, indicating steady expansion in
the mainstay of aggregate demand – rebounded
discretionary spending in urban areas (Chart III.3). As
strongly, growing at 7.4 per cent in Q1:2024-25 and per the latest round of the Reserve Bank’s consumer
contributing 4.2 percentage points to overall GDP confidence survey, consumer confidence (current
growth. Amongst the high frequency indicators (HFIs) situation index) improved in September 2024, along
of urban consumption, domestic air passenger traffic with an improvement in households' optimism on
rose by 5.6 per cent in Q1:2024-25 and sustained its one year ahead economic conditions. Bank credit
momentum in July-August 2024. Passenger vehicle to households grew in double digits, despite the
slowdown in unsecured personal loans and credit
sales posted positive y-o-y growth in Q1:2024-25
cards outstanding that set in after the November 16,
but contracted in July-August 2024. The index of
2023 measures (Chart III.3d).
Rural demand is showing a gradual pickup. While
Chart III.2: GDP Growth - Projection versus
motorcycle sales continued to record upbeat growth
Actual - Q1:2024-25
in April-August 2024, tractor sales expanded in June-
July 2024 (Chart III.4). The demand for work under
the Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA) contracted by 16.6 per
cent in Q2:2024-25, reflecting an improvement in
farm sector employment. Spending on fast moving
consumer goods (FMCG) in the rural areas bodes well
for rural demand. The positive outlook for agriculture,
supported by above normal south-west monsoon
(SWM) rainfall, higher cumulative kharif sowing and
improved reservoir levels augurs well for sustaining
the revival in rural demand.
An examination of macroeconomic drivers of item
Sources: NSO; and RBI staff estimates.
group-wise consumption reveals that income effect

48 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Chart III.3: Urban Demand: High-Frequency Indicators

Sources: Directorate General of Civil Aviation (DGCA); Society of Indian Automobile Manufacturers (SIAM); NSO; and RBI.

boosts consumption demand while economic discretionary items, they are more insulated from
uncertainty dampens it. As consumption of necessary economic uncertainty (Box III.1).
items have lower elasticity of substitution than

Chart III.4: Rural Demand: High-Frequency Indicators

Sources: Tractor and Mechanization Association (TMA); SIAM; NSO; and Ministry of Chemicals and Fertilisers.

RBI Bulletin October 2024 49

 OCTOBER 2024 Monetary Policy Report

Box III.1: Consumption Switching? Unravelling the Drivers behind Changing

Consumption Patterns in India

There has been a slowdown in private final consumption private consumption, It is the short-term interest proxied
expenditure (PFCE) in the post-pandemic period (average by weighted average call money rate, Ut is macroeconomic
growth rate of 5.4 per cent) when compared with the pre- uncertainty [proxied by the economic policy uncertainty
COVID period1 (average growth of 6.7 per cent). PFCE grew (EPU) index by Bloom, Blake and Scott (2016)2] and gYt–1
by a meagre 4.0 per cent in 2023-24 as adverse rainfall is the q-o-q income growth (real GDP growth lagged by
conditions weakened rural demand. Consumption, 1 quarter). The estimation period is Q1:2012-13 to
however, rebounded with a 7.4 per cent growth in
Q1:2024-25. The findings suggest that higher interest
Q1:2024-25. Drawing on the real business cycle literature
rates hurt consumption growth, and the effect increases
(Kydland and Prescott, 1982), consumption switching is
in the upper quantiles, i.e., when consumption growth is
analysed at the aggregate level using a quantile regression
high. The income effect improves consumption growth,
framework, based on the following specification
but the impact gradually moderates when consumption
τ τ τ τ τ
Qτ (gtC ) = α0 + α1 g Ct–1 + α2 It + α3 Ut + α4 gYt–1 + ηt growth is high. Economic uncertainty acts as a dampener
Where for different quantiles (τ), g is the q-o-q growth of
C
t
of consumption growth across all quantiles (Chart III.1.1).

Chart III.1.1: Quantile Regression Coefficient Plot

Notes: B
 ands around the point estimates are 95 per cent bootstrapped confidence intervals.
X-axis denotes quantiles.

(Contd.)

1 Pre-COVID period includes Q1:2012-13 to Q4:2019-20.

2 Robustness checks are carried out using the economic uncertainty index derived from SPF data by Patra et. al. (2023). Results are in similar lines.

50 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Next, the precautionary motive is linked to consumption discretionary spending is expected to recover steadily as
switching by looking at consumption growth at a broad income strengthens. A watchful monetary policy restricts
commodity level. Following a nested Constant Elasticity the spillover of price pressure to discretionary spending,
of Substitution (CES) approach (Fernandez-Villaverde facilitating a rebound of aggregate demand.
and Guerron-Quintana, 2020), intra-temporal choices
of households are governed by elasticity of substitution Table III.1.1: Dynamic Panel Estimates of Drivers of
among the necessary and discretionary group of Consumption Growth
PFCE PFCE PFCE PFCE
commodities i.e.
(1) (2) (3) (4)
PFCE(-1) -0.020* -0.020* -0.079* -0.079*
(for essentials) and
(0.011) (0.012) (0.039) (0.041)
δ (𝜋𝑖 − 𝜋) × 1𝐷 -0.634** -0.634*** -0.674*** -0.674**
(for discretionary)
(0.257) (0.195) (0.256) (0.267)
Following this, the panel regression specification can be (𝜋𝑖 − 𝜋) × 1𝑁 -0.251 -0.251 -0.124 -0.124
(0.161) (0.290) (0.163) (0.319)
generalised as
Interest Rate (-1) × 1D -1.286*** -1.286* -0.272 -0.272
Ct(j) = θ0Ct-1(j)+ θ1(πt (j) – πt) × 1N|D + θ2 Xt × 1N|D + γj+ ϵt (j) (0.467) (762) (0.508) (580)
Interest Rate (-1) × 1N -0.076 -0.076 0.335 0.335
where Ct (j) the consumption of j-th item in consumption (0.608) (0.282) (0.645) (0.270)
basket, 1N|D is the indicator variable for necessary/ GDP (-1) × 1D 1.823*** 1.823***
(0.238) (0.519)
discretionary items3 within consumption basket.
GDP (-1) × 1N 1.059*** 1.059***
(πt (j) – πt) is the inflation differentials between item (0.292) (0.407)
group j and headline inflation. Xt are the controls for GNDI (-1) × 1D 1.257*** 1.257***
macroeconomic conditions, which include GDP [or Gross (0.166) (0.299)
National Disposable Income (GNDI)] growth (lagged by GNDI (-1) × 1N 0.712*** 0.712*
(0.217) (0.364)
one year), interest rate, and macroeconomic uncertainty.
Uncertainty × 1D -0.025 -0.025** -0.037** -0.037***
γj is the commodity group fixed effects to absorb (0.019) (0.013) (0.018) (0.011)
heterogeneity. Uncertainty × 1N -0.001 -0.001 -0.017 -0.017
(0.026) (0.005) (0.026) (0.014)
Using annual data for the period 2004-234 and group-
- Robust - Robust
level inflation, the effects of the drivers are derived Standard errors in parentheses
using dynamic panel estimates. The estimates show * p < 0.10, ** p < 0.05, *** p < 0.01
that the elasticity of substitution among the necessary
References:
items is lower than for discretionary items. The interest
Baker, S. R., N. Bloom, and S. J. Davis (2016). Measuring
rate adversely impacts the consumption of discretionary
Economic Policy Uncertainty, Quarterly Journal of
items. Income effects strengthen the consumption of all
Economics, 131(4), 1593-1636.
items, and the effect is marginally higher on discretionary
Fernandez-Villaverde, Jesus and Pablo A. Guerron-
consumption items. Policy uncertainty dampens
Quintana (2020). Uncertainty Shocks and Business Cycle
discretionary consumption demand (Table III.1.1).
Research. Review of Economic Dynamics. 37, 118-146.
Accommodative monetary policy helped offset the Kydland, F. E., and Prescott, E. C. (1982). Time to Build and
adverse effects of higher economic uncertainty, which led Aggregate Fluctuations. Econometrica, 50(6), 1345–1370.
to lower consumption of discretionary items in the post- Patra, M. D., Mohan R., John J., and Bhattacharya I. (2023).
pandemic period, while essential spending remained Measuring Uncertainty: An Indian Perspective. RBI
largely unaffected. With the ongoing economic recovery, Bulletin, October, 169-178.

3 Within broad commodity groups, the necessary items are food, clothing, medical and education. The rest, i.e., hotel, housing, furniture, transport,

communication, recreation and miscellaneous items, are discretionary in spending type.

4 National accounts data of household consumption is available up to 2022-23.

RBI Bulletin October 2024 51

 OCTOBER 2024 Monetary Policy Report

Chart III.5: Employment Situation in India

Sources: MoSPI; and Employees’ Provident Fund Organisation (EPFO).

Employment conditions remained robust in Q1:2024- capital goods expanded strongly during April-August,
25, though labour force participation rate (LFPR) led by electronic goods, transport equipment and
and employment rate (ER) under the Urban Periodic electrical and non-electrical machinery (Chart III.6a).
Labour Force Survey (PLFS) moderated marginally Construction activity gathered momentum on the back
relative to the previous quarter. However, both of an ebullient housing sector. Among the coincident
indicators recorded the second highest reading since indicators of construction activity, steel consumption
the survey’s inception. The unemployment rate in recorded double digit growth in April-August 2024, but
urban areas declined during Q1 to 6.6 per cent, one cement production posted a modest expansion during
of the lowest in the PLFS series (Chart III.5a). The April-August mainly due to the heat wave in April and
Employees’ Provident Fund Organisation (EPFO) monsoon rains since June 2024 (Chart III.6c and d).
payrolls data also point to strengthening of formal
Capacity utilisation (CU) in the manufacturing sector5
employment as net payroll additions rose by 47.2 per
recorded a seasonal dip to 74.0 per cent in Q1:2024-25
cent y-o-y in April-July 2024. The net payroll additions
from 76.8 per cent in Q4:2023-24. Seasonally adjusted
were higher than in previous years (Chart III.5b).
capacity utilisation improved from 74.6 to 75.8 and
III.1.2 Gross Fixed Capital Formation is well above the long-term average of 73.8 per cent6
Gross fixed capital formation (GFCF) expanded by (Chart III.7). Stretched capacity utilisation necessitates
7.5 per cent in Q1:2024-25 despite contraction in new capacity additions to keep pace with underlying
government capex, reflecting robust private sector domestic demand. Funds raised for capex by private
investment. The share of GFCF in GDP at 34.8 corporates during Q1:2024-25 through the different
per cent in Q1, is the highest since Q2:2012-13. channels (banks/FIs, ECBs, IPOs) remained strong,
Amongst the key underlying indicators, import of indicating upbeat investment sentiment.
5 Based on RBI’s survey of order books, inventories and capacity utilisation.
6 Long term average is for the period Q1:2008-09 to Q1:2024-25 excluding Q1:2020-21.

52 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Chart III.6: Indicators of Investment Demand

Sources: Directorate General of Intelligence & Statistics (DGCI&S); NSO; Joint Plant Committee; and Office of Economic Adviser.

The interest coverage ratio (ICR)7 of listed in capacity. Within the services sector, the ICR of
private manufacturing companies improved in IT companies remained stable while that of non-IT
Q1:2024-25, indicating comfortable debt servicing companies stayed above the threshold level of unity
capacity and conducive conditions for expansion (Chart III.8).

Chart III.7: Capacity Utilisation in Manufacturing Chart III.8: Interest Coverage Ratio

Note: Data for Q1:2024-25 are based on results of 2,934 listed non-government
non-financial companies.
Source: RBI staff estimates. Source: RBI staff estimates.

7 Interest coverage ratio is the ratio of earnings before interest and taxes (EBIT) to interest expenses and measures a company’s capacity to make interest
payments on its debt. The minimum value for a viable ICR is 1.

RBI Bulletin October 2024 53

 OCTOBER 2024 Monetary Policy Report

Chart III.9: Centre’s Expenditure during April-August

Sources: Controller General of Accounts (CGA); and RBI staff estimates.

III.1.3 Government Consumption improve, with revenue expenditure to capital outlay

ratio declining to an all-time low of 4.0. Moreover,
Government final consumption expenditure (GFCE)
capital expenditure is budgeted to increase to a two-
contracted by 0.2 per cent (y-o-y) in Q1:2024-25,
decade high of 3.4 per cent of GDP in 2024-25 from
pulling down overall GDP growth (Table III.1). The
3.2 per cent in provisional actuals of 2023-24, which is
Government of India’s (GoI) revenue expenditure
expected to support growth during the year.
excluding interest payments and major subsidies
registered a modest increase of 3.1 per cent (y-o-y) On the receipts side, the central government’s gross
during April-August 2024, whereas the capital tax revenues increased by a 12.1 per cent (y-o-y)
expenditure contracted by 19.5 per cent during the during April-August 2024, driven by a rise in income
same period8 (Chart III.9a). The revenue expenditure tax revenue. Indirect tax revenue expanded by 10.0
to capital outlay (RECO) ratio at 5.2 in April-August per cent (y-o-y), aided by goods and services tax
(4.1 a year ago) suggests some moderation in (GST) collections (centre plus states) and customs
expenditure quality during the period. However, duty collections. Overall, the robust tax collection
revenue deficit as per cent of gross fiscal deficit is reflective of buoyant economy and effective
improved to 32.9 during the period (44.2 per cent a enforcement by the tax authorities (Chart III.10).
year ago) [Chart III.9b]. Custom duty receipts recorded a robust y-o-y increase
of 12.9 per cent, whereas union excise duties grew
The Union Budget for 2024-25 reiterated the
by 4.2 per cent (y-o-y). Overall, net tax revenue of the
commitment towards fiscal prudence by budgeting
central government increased by 8.7 per cent during
a gross fiscal deficit (GFD) of 4.9 per cent of GDP, a
April-August 2024 (Table III.2).
drop of 66 basis points from the provisional actuals of
2023-24. This is in line with the medium-term target Non-tax revenue receipts recorded a growth of 59.6
of achieving a GFD of less than 4.5 per cent of GDP per cent primarily on the back of a surplus transfer
by 2025-26. The quality of expenditure is budgeted to of ₹2.1 lakh crore from the Reserve Bank, which was
8 There has been a turnaround in Q2:2024-25 (July-August), with GoI's revenue expenditure excluding interest payments and major subsidies, and capital
expenditure expanding by 9.6 per cent and 25.8 per cent, respectively.

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Monetary Policy Report OCTOBER 2024

Table III.2: Central Government’s Tax Collections

Item ₹ thousand crore Per cent
BE Actuals Per cent to BE Growth Rate
2023-24 2024-25 Apr-Aug 2023 Apr-Aug 2024 Apr-Aug 2023 Apr-Aug 2024 Apr-Aug 2023 Apr-Aug 2024
A. Direct taxes 1,823.3 2,207.0 609.8 695.6 33.4 31.5 26.2 14.1
Of which
1. Corporation tax 922.7 1,020.0 238.9 224.6 25.9 22.0 15.1 -6.0
2. Income tax 873.0 1,150.0 360.4 452.3 41.3 39.3 35.7 25.5
B. Indirect taxes 1,537.6 1,633.2 579.4 637.1 37.7 39.0 7.8 10.0
Of which
1. Total GST 960.5 1,066.8 392.7 432.5 40.9 40.5 10.6 10.2
2. Custom duties 233.1 237.7 83.5 94.3 35.8 39.7 27.8 12.9
3. Union excise duties 339.0 324.0 99.8 104.0 29.4 32.1 -12.4 4.2
C. Gross tax revenue 3,360.9 3,840.2 1189.2 1332.7 35.4 34.7 16.5 12.1
D. Assignment to States/UTs 1,021.4 1,247.2 382.5 455.7 37.4 36.5 20.4 19.1
E. Net tax revenue 2,330.6 2,583.5 803.9 873.8 34.5 33.8 14.8 8.7
Note: BE: Budget Estimates.
Sources: Union Budget Documents; and CGA.

significantly higher than ₹87,416 crore transferred higher than 2.9 per cent in 2023-24 provisional
last year (Chart III.11). Accordingly, the central accounts (PA). Growth in revenue receipts is budgeted
government’s gross fiscal deficit (GFD) during April- to accelerate to 19.1 per cent. States’ capital spending
August 2024 stood at 27.0 per cent of the budget is expected to rise by 21.0 per cent in 2024-25 on top
estimates, substantially lower than a year ago. of 23.4 per cent growth a year ago. The revenue deficit
The consolidated GFD of state governments is (RD) is expected to remain stable at 0.2 per cent of
budgeted at 3.1 per cent of GDP in 2024-25, marginally GDP (Table III.3 and Chart III.12).

Chart III.10: GST Collections (Centre plus States) Chart III.11: Non-tax Revenue - April-August

Source: Ministry of Finance (MoF). Source: CGA.

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Table III.3: State Government Finances - Key Chart III.12: Receipts and Expenditure of the
Deficit Indicators States/UTs
(Per cent to GDP)
2022-23 (A) 2023-24 (PA) 2024-25 (BE)
Revenue Deficit 0.2 0.2 0.2
Gross Fiscal Deficit 2.7 2.9 3.1
Primary Deficit 1.0 1.4 1.4
Notes: A: Actuals; PA: Provisional Accounts; BE: Budget Estimates.
Data pertain to 31 States/UTs.
Sources: Budget Documents of State Governments; and Comptroller and
Auditor General (CAG) of India.

As per the data available for April-July 2024-25, states’

GFD increased due to higher revenue expenditure and
a contraction in grants from the GoI (Chart III.13a).
Both tax and non-tax revenues, however, recorded
robust growth (Chart III.13b). Meanwhile, on a y-o-y
basis, capital expenditure declined. The Union Budget Note: Data pertain to 31 states/UTs.
Sources: Budget Documents of State Governments; and CAG.
2024-25 has made a provision of ₹1.5 lakh crore for
long-term interest-free loans, which could assist States average yield of these issuances during this period
in boosting their capital spending. was 7.0 per cent, marginally lower than 7.2 per cent
The Union Budget for 2024-25 allocated gross and net recorded in the previous year, while the weighted
market borrowings via dated securities amounting to average maturity elongated to 20.7 years, up from 17.6
₹14.01 lakh crore and ₹11.63 lakh crore, respectively. years. During H2, the Centre has planned gross market
In the first half of the fiscal year, the central borrowings through dated securities of ₹6.61 lakh
government’s gross market borrowings amounted to crore. Concurrently, States raised ₹3.86 lakh crore in
₹7.40 lakh crore, accounting for 52.8 per cent of the gross market borrowings during H1:2024-25, against
annual budget estimates (Table III.4). The weighted an indicative calendar amount of ₹5.18 lakh crore.

Chart III.13: Key Fiscal Performance Indicators (April - July)

Note: Data pertain to 25 States/UTs.

Source: CAG.

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Table III.4: Government Market Borrowings

(₹ crore)
2022-23 2023-24 2024-25 (April to September 30)
Centre States Total Centre States Total Centre States Total
Net borrowings 11,08,261 5,18,830 16,27,091 11,80,456 7,17,140 18,97,596 5,74,399 2,63,271 8,37,670
Gross borrowings 14,21,000 7,58,392 21,79,392 15,43,000 10,07,058 25,50,058 7,39,697 3,85,637 11,25,334
Sources: Government of India; and RBI staff estimates.

For Q3:2024-25, the indicative calendar has placed imports rose by 7.1 per cent (y-o-y) during this period.
states’ gross market borrowings at ₹3.20 lakh crore. Consequently, the merchandise trade deficit widened
To meet the transitory mismatches between receipts to US$ 116.7 billion from US$ 99.2 billion during
and expenditures, the Ways and Means Advances the corresponding period a year ago (Chart III.14).
(WMA) limit for the GoI was set at ₹1.5 lakh crore for As per the estimates released by the NSO, exports of
H1:2024-25; it has been fixed at ₹50,000 crore for H2. goods and services increased by 8.7 per cent y-o-y in
Taking into account the recent expenditure trends, real terms in Q1:2024-25, and imports of goods and
the WMA limits for States and Union Territories have services grew by 4.4 per cent.
been increased to ₹60,118 crore from the previous Merchandise exports growth, after experiencing
limit of ₹47,010 crore, effective from July 1, 2024. 9
a pickup in Q1:2024-25, contracted in Q2 (up to
August). For H1:2024-25 (April-August), the growth
III.1.4 External Demand
in merchandise exports was mainly led by electronic
India’s external demand revived in H1:2024-25 goods, engineering goods, drugs and pharmaceuticals,
(April-August), buoyed by a recovery in global trade. readymade garments, and organic and inorganic
Merchandise exports (US$) expanded by 1.1 per cent chemicals. On the other hand, petroleum products,
(y-o-y) during April-August 2024, while merchandise gems and jewellery, rice, marine products, and iron
ore dragged down exports (Chart III.15).
Chart III.14: Merchandise Trade
The expansion in merchandise imports in H1:2024-
25 (April-August) was driven by higher imports of
petroleum, oil and lubricants (POL), gold and non-
POL non-gold commodities such as electronic goods,
transport equipment, and silver. Import of pearls,
precious and semi-precious stones, chemical material
and products, coal, coke and briquettes, fertilisers,
and dyeing materials contributed negatively to the
overall import growth (Chart III.16). POL imports grew
by 9.2 per cent (y-o-y) to US$ 76.4 billion in H1 (April-
August), while non-POL non-gold imports rose by 4.5
per cent (y-o-y) to US$ 196.2 billion during this period.
Services exports remained buoyant, with a growth
Source: Directorate General of Commercial Intelligence and Statistics.
of 9.8 per cent y-o-y in Q1:2024-25 and 10.9 per
9 Based on the recommendations made by the Group constituted by the Reserve Bank and consisting of select State Finance Secretaries.

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Chart III.15: Merchandise Exports

Notes: Figures in parentheses in chart b are y-o-y per cent change in exports of the commodity during the period. RMG stands for readymade garments.
Data on world trade is available up to July 2024.
Sources: DGCI&S; CPB Netherlands; and RBI staff estimates.

cent in July-August 2024 (Chart III.17). The growth growth in Q1 and 12.1 per cent in July-August 2024 on
in services exports was mainly driven by software, the back of buoyant domestic demand.
business, transportation and travel services, reflecting On a balance of payments basis, the current account
improving global demand for Indian services. Among deficit widened marginally to 1.1 per cent of GDP in
the major exporters of services globally, India retained Q1:2024-25 from a deficit of 1.0 per cent of GDP in
its position in the top ten exporting countries during Q1:2023-24 and a surplus of 0.5 per cent of GDP in
January-June 2024. Services imports moved out of Q4:2023-24, mainly due to higher merchandise trade
the contractionary zone, posting a 7.2 per cent y-o-y deficit. For the fiscal year 2023-24, the current account

Chart III.16: Merchandise Imports

Note: Figures in parentheses in chart b are y-o-y per cent change in imports of the commodity during the period.
Sources: DGCI&S; and RBI staff estimates.

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Chart III.17 Services Trade Chart III.18: Net Foreign Direct and Portfolio
Investment

Notes: Net FDI data for Q2: 2024-25 is up to July 2024.

Note: P: Provisional. P: Provisional.
Source: RBI. Sources: National Securities Depository Limited (NSDL); and RBI.

deficit (CAD) narrowed to 0.7 per cent of GDP from 2.0 External commercial borrowing flows moderated to
per cent in 2022-23, driven by a lower merchandise US$ 3.6 billion in April-August 2024 from US$ 4.3
trade deficit, robust services exports and substantial billion a year ago. On the other hand, net accretions
inward remittances. to non-resident deposits surged to US$ 5.8 billion in
In the financial account, net FDI flows increased to April-July 2024 from US$ 3.0 billion a year ago, led by
US$ 4.9 billion in April-July 2024 from US$ 3.8 billion higher inflows in all three accounts [foreign currency
a year ago, on account of robust gross equity inflows non-resident (FCNR), non-resident external (NRE)
(Chart III.18). Singapore, Mauritius, Netherlands, and non-resident ordinary (NRO) accounts]. As on
USA and Belgium were the major sources of FDI September 27, 2024 India’s foreign exchange reserves
inflows, accounting for a share of 70.8 per cent. On amounted to US$ 704.9 billion, equivalent to 12.1
the sectoral front, manufacturing, financial services, months of annualised merchandise imports as per
communication services, computer services and BoP basis and 103.3 per cent of outstanding external
electricity and other generation, distribution and debt at end-June 2024.
transmission attracted the majority of FDI equity III.2 Aggregate Supply
inflows with a share of 77.3 per cent.
Aggregate supply – measured by real gross value added
Foreign portfolio investment (FPI) moderated in (GVA) at basic prices – expanded by 6.8 per cent y-o-y
Q1:2024-25 mainly due to net outflows in equities, in Q1:2024-25 (8.3 per cent a year ago)- a three-quarter
though debt inflows have remained robust after the high, supported by industry and services (Table III.5).
announcement of inclusion of Indian government The momentum of GVA improved over the previous
bonds in the J.P.Morgan’s benchmark emerging market quarter (Chart III.19).
index. FPI inflows, however, registered a turnaround
in Q2:2024-25 with continued surge in debt inflows III.2.1 Agriculture
and a revival in equity flows. FPI inflows of US$ 20.1 Real GVA in agriculture, forestry and fishing slowed
billion were recorded in H1: 2024-25 as against net to 2.0 per cent in Q1:2024-25 (3.7 per cent a year ago)
inflows of US$ 20.3 billion a year ago. on account of muted growth in foodgrains production

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Table III.5: Real GVA Growth

(y-o-y, per cent)
Sector 2022- 2023- Weighted 2022-23 2023-24 2024-25
23 24 Contribution
(FRE) (PE) 2022-23 2023-24 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Agriculture, forestry and fishing 4.7 1.4 0.7 0.2 2.7 2.3 5.2 7.6 3.7 1.7 0.4 0.6 2.0
Industry -0.6 9.3 -0.1 2.0 4.0 -5.5 -2.8 1.7 5.0 13.6 10.8 8.3 7.4
Mining and quarrying 1.9 7.1 0.0 0.2 6.6 -4.1 1.4 2.9 7.0 11.1 7.5 4.3 7.2
Manufacturing -2.2 9.9 -0.4 1.7 2.2 -7.2 -4.8 0.9 5.0 14.3 11.5 8.9 7.0
Electricity, gas, water supply and other 9.4 7.5 0.2 0.2 15.6 6.4 8.7 7.3 3.2 10.5 9.0 7.7 10.4
utilities
Services 9.9 7.9 6.1 5.0 16.4 9.4 7.5 7.3 10.4 6.9 7.5 7.0 7.7
Construction 9.4 9.9 0.8 0.9 14.7 6.9 9.5 7.4 8.6 13.6 9.6 8.7 10.5
Trade, hotels, transport, 12.0 6.4 2.1 1.2 22.1 13.2 9.2 7.0 9.7 4.5 6.9 5.1 5.7
communication
Financial, real estate and professional 9.1 8.4 2.0 1.9 10.5 8.7 7.7 9.2 12.6 6.2 7.0 7.6 7.1
services
Public administration, defence and 8.9 7.8 1.1 1.0 23.6 7.3 3.5 4.7 8.3 7.7 7.5 7.8 9.5
other services
GVA at basic prices 6.7 7.2 6.7 7.2 11.3 5.0 4.8 6.0 8.3 7.7 6.8 6.3 6.8
Note: FRE: First revised estimates; PE: Provisional estimates.
Sources: NSO; and RBI staff estimates.

during rabi and summer seasons. The southwest distribution (Chart III.20b). The robust progression
monsoon (SWM) commenced at a sluggish pace in June; of monsoon rains enabled increased acreage of
however, it gained momentum from July onwards. By kharif sowing, which saw a 1.9 per cent rise over the
July 2, 2024, monsoon rainfall had covered the whole previous year and exceeded normal sowing levels
country and precipitation turned into a surplus of 8 by 1.7 per cent as of September 27, 2024. The area
per cent by September 30, 2024 (Chart III.20a). Out devoted to all major crops, barring cotton, was greater
of the 36 sub-divisions, 33 experienced normal or than in the previous year. Specifically, the area under
above-normal rainfall, reflecting a broadly equitable rice – constituting nearly 37 per cent of the kharif
Chart III.19: GVA Growth and Momentum sowing area – rose by 2.5 per cent from the previous
year’s acreage. Similarly, the area covered by pulses
and oilseeds sowing expanded by 7.4 per cent and 2.7
per cent, respectively (Chart III.20c). The enhanced
rainfall also facilitated the replenishment of reservoir
levels to 87 per cent of total capacity as of September
26, 2024, a marked improvement from the historically
low levels recorded in June 2024 (Chart III.20d). With
these elevated reservoir levels and the anticipated
onset of La Niña later in the year, the outlook for rabi
crop appears promising. As of September 30, 2024 the
production-weighted rainfall index (PRN) stood at 107
per cent, surpassing the 93 per cent level recorded
during the same period last year (Chart III.20e). The
Note: saar - Seasonally adjusted annualised rate. resurgence of rainfall in the North-Western states
Sources: NSO; and RBI staff estimates.
of India contributed to a higher PRN relative to the

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Chart III.20: Progress of Rainfall and Kharif Sowing

Notes: *Normal area as on date is the average of 5 years - 2019-20 to 2023-24.

FRL: Full Reservoir Level; LPA: Long Period Average.
Sources: India Meteorological Department (IMD); Central Water Commission; Ministry of Agriculture and Farmers' Welfare; and RBI staff estimates.

previous year. Furthermore, the crop-specific PRN basis by 1.5 per cent and 2.5 per cent, respectively,
exceeded both last year's position and the five-year whereas coarse cereals, pulses, oilseeds, sugarcane
average across all crops (Chart III.20f). and cotton recorded a decline in production during
According to the final estimates of crop production the year (Table III.6).
for 2023-24, total foodgrain production at 3,323 lakh The government announced an increase of 1.4–12.7
tonnes recoded an increase of 0.8 per cent over the per cent in minimum support prices (MSP) for kharif
final estimates of 2022-23 and 1.0 per cent over the 2024-25 crops, ensuring a return of at least 50
third advance estimates of 2023-24. Among major per cent over the cost of production (as measured
crops, rice and wheat production increased on y-o-y by A2 plus FL10). This adjustment aligns with the
10 A2 (out of pocket expenses) plus FL (family labour) includes all paid out costs such as expenses on hired labour, machines, rent paid for leased land,
seeds, fertilisers, irrigation charges, depreciation as well as imputed value of family labour.

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Table III.6: Agriculture Production in 2023-24

(Lakh tonnes)
Item 2022-23 2023-24 Variation in 2023-24 (Per cent)
Final Third AE Final Over Third AE Over 2022-23
2023-24
Foodgrains 3296.9 3288.5 3323.0 1.0 0.8
Kharif 1557.1 1566.8 1557.7 -0.6 0.0
Rabi 1578.4 1576.6 1600.1 1.5 1.4
Summer 161.4 145.2 165.2 13.8 2.4
Rice 1357.6 1367.0 1378.3 0.8 1.5
Wheat 1105.5 1129.3 1132.9 0.3 2.5
Coarse Cereals 573.2 547.3 569.4 4.0 -0.7
Pulses 260.6 244.9 242.5 -1.0 -7.0
Oilseeds 413.6 395.9 396.7 0.2 -4.1
Sugarcane 4905.3 4425.2 4531.6 2.4 -7.6
Cotton# 336.6 325.2 325.2 0.0 -3.4
Jute & Mesta## 93.9 97.1 96.9 -0.2 3.2
Notes: #: Lakh bales of 170 kgs each; # #: Lakh bales of 180 kgs each.
AE: Advance estimates
Source: Ministry of Agriculture and Farmers’ Welfare.

Government’s recent efforts to recalibrate MSPs in held by the Food Corporation of India at 408.8 lakh
favour of oilseeds, pulses, and nutri-cereals, aiming tonnes as of September 16, 2024 was the highest ever
to foster crop diversification, rectify the demand- held by them compared to the corresponding date in
supply disparity, and advance sustainable agricultural the previous years and is 3 times the quarterly buffer
practices. Procurement of rice during the kharif norms. Rice allocation under the Open Market Sales
marketing season 2023-24 (up to September 30, 2024) Scheme (OMSS) fell way short of the target, partly
at 525.4 lakh tonnes was 7.7 per cent lower than in the owing to subdued demand for the variety of rice
previous year. Despite this reduction, the stock of rice offered by the corporation (Chart III.21a). In contrast,

Chart III.21: Stock, Procurement and Offtake Position – Rice and Wheat

Sources: Food Corporation of India; and GoI.

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wheat procurement during the rabi marketing season Mining and quarrying recorded a growth of 7.9 per
2024-25 stood at 266.1 lakh tonnes, reflecting a 1.6 per cent in Q1 and 3.7 per cent in July. Manufacturing
cent increase over the previous year. The wheat stock recorded an expansion of 4.1 per cent in Q1 (5.1 per
of 246.8 lakh tonnes, however, fell short of the buffer cent during the previous year) and 4.6 per cent in
requirement by 29.0 lakh tonnes (Chart III.21b). July, while electricity registered a robust expansion of
10.8 per cent in Q1 (1.3 per cent during the previous
III.2.2 Industry
year) and 7.9 per cent in July. While the production
Industrial GVA expanded by 7.4 per cent in Q1:2024- of basic metals, electrical equipment, motor vehicles
25 (5.0 per cent a year ago), primarily on account and other transport equipment recorded an upsurge
of stronger manufacturing activity than a year ago, in Q1 and July, food products, textiles, and leather
despite some build-up of supply chain pressures and related products acted as a drag on growth. In
due to the rise in global freight and container costs. terms of the use-based classification, primary, capital,
Manufacturing GVA expanded by 7.0 per cent y-o-y intermediate, infrastructure and consumer durables
during Q1 on top of 8.9 per cent growth in Q4. GVA rose during Q1 and July. Consumer non-durable
in mining and electricity, gas, water supply, and goods, however, registered a contraction during this
other utility services increased at a pace of 7.2 per period.
cent and 10.4 per cent y-o-y, respectively, during Q1 Electricity, gas, water supply and other utility
(Chart III.22). services remained strong and posted a growth of 10.4
The index of industrial production (IIP) grew by per cent y-o-y in Q1, reflecting underlying demand
5.4 per cent in Q1:2024-25 and 4.8 per cent in July, conditions. Electricity generation rose sharply by
with support from all constituents – mining, 7.2 per cent y-o-y during April-August 2024 (5.5 per
manufacturing, and electricity generation (Chart III.23 cent a year ago), driven by thermal power generation
and Table III.7). which registered a growth of 7.8 per cent. Renewable

Chart III.22 Industrial GVA Growth

Note: Data for Q1:2024-25 are based on results of 1,690 listed private
manufacturing companies.
Sources: NSO: and RBI staff estimates. Source: RBI staff estimates based on data published by listed companies.

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Chart III.23: Index of Industrial Production (IIP)

Sources: NSO; and RBI staff estimates.

energy sources, with a share of around 14.0 per cent pick-up in demand from the northern region amidst
in total electricity generation, registered a growth of extended spells of heatwaves, except a marginal
6.1 per cent during April-August 2024 (Chart III.24a). moderation in western region. Electricity demand
Region-wise, electricity demand remained strong in contracted in August 2024 owing to a high base
all regions during April-August 2024, with a sharp (Chart III.24b).

Table III.7: Industrial Sector y-o-y growth

(per cent)
Indicators 2023-24 2024-25
Q1 Q2 Q3 Q4 Q1 Jul Aug Sep
1 PMI: Manufacturing 57.9 57.9 55.5 57.5 58.2 58.1 57.5 56.5
(>50 indicates growth over previous month)
2 Index of Industrial Production (IIP) 4.8 7.8 6.1 5.1 5.4 4.8
3 IIP: Manufacturing 5.1 6.8 5.4 4.8 4.1 4.6
4 IIP: Primary goods 3.6 9.3 8.1 3.9 6.9 5.9
5 IIP: Capital goods 5.1 8.8 7.5 4.1 3.2 12.0
6 IIP: Infrastructure and construction goods 13.2 12.8 6.5 7.1 7.3 4.9
7 IIP: Consumer durables -2.7 1.1 5.3 11.2 10.6 8.2
8 IIP: Consumer non-durables 6.8 7.0 2.5 0.7 -0.5 -4.4
9 Eight Core Industries (ECI) 6.0 10.5 8.4 5.8 6.3 6.1 -1.8
10 ECI: Steel 16.5 15.4 10.5 8.7 8.5 6.4 4.5
11 ECI: Cement 12.7 10.3 5.1 7.6 0.5 5.5 -3.0
12 Electricity demand 1.5 13.9 9.9 8.1 10.2 4.0 -6.5
Production of Automobiles
13 Passenger vehicles 7.0 5.6 5.0 9.7 5.8 1.2 0.7
14 Two wheelers 1.3 -1.5 19.0 26.4 19.6 21.1 4.9
15 Three wheelers 24.4 19.6 13.4 8.4 9.4 6.0 9.0
16 Tractors -8.9 -10.1 -13.0 -15.1 1.0 8.1 -1.0
Sources: MOSPI; Office of Economic Adviser; CEIC; NSO; SIAM; HSBC, S&P Global; and RBI staff estimates.

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Chart III.24: Electricity Generation and Consumption

Sources: Central Electricity Authority; and Power System Operation Corporation Limited (POSOCO).

The manufacturing purchasing managers’ index III.2.3 Services

(PMI) stayed in expansion mode all through H1:2024- Services remained the mainstay of the economy, with
25, though it eased to 57.4 in Q2 from 58.2 in Q1 a contribution of over 70 per cent to GVA growth in
with a moderation in new orders-both domestic Q1:2024-25. Services sector GVA growth accelerated to
and exports. The future output index moderated 7.7 per cent in Q1 from 7.0 per cent in Q4:2023-24,
marginally but remained in expansion at 63.9 in H1 with the impetus from construction activity; financial,
(Chart III.25a). real estate and professional services; and public

Chart III.25: PMI Manufacturing and Services

Note: PMI>50: Expansion, PMI< 50: Contraction.

Sources: HSBC, S&P Global.

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OCTOBER 2024 Monetary Policy Report

administration, defence and other services (Chart Real GVA growth in financial, real estate and
III.26a). High frequency indicators point to strong professional services rose by 7.1 per cent y-o-y in
construction activity in H1;2024-25 (up to August) – Q1:2024-25 and was a major contributor to service
steel consumption recorded a robust growth, while sector GVA growth (38.1 per cent) as well as to
cement production remained subdued on account aggregate GVA growth (27.7 per cent). Bank credit
of heat waves, and an unfavourable base effect and deposits expanded by 14.4 per cent (y-o-y) and
(Chart III.26b). 12.0 per cent, respectively, as on September 20, 2024
GVA growth of trade, hotels, transport, and suggesting continued buoyancy in financial services.
communication accelerated to 5.7 per cent y-o-y Moreover, the growth of insurance premia in both
in Q1:2024-25 (5.1 per cent in Q4:2023-24). GST life and non-life segments remained healthy in H1
collections and issuances of e-way bills – indicators (April-August) (Table III.8).
of wholesale and retail trade – point towards robust
Nominal sales of non-IT services grew by 6.3 per
economic activity. Domestic air passenger traffic
cent during Q1:2024-25 as against 10.4 per cent
improved in H1:2024-25, reflecting sustained growth
during Q4:2023-24. The performance of the IT sector
in tourism and business-related travel. Indicators of
improved in Q1 after decelerating in the previous six
transportation services displayed a mixed picture
quarters (Chart III.27).
– commercial vehicle sales growth rebounded in
Q1:2024-25 following a contraction in Q4:2023-24; Real estate activity in Q1:2024-25 remained robust,
the growth in toll collections remained subdued in with a moderation in unsold inventory as sales
Q1 before improving in Q2; port cargo and railway surpassed new launches for the third consecutive
freight traffic recorded a modest growth of 5.0 per quarter (Chart III.28a). The growth in all-India
cent and 3.9 per cent, respectively, in H1; 2024-25 housing prices moderated in Q1:2024-25; largely due
(up to August). to a drop in prices in Delhi (Chart III.28b). Public

Chart III.26: Services Sector

Sources: NSO; Office of Economic Adviser; and Joint Plant Committee.

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Table III.8: Services Sector y-o-y growth

(per cent)
Indicators 2023-24 2024-25
Q1 Q2 Q3 Q4 Q1 Jul Aug Sep
1 PMI: Services (>50 indicates growth over previous month) 60.6 61.1 58.1 61.2 60.5 60.3 60.9 57.7
Construction
2 Steel consumption 12.1 17.6 14.5 10.7 15.0 14.4 10.0
3 Cement production 12.7 10.3 5.1 7.6 0.5 5.5 -3.0
Trade, Hotels, Transport, Communication and Services related to
Broadcasting
4 Commercial vehicle sales -3.5 6.9 3.5 -3.8 3.5
5 Domestic air passenger traffic 19.1 23.0 9.1 5.2 5.6 7.6 6.7
6 Domestic air cargo -4.7 -1.0 9.5 10.0 7.1 8.8 0.6
7 International air cargo 0.1 3.7 10.7 23.9 18.4 24.4 20.7
8 Freight traffic 1.1 4.8 6.4 8.4 5.0 4.5 0.0
9 Port cargo 1.9 2.9 10.1 3.1 3.9 6.0 6.7
10 Toll collection: volume 15.4 13.3 12.8 10.9 5.6 9.4 6.8 6.5
11 Petroleum consumption 6.4 6.3 2.1 5.5 3.9 10.6 -2.3 -1.6
12 GST E-way bill 15.8 15.0 17.1 16.3 16.0 19.2 12.9 18.5
13 GST revenue 11.6 10.6 12.9 11.5 10.2 10.3 10.0 6.5
Financial, Real Estate and Professional Services
14 Credit outstanding 16.2 15.3 15.6 16.3 13.9 15.1 15.0 14.4
15 Bank deposits 12.9 12.3 12.6 12.9 10.6 11.0 11.3 12.0
16 Life insurance premium -0.9 -21.2 5.4 26.0 22.9 14.2 21.9
17 Non-life insurance premium 17.8 12.6 12.1 9.5 13.3 9.3 4.2

Sources: CEIC; NSO; HSBC, S&P Global; MOSPI; IRDAI; and RBI staff estimates.

administration, defence, and other services (PADO) Q1:2024-25. The centre’s revenue expenditure,
grew at an 8-quarter high of 9.5 per cent y-o-y in excluding interest payments and subsidies,
contracted by 1.5 per cent in Q1 before expanding
Chart III.27: Nominal Sales Growth by 9.6 per cent during July-August. Healthy growth
in other services like health, education and other
personal services, however, helped in offsetting
muted government consumption in Q1.

The services PMI remained in expansionary zone

at 60.5 in Q1:2024-25 and 59.6 in Q2, slightly down
from 61.2 in Q4:2023-24, supported by strong
demand and new business activity (Chart III.25b).
The composite PMI index declined marginally
from 61.2 in Q4:2023-24 to 61.0 in Q1:2024-25,
and further to 59.9 in Q2, PMI manufacturing and
PMI services readings for India have remained the
Note: Results are based on 2,934 listed non-government non-financial companies
for Q1: 2024-25. highest globally since July 2022 and April 2023,
Source: RBI staff estimates.
respectively.

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OCTOBER 2024 Monetary Policy Report

Chart III.28: Housing Sector – Launches, Sales and Prices

Sources: PropTiger; and RBI.

III.3 Conclusion prospects, sustained buoyancy in services, consumer

Domestic economic activity has held up well in and business optimism, the government’s continued
H1:2024-25, despite slowdown in government thrust on capex and healthy balance sheets of
expenditure. Private consumption rebounded banks and corporates should support economic
strongly, with rural demand augmenting sustained activity. Geopolitical tensions and geo-economic
urban demand. Investment activity demonstrated fragmentation, volatility in global financial markets,
resilience despite lower government capex in unseasonal rains and weather disturbances pose
Q1:2024-25. Looking ahead, brighter agriculture downside risks to the domestic outlook.

68 RBI Bulletin October 2024

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IV. Financial Markets and swings in capital flows. Since the second half of
September, however, bond yields hardened and the
Liquidity Conditions dollar index firmed up reversing its earlier trend (see
Chapter V for details).
Domestic financial markets exhibited orderly movements
IV.1 Domestic Financial Markets
in contrast to volatile global market conditions during
H1:2024-25. Money market rates evolved in line with In contrast to global developments, domestic
liquidity shifts while long-term bond yields eased. financial markets remained relatively stable and
Banks’ lending and deposit rates increased, reflecting resilient. Money market rates evolved in sync with
ongoing monetary policy transmission. The Reserve liquidity shifts. Long-term government bond yields
Bank conducted two-way market operations while eased in response to domestic developments and
ensuring adequate liquidity to meet the productive global cues. Equity markets remained buoyant,
requirements of the economy. with sporadic episodes of course corrections. The
INR traded with a depreciating bias against the US
Introduction
dollar in H1 but remained among the least volatile
During H1:2024-25, global financial markets major EME currencies. In the credit market, growth
sporadically turned volatile in response to changing in bank credit outpaced deposit expansion although
perceptions on the future monetary policy trajectory, the wedge has narrowed more recently.
sparked by data releases. Global bond yields
moderated in response to the improving inflation IV.1.1 Money Market
outlook and cooling labour markets. Global equity During H1:2024-25, liquidity conditions transitioned
markets gained in H1 amidst intermittent bouts to surplus from deficit in H2:2023-24 (see Section IV.3
of sell-offs. The US dollar traded with a weakening for details). As a result, overnight money market rates
bias and currencies of emerging market economies softened and generally remained within the Liquidity
(EMEs) mirrored its movements, exacerbated by Adjustment Facility (LAF) corridor (Chart IV.1a).

Chart IV.1: Policy Corridor and WACR

Sources: Reserve Bank of India (RBI); and RBI staff calculations

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 OCTOBER 2024 Monetary Policy Report

In response to the changing liquidity dynamics, the rates in the collateralised segment, i.e., tri-party repo
Reserve Bank conducted two-way operations under (TREPS) and market repo were broadly aligned with
the LAF to ensure that the weighted average call rate the WACR.
(WACR) – the operating target of monetary policy – Money market activity was dominated by the
remained closely aligned with the policy repo rate. collateralised segments, with their share in overnight
The WACR increased sharply during June 27-28 due money market volumes remaining unchanged at 98.0
to quarter-end liquidity tightness, also evident from per cent in H1 (Chart IV.2).
a sudden spike in borrowings under the marginal
standing facility (MSF). The WACR, which remained Mutual funds (MFs) remained the major lenders in
mostly above the repo rate until end-June 2024, TREPS, although their share moderated to 65 per cent
in H1 from 66 per cent in H2:2023-24. In the market
moderated from July 2024 as liquidity conditions
repo segment, the share of MFs increased to 41 per
eased with a pick-up in government spending. At
cent in H1 from 33 per cent, with a concomitant
the end of H1 (September 30), however, the WACR
decline in the share of foreign banks to 34 per cent
increased by 15 bps on account of banks reducing
from 43 per cent. On the borrowing side, public
their exposures in the uncollateralised market which
sector banks (PSBs) remained the dominant players
incur higher Capital to Risk (Weighted) Assets Ratio
in TREPS, with their share increasing to 47 per cent
(CRAR) requirements in the ensuing quarter.1 On an
in H1 from 45 per cent in H2:2023-24. In market repo,
average basis, the WACR remained 5 basis points (bps)
however, their share reduced to 4 per cent from 9 per
above the policy repo rate during H1, as compared
cent over the same period.
with 21 bps in H2:2023-24 (Chart IV.1b). Volatility in
the WACR, as measured by the coefficient of variation In the longer-term segments of the money market,
(CV), moderated to 1.61 per cent during H1 from 1.77 rates on commercial papers (CPs), certificates
per cent during H2:2023-24. Movements in overnight of deposit (CDs) and T-bills softened during H1

Chart IV.2: Share in Overnight Money Market Volumes Chart IV.3: Money Market Rates and Policy Corridor

Sources: Clearing Corporation of India Ltd. (CCIL); and RBI. Sources: CCIL; and RBI.

1 Additionally, the tightness in the overnight segment was compounded by mutual funds reducing their lending in tri-party repo due to redemption
pressures.

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relative to H2:2023-24 due to improved liquidity in

Chart IV.4: Tenor Wise Break up of CD Issuances
the banking system and reduced supply of shorter
maturity T-bills (Chart IV.3). Rates on CPs issued
by non-banking financial companies (NBFCs),
however, remained elevated reflecting, inter alia, the
increase in risk weights on bank lending to NBFCs
announced by the Reserve Bank on November 16,
2023. The average spreads of T-bills, CDs and CPs
over the MSF rate softened to zero, 49 bps and 61 bps,
in H1 from 19 bps, 74 bps and 100 bps, respectively,
in H2:2023-24.
Fresh issuances of CDs moderated to ₹4.0 lakh crore
in H1 from ₹5.5 lakh crore in H2:2023-24, mainly
due to surplus liquidity conditions since July 2024.
Within H1, CD issuances in the shorter tenor (up to
Sources: CCIL; and RBI staff estimates.
91-day) declined, with their share in total issuances
reducing to 54 per cent in July 2024 from 84 per cent
lakh crore in H2:2023-24 (Chart IV.5a). Among fresh
in May 2024. Concomitantly, the share of longer tenor
issuances, the average share of NBFCs increased to 32
CDs (181-365 days) increased to 45 per cent in July
per cent in H1 from 29 per cent in the corresponding
2024 from 14 per cent in May 2024 (Chart IV.4). The period of the previous year. Thus, NBFCs have
persistent gap in credit and deposit growth prompted resorted to greater mobilisation of resources from the
banks to explore alternative sources such as CDs of market in the wake of the November 2023 measures,
longer tenors to bridge the funding gap. as mentioned earlier. In the CP market, corporates
Resource mobilisation through fresh issuances of were the major players with a share of 38 per cent in
CPs increased to ₹7.5 lakh crore during H1 from ₹6.7 total issuances (Chart IV.5b).

Chart IV.5: Primary Issuances of Commercial Papers

Sources: RBI; CCIL F-TRAC; and RBI staff estimates.

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 OCTOBER 2024 Monetary Policy Report

week of May, buoyed by positive sentiments on the

Table IV.1: Maturity Profile of CP Issuances
(₹ lakh crore) inclusion of Indian G-secs in global bond indices and
Tenor H1: H2: H1: the buyback of government paper. Yields remained
2023-24 2023-24 2024-25
largely stable during the month of June and July,
7- 30 days 0.45 0.48 0.63
moderating towards the end of July due to market
31-90 days 3.18 2.32 2.35
reactions to a potential increase in the Liquidity
91-180 days 2.75 3.11 3.94
0.70 0.77 0.64
Coverage Ratio (LCR) based on the draft guidelines on
181-365 days
Total 7.09 6.67 7.55 LCR issued by the RBI. Yields continued to moderate
Outstanding (as at end-period) 4.12 3.89 3.98 in August and September on lower inflation prints
Sources: CCIL; F-TRAC; and RBI. (for July and August) and the start of the policy easing
cycle in the US.
Among various maturity buckets, the 91-180 days
segment had the largest share of fresh CP issuances The yields on T-bills moderated during May and June
[52 per cent in H1 (Table IV.1)]. amidst reduction in the supply of T-bills by ₹60,000
crore. The softening bias continued to prevail
IV.1.2 Government Securities (G-sec) Market
thereafter till September as liquidity continued
During H1, G-sec yields softened (Chart IV.6). At the to remain in surplus and also in the wake of the
beginning of the financial year, yields hardened, cancellation of treasury bill auctions scheduled for
tracking movements in US yields and the increase the second half of the month (Chart IV.7).
in crude oil prices. Thereafter, they eased during the The average trading volume in G-secs and T-bills
first week of May with the softening of US yields and increased in H1:2024-25 relative to H2:2023-24
easing crude oil prices in the wake of the US Federal (Chart IV.8). The weighted average yield (WAY) on
Open Market Committee’s (FOMC’s) announcement traded maturities for G-secs and T-bills declined by
to reduce the pace of balance sheet runoff from June 23 bps and 19 bps, respectively, in H1 from that in
2024. Yields eased further in the second and third H2:2023-24.

Chart IV.6: 10-year Par Yield, Repo Rate and Chart IV.7: FBIL T-bill Benchmark
Liquidity Conditions (Yield to Maturity)

Sources: RBI; and Financial Benchmarks India Pvt. Ltd. (FBIL). Source: FBIL.

72 RBI Bulletin October 2024

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Chart IV.8: Trading Volumes and Yield

Sources: CCIL; and RBI staff estimates.

The overall dynamics of the yield curve are captured yield curve increased by 26 bps due to the relatively
by its latent factors viz., level, slope and curvature2. higher decline in short-term rates (Chart IV.9b). The
Yields have softened across the term structure as curvature, on the other hand, increased by 18 bps,
reflected in the downward shift of the yield curve reflecting the hardening bias in the mid-segment
during H1 (Chart IV.9a), with the average level of vis-à-vis the short and long term. In the Indian
yields softening by 29 bps while the slope of the context, the level and curvature of the yield curve are

Chart IV.9: G-sec Yield Curve

Sources: FBIL; and RBI staff estimates.

2 The level is the average of par yields of all tenors up to 30-years published by FBIL and the slope (term spread) is the difference in par yields of
3-months and 30-year maturities. The curvature is calculated as twice the 15-year yield minus the sum of 30-year and 3-month yields.

RBI Bulletin October 2024 73

 OCTOBER 2024 Monetary Policy Report

found to have more information content on future

Chart IV.10: SGS - Amount Raised and Spread
macroeconomic outcomes than the slope, unlike in
AEs (Patra et al, 2022)3.

On a review of prevailing market conditions,

the Reserve Bank, in consultation with the Government
of India (GoI), announced that all securities under
the market borrowing programme of the GoI shall
be auctioned by the multiple price auction method,
effective April 1, 2024. The return to multiple price
auctions for all the securities after a gap of three years
was aimed at encouraging better price discovery in the
G-sec market.

To facilitate debt consolidation, the Reserve Bank

conducted six switch auctions on behalf of the GoI, Source: RBI.

amounting to ₹1.16 lakh crore during H1:2024-25.

Even as the weighted average maturity (WAM) of the IV.1.3 Corporate Bond Market
outstanding stock of G-secs increased to 12.96 years Corporate bond yields softened while spreads
at end-September 2024 from 12.54 years at end-March widened during H1:2024-25. Issuer-wise, the
2024, the weighted average coupon (WAC) at 7.28 per average yield on AAA-rated 3-year bonds issued
cent was nearly identical to 7.29 per cent over the by public sector undertakings (PSUs), financial
same period. institutions (FIs) and banks softened by 10 bps (to
7.53 per cent), while those by non-banking financial
In May and early June 2024, five buyback auctions were
companies (NBFCs) and corporates declined by 14
announced with a view to retiring some of the GoI's
bps (to 7.84 per cent) and 15 bps (to 7.80 per cent),
debt ahead of schedule, particularly in the backdrop
respectively, in September over March 2024 (Chart
of its improved cash position.4 The market response
IV.11a). Nevertheless, the risk premium (the spread
to the auctions, however, was tepid, with the Reserve
of 3-year AAA corporate bond yields over 3-year G-sec
Bank accepting offers aggregating only ₹0.3 lakh crore yields) increased from 44 bps to 71 bps for PSUs,
against the notified amount of ₹2.3 lakh crore. FIs and banks; from 80 bps to 102 bps for NBFCs;
The weighted average spread of cut-off yields on and from 77 bps to 97 bps for corporates, in
state government securities (SGS) over GoI G-sec yields H1:2024-25 due to sharper decline in G-sec yields
of comparable maturities was 31 bps in H1:2024- (Chart IV.11b).
25 (Chart IV.10). The average inter-state spread on The increase in risk premia was evident across
securities of 10-year tenor (fresh issuances) was 2 bps tenors and the rating spectrum amidst moderation
in H1 as against 4 bps in H2:2023-24. in corporate performance in Q1:2024-25 (Table IV.2).

3 Patra, M.D., Joice, J., Kushwaha, K.M., and I. Bhattacharyya (2022), “What is the Yield Curve telling us about the Economy?”, Reserve Bank of India
Bulletin, June.
4 Although buybacks have a liquidity impact, they should not be construed as liquidity management operations; instead, they are part of an active debt
consolidation strategy.

74 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Chart IV.11: AAA-rated 3-Year Corporate Bond Yield and Spreads

Note: Data are monthly averages for spreads over G-secs.

Source: Fixed Income Money Market and Derivatives Association of India (FIMMDA).

In contrast, the average 3-year credit default swap H2:2023-245 (Chart IV.12a). Overseas issuances at
(CDS) spreads that are trading overseas for the State ₹29,029 crore during H1 were lower than ₹31,492
Bank of India and ICICI Bank reduced by 3 bps each crore during H2:2023-24. Almost the entire resource
in H1 over H2:2023-24. mobilisation in the corporate bond market (99.0
Primary issuances of listed corporate bonds in per cent) was through the private placement route
(up to August 2024). Outstanding investments by
domestic markets declined to ₹3.3 lakh crore during
foreign portfolio investors (FPIs) in corporate bonds
H1 (up to August 2024) from ₹4.6 lakh crore during
increased to ₹1.18 lakh crore at end-September
Table IV.2: Financial Markets - Rates and Spread 2024, from ₹1.08 lakh crore at end-March 2024,
Interest Rates Spread (bps) with the utilisation of the approved limits
(per cent) (over corresponding
risk-free rate)
improving marginally to 16.4 per cent from 16.2
Instrument September March September September March September per cent over the same period (Chart IV.12b).
2023 2024 2024 2023 2024 2024 Secondary market activity, however, picked up
1 2 3 4 5 6 7 with daily average trading volume at ₹6,168 crore
Corporate during H1 (up to end-July 2024) from ₹5,791
Bonds
crore during H2:2023-24 (Chart IV.12c).
(i) AAA (1-yr) 7.68 7.97 7.92 53 77 117
(ii) AAA (3-yr) 7.83 7.95 7.80 51 77 97
From a regulatory perspective, the Securities
(iii) AAA (5-yr) 7.69 7.74 7.70 37 54 86
and Exchange Board of India (SEBI) lowered
(iv) AA (3-yr) 8.46 8.55 8.55 113 137 172
the denomination of debt securities for private
(v) BBB-minus 12.14 12.19 12.14 481 500 531 placements to ₹10,000 from ₹1 lakh with a view
(3-yr) to encouraging retail participation and enhancing
Note: Yields and spreads are computed as monthly averages.
Source: FIMMDA.
liquidity in the corporate bond market.

5 Issuances in the first half of the financial year are usually lower than the second half as the borrowing plans of corporates are chalked out gradually.
Moreover, central government borrowing is usually frontloaded, which provides greater space to corporates for resource mobilisation in the second half.

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 OCTOBER 2024 Monetary Policy Report

Chart IV.12: Corporate Bond Market Activity

Note: * Data for domestic issuances is up to August 2024 while data for overseas issuances is up to September 2024.
Sources: SEBI; NSDL; and Prime Database.

IV.1.4 Equity Market wake of positive market sentiments from improved

Despite transient surges in volatility, Indian equity GoI finances and other domestic and global cues. In
markets maintained an upward trajectory in early June, the market exhibited large swings during
the announcement of Lok Sabha election results,
H1:2024-25, with the BSE Sensex surpassing the
which drove the India VIX6 to its highest levels since
historic 80,000 mark in July 2024. Amidst these gains,
the onset of the Russia-Ukraine war.
market valuation, as measured by the trailing price-
earnings ratio of the BSE Sensex, continued to remain Thereafter, markets recovered quickly amidst
above its long-term average and reached 24.8 at end- expectations of policy continuity, release of softer
September 2024. Indian equities began the financial than-expected domestic as well as US inflation for
year positively, driven by strong domestic and global May and India’s current account turning into a surplus
macroeconomic data and robust domestic corporate in Q4:2023-24. In July, gains in IT sector stocks and
earnings. Thereafter, markets declined briefly amidst dovish signals from the US Fed propelled the Sensex
rising geopolitical tensions in the Middle-East. After past the 80,000 mark before its correction later in the
the initial losses in May, the market capitalisation of month on the budgetary announcement of changes in
Indian listed companies surpassed US$ 5 trillion in the the capital gains tax structure.
6 A measure of short-term expected volatility of Nifty 50.

76 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Indian financial markets faced a fresh bout of global market volatility and a significant churning
volatility in early August 2024 on account of a of portfolio flows. Thereafter, markets recovered
combination of factors: (i) elevated geopolitical as expectations of a US Fed rate cut grew stronger
tensions in the Middle-East; (ii) weaker-than- after the release of dovish US FOMC minutes and the
expected economic data from the US; and (iii) the remarks of the US Fed Chairman at the Jackson Hole
Bank of Japan (BoJ) raising rates for the second time Economic Symposium hinting at the possibility of an
in 17 years. The BoJ's actions prompted a sudden and imminent policy pivot. The resulting surprises on
large unwinding of yen carry trade. The resulting the future path of monetary policy have a profound
US equity market meltdown led to heightened impact on financial asset prices (Box IV.1). Domestic

Box IV.1: Monetary Policy Surprises and Equity Markets

Monetary policy surprises can be decomposed into
Chart IV.1.1: Estimated Target and Path factors
‘target’ and ‘path’ factors. The former reflects unexpected
changes in the contemporaneous policy rate, while the
latter represents surprises in its future trajectory.
Intraday changes in 1-year MIBOR-linked OIS rates on
policy announcement days are used as a measure of policy
surprise (Lloyd, 2018).7 The target factor is the difference
between the actual repo rate and the mean expectations
of the repo rate from the Bloomberg Economists’ survey
(Anderson 2010). The path factor is estimated as the
residual of a regression of changes in OIS rate on the
target factor:
(1) Source: RBI staff estimates.

where is the change in 1-year OIS rates, it is the

where the 𝛿,𝑡 subscript represents changes/returns in
actual repo rate, is the expected/mean repo rate in the
alternative time windows (in minutes) with δ ∈ {30,60}
Bloomberg survey and εt is the path factor. To minimise
being returns on policy day 𝑡. The windows thus
the impact of other significant macroeconomic events on
constructed span 30 minutes (i.e., 10 minutes before
asset prices, changes are measured over a narrow window
and 20 minutes after the policy announcement) and 60
around policy announcements (Gurkaynak et al., 2004).
minutes (i.e., 15 minutes before and 45 minutes after)
The estimated target and path factors on each policy
around the policy announcement. The findings indicate
announcement day around a 60-minute window for the
that Sensex returns are affected significantly by the
period January 2014-August 2024 encompassing 67 policy
surprise in the future path of monetary policy (path factor),
announcement dates, including 5 unscheduled ones, are
and it is stronger for the 60-minute window vis-à-vis the
presented in Chart IV.1.1.8
30 minutes window (Table IV.1.1). As expected, a positive
To assess the relative importance of target and path factors path factor or an expected policy tightening in the future
for movements in equity prices, BSE Sensex returns over
leads to negative equity returns as equity markets price
two different, but narrow, time windows are regressed on
in changes in longer-term borrowing costs. The results,
the target and path factors:
𝑅𝛿,𝑡 = 𝛼 + 𝛽1𝑇𝐹𝛿,𝑡 + 𝛽2𝑃𝐹𝛿,𝑡 (2) (Cont.)

7 Assuming that changes in the OIS rates are in response to unanticipated changes in monetary policy and that other factors such as risk premia remain
constant in these intraday windows.
8 Gupta et al., (2024) conducts a similar exercise on policy dates for the period June 2018-June 2022.

RBI Bulletin October 2024 77

OCTOBER 2024 Monetary Policy Report

References:
Table IV.1.1: Monetary Policy Announcement
Impact on BSE Sensex Anderson, M. (2010). Using intraday data to gauge
financial market response to federal reserve and ECB
Variables 30 minutes 60 minutes
monetary policy decision. International Journal of Central
Intercept -0.033 -0.032
(0.039) (0.062) Banking, 6(2), 107-116.
Target Factor 0.192 0.727 Gupta, M., Pawar, A., Kumar, S., Borad, A. & Seet, S. (2024).
(0.621) (1.230)
Equity Markets and Monetary Policy Surprises (Working
Path Factor -0.016* -0.034**
(0.009) (0.015)
Paper No. 3). Reserve Bank of India.
Observations 67 67 Gurkaynak, R. S., Sack, B., & Swanson, E. T. (2004). Do
Adjusted R2 0.041 0.138 actions speak louder than words? The response of asset
Notes: a) Significance level: ‘***’ 0.01 (1%), ‘**’ 0.05 (5%), ‘*’ 0.1 (10%). prices to monetary policy actions and statements. Finance
b) Newey-West standard errors are presented in parentheses.
Source: RBI staff estimates. and Economics Discussion Series, 2004(66), 1–43.
Lloyd, S. P. (2018). Overnight index swap market-based
therefore, underscore the impact of central bank
measures of monetary policy expectations. Staff Working
communication on market movements and sentiments. Paper No. 709.

equities continued to rally in September amid a US (Chart IV.13a). Amid bouts of volatility, India VIX
Fed rate cut of 50 bps and reached new highs, with the averaged higher at around 14.8 during H1:2024-25
weight of Indian equities surpassing that of China in a than 13.2 during H2:2023-24 (Chart IV.13b).
key global MSCI index. Foreign Portfolio Investment (FPI) flows remained
Overall, the BSE Sensex gained 14.5 per cent during volatile in the early half of H1:2024-25, with FPIs
H1:2024-25 to close at 84,300 at end-September 2024. turning net sellers during April and May 2024.
The broader market indices continued to outperform Foreign investors, however, remained overall net
the benchmark Sensex, with the BSE MidCap and buyers in equities during H1:2024-25. Support
the BSE SmallCap index increasing by 25.5 per cent from domestic institutional investors (DIIs), on the
and 32.4 per cent, respectively, during H1:2024-25 other hand, remained robust. Overall, DIIs and FPIs

Chart IV.13: Stock Market Performance in H1: 2024-25

Source: Bloomberg.

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Monetary Policy Report OCTOBER 2024

Chart IV.14: Institutional Investments and Resource Mobilisation

Note: IPO – Initial Public Offer, QIP – Qualified Institutional Placement, FPO – Follow On Public Offer
Sources: Capitaline; NSDL; and SEBI.

were net buyers to the tune of ₹2.26 lakh crore and H1 (up to August 2024) as against ₹1.32 lakh crore
₹0.82 lakh crore, respectively, in H1 (Chart IV.14a). in H2:2023-24 (Chart IV.14b). Of the total resource
In terms of systematic investment plan (SIP) mobilisation from the primary market, SME
contributions through mutual funds, monthly companies mobilised ₹3,858 crores (up to August
collections crossed the ₹20,000 crore mark for the 2024) through public issues.
first time in April 2024, followed by fresh highs in
each of the subsequent months in H1 (up to August IV.1.5 Foreign Exchange Market
2024). Primary market resource mobilisation in The Indian rupee (INR) traded in a range-bound
equity markets was placed at ₹1.58 lakh crore during manner with a depreciating bias during the first half

Chart IV.15: Indian Rupee and Volatility

Sources: FBIL; Refinitiv Eikon; and Bloomberg.

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OCTOBER 2024 Monetary Policy Report

of 2024-25 (Chart IV.15a). The US dollar remained

Table IV.3: Nominal and Real Effective Exchange
strong on the back of elevated US treasury yields Rate Indices (Trade-weighted)
between April and mid-July 2024 but depreciated (Base: 2015-16 = 100)
thereafter due to strong market expectations of a Appreciation (+) /
Index:
potential rate cut by the US Fed, which was eventually Depreciation (-) (Per cent)
Item
September 27, September 27, 2024, over
corroborated by the 50 bps rate cut by the US Fed on
2024 (P) March (average) 2024
September 18. The unwinding of yen carry trade in 40-currency REER 104.7 0.1
early-August exacerbated volatility in global financial 40-currency NEER 90.2 -2.1
markets, albeit briefly. Overall, the volatility of the 6-currency REER 101.7 2.0
INR – measured by the 1-month at the money (ATM) 6-currency NEER 81.3 -16.4
option implied volatility – fell marginally to an ₹/US$ (September 30) 83.8 -0.9
average of 2.2 per cent during H1 from 2.4 per cent P: Provisional.
Sources: RBI; and FBIL.
during H2:2023-24 (Chart IV.15b).
Between end-March and end-September 2024,
increased expectations of a US rate cut. The 1-month
the INR depreciated by 0.5 per cent against the US
forward premia averaged 1.18 per cent during
dollar, although it outperformed several EME peer
currencies (Chart IV.16). H1:2024-25, marginally higher than 1.13 per cent
in H2:2023-24, while the 12-month premia rose to
In terms of the Reserve Bank’s 40-currency real
1.84 per cent in H1:2024-25 from 1.72 per cent in
effective exchange index, the INR appreciated by
0.1 per cent between March 2024 (average) and H2:2023-24 (Chart IV.17).
September 27, 2024 (Table IV.3). A composite view of all market segments
Forward premia remained stable in Q1:2024-25 but suggest benign financial conditions in H1
rose in Q2, particularly for longer maturities, due to (Box IV.2).

Chart IV.16: Global Movement in Currencies Chart IV.17: Movements in Forward Premia

Sources: FBIL; IMF; and Refinitiv Eikon. Source: Bloomberg.

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Box IV.2: Financial Conditions Index – A High-Frequency Approach

A financial conditions index (FCI) is a summary measure
that encapsulates the information content in a broad Table IV.2.1: Variables for FCI
array of financial variables and helps to gauge the WAMMR spread over repo rate
WAMMR volatility
incipient stress in financial markets. Monetary policy Money Market
Net LAF / NDTL
actions impact financial conditions through channels of 3M CP (NBFC) over T-Bill
monetary transmission although financial conditions Yield Curve level
often change independently of policy decisions. The FCI G-sec Market Yield Curve slope
Yield Curve curvature
is, thus, a valuable input for monetary policy in so far
AAA 3yr spread
as it measures the impact of financial variables on real
Corporate Bond AAA 5yr spread
activity, over and above the direct effects of monetary Market AA 3yr spread
policy (Hatzius et al., 2010). It can, therefore, serve as a AA 5yr spread
guide on the effective stance of policy (Bowe et al., 2023). India US 10yr yield differential
USD-INR 1M ATM volatility
Forex Market
An FCI for India is constructed by using twenty financial Currency return
market indicators at daily frequency for the period January 1M forward premia

1, 2012 to September 30, 2024. The chosen indicators India VIX

PE level relative to 2yr moving average
represent five market segments, namely (i) the money Equity Market BSE Sensex return
market; (ii) the G-sec market; (iii) the corporate bond BSE Mid-Cap return
market; (iv) the forex market; and (v) the equity market BSE Small-Cap return

(Table IV.2.1). The money market segment includes The FCI is computed using a dynamic factor model (DFM):
indicators on liquidity conditions while the G-sec market
𝑋𝑡 = 𝜆(𝐿)𝑓𝑡 + 𝜉𝑡
segment is represented by latent factors viz., level, slope, 𝑓𝑡 = Ψ(𝐿)𝑓𝑡-1 + 𝜂𝑡 (1)
and curvature of the sovereign yield curve. The corporate
bond market segment is captured through credit risk where 𝑋𝑡 is the vector of financial indicators, 𝑓t is the
indicators. Finally, indicators on return and volatility of underlying common factor representing the financial
currency and equities constitute the forex and equity conditions index, and 𝜉𝑡 and 𝜂𝑡 are mean-zero serially
market segments, respectively. All indicators are factored uncorrelated idiosyncratic errors.
into the index in a manner such that an increase in these The standardized FCI along with the contribution of its
indicate a tightening of financial conditions. constituent blocks is presented in Chart IV.2.1.

Chart IV.2.1: FCI and its Drivers

Source: RBI staff estimates.

(Cont.)

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The estimated FCI closely tracks the evolution of financial withdrawal of accommodation. Congenial financial
conditions in India over the years. The peaks in FCI are conditions during this period were mainly driven by
associated with major events like the taper tantrum, stress stable forex market conditions and the buoyant equity
in the NBFC sector during the Infrastructure Leasing and market, reflecting improved global investor confidence in
Financial Services (IL&FS) episode and the COVID-19 India’s economic outlook.
pandemic. The major drivers of FCI, however, vary across
References:
events. While the forex market was the key factor during
the taper tantrum, domestic factors were the primary Bowe, F., Gerdrup, K.R., Maffei-Faccioli, N., and Olsen, H.
drivers during the IL&FS and COVID-19 episodes. The (2023). A high-frequency financial conditions index for
exceptionally easy financial condition in the aftermath of Norway. Staff Memo No. 1, Norges Bank.
the pandemic was driven by all market segments.
Hatzius, J., Hooper, P., Mishkin, F.S., Schoenholtz, K.L.,
Since mid-2023, financial conditions have remained and Watson, M.W. (2010). Financial Conditions Indexes: A
benign even as the policy repo rate remained on pause Fresh Look After the Financial Crisis. NBER Working Paper
at 6.5 per cent and the stance continued to focus on No. 16150

IV.1.6 Credit Market9 Across bank groups, credit growth of private sector
Growth in bank credit remained strong in H1:2024- banks (PVBs) remained higher (16.4 per cent) than
25, albeit with a slowing momentum. Non food that of public sector banks (PSBs) (12.9 per cent),
bank credit of scheduled commercial banks (SCBs) while foreign banks’ credit offtake picked up pace
decelerated to 14.4 per cent (y-o-y) as on September (Chart IV.19a). PSBs continued to account for the
20, 2024 from 15.3 per cent a year ago (Chart IV.18). largest share of incremental credit, although their
share declined vis-à-vis PVBs and foreign banks
Chart IV.18: Non-food Credit Growth of SCBs (Chart IV.19b).
From a sectoral perspective, the overall growth (y-o-y)
in bank credit was primarily driven by personal loans
and services, although their share in total incremental
credit moderated in H1:2024-25 (up to August) vis-à-
vis the same period of the previous year10. Credit
growth to the agriculture sector remained in double
digits. Industrial credit growth, which was tepid
during H1:2023-24, recorded an uptick in H1:2024-25
(up to August). Credit to services and personal loans
segments, however, moderated, reflecting the impact
of the regulatory measures11 undertaken by the
Reserve Bank in November 2023 (Chart IV.20a).
The share of agriculture and industry in SCBs’
Source: RBI. incremental credit offtake rose to 16.1 per cent and

9 While overall bank credit and non-food credit data are based on Section-42 return (which covers all SCBs), sectoral non-food credit data are based on
sector-wise and industry-wise bank credit (SIBC) return, which covers select banks accounting for about 95 per cent of total non-food credit extended by
all SCBs. Data on bank credit exclude the impact of merger of a non-bank with a bank.
10 The sectoral credit growth (y-o-y) for May 2024 is based on 27 fortnights as against the usual 26 fortnights.
11 Risk weights on bank lending to NBFCs and retail loans excluding housing, education, vehicle loans, and loans against gold and gold jewellery were
increased on November 16, 2023 (https://rbidocs.rbi.org.in/rdocs/notification/PDFs/REGULATORYMEASURES8785E7886A044B678FB8AF2C6C051807.PDF).

82 RBI Bulletin October 2024

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Chart IV.19: Credit Flow across Bank Groups

Source: RBI.

16.6 per cent, respectively, in August 2024 from 14.4 support from the Government through the price
per cent and 9.6 per cent, respectively, in the previous support scheme (PSS) for pulses & oilseeds and market
year. In contrast, the incremental share of services intervention scheme (MIS) for perishable agricultural
and personal loans moderated over the same period commodities.
(Chart IV.20b). Credit to industry grew by 9.8 per cent in August
Credit to agriculture and allied activities registered 2024 from 5.3 per cent a year ago, primarily driven
double digit growth, improving to 17.7 per cent (y-o-y) by a pickup in offtake to large industry (Chart
in August 2024 from 16.5 per cent a year ago (Chart IV.21a). Higher credit expansion in micro, small and
IV.20a), driven by favourable monsoon and continued medium industries further supported growth in this

Chart IV.20: Sectoral Deployment of Bank Credit

Source: RBI.

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Chart IV.21: Bank Credit to Industry Sector

Source: RBI.

segment (Chart IV.21b). Among the major industrial NBFCs were the main driver of overall growth.
sub-sectors, credit growth to chemicals and chemical Increasing dependency of NBFCs on bank borrowings
products, food processing, infrastructure, and triggered regulatory concerns. Similarly, certain
petroleum, coal products and nuclear fuels accelerated components showed higher growth in the personal
in August 2024. loans segment, which led to concerns about incipient
Credit growth to services and personal loans segments stress. To address the build-up of any potential
at 15.6 per cent and 16.9 per cent, respectively, risk, the Reserve Bank tightened lending norms in
in August 2024 displayed gradual moderation November 2023 as alluded to earlier. Consequently,
(Chart IV.22a and IV.23a). Within the services sector, total consumer loan growth in the sub-segments

Chart IV.22: Bank Credit to Services Sector

Note: In the case of NBFCs, a few banks have reported prepayment/repayment of their advances from some HFCs/PFIs/NBFCs, which also contributed to the decline in
growth.
Source: RBI.

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Chart IV.23: Bank Credit in Personal Loans Segment

Source: RBI.

where risk weights were increased, moderated to 13.9 The asset quality of SCBs improved during 2024-
per cent while their share in incremental credit to 25 (up to June 2024), with the overall gross non-
the sector declined to 29.7 per cent in August 2024 performing assets (NPA) ratio declining to 2.7 per
(Chart IV.23b). cent in June 2024 from 3.7 per cent a year ago (Chart
IV.24a). Asset quality improved across all the major
In tandem, growth in bank credit to NBFCs moderated
sectors (Chart IV.24b).
to 12.2 per cent, bringing down its share to 26.9 per
cent of incremental credit extended to services during Growth in non-SLR12 investments of banks (comprising
the same period (Chart IV.22b). investments in CPs, bonds, debentures and shares of

Chart IV.24: Stressed Assets and Non-Performing Assets of SCBs

Source: RBI.

12 Statutory Liquidity Ratio

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Chart IV.25: Non-SLR Investment and Adjusted Non-Food Credit

Source: RBI.

public and private corporates) increased to 4.8 per demand and time liabilities (NDTL), up from 8.6 per
cent in H1:2024-25 from 4.1 per cent in H2:2023-24 cent at end-September 2023 (Chart IV.26). Excess SLR
(Chart IV.25a). The growth in adjusted non-food credit holdings provide collateral buffers to banks for availing
(i.e., non-food bank credit plus non-SLR investments funds under the LAF as well as wholesale funding in
by banks) was marginally lower at 14.1 per cent in the TREPS and market repo segments. They are also a
Q2:2024-25 as compared to 14.4 per cent in Q2:2023- component of the liquidity coverage ratio (LCR).
24 (Chart IV.25b).
IV.2 Monetary Policy Transmission
Excess holdings of SLR securities by SCBs as on
Transmission to lending and deposit rates of banks
September 6, 2024 were 8.8 per cent of their net
continued in H1:2024-25, with the latter adjusting
Chart IV.26: Excess SLR of Banks faster in the wake of persistent credit demand and
the widening gap between credit and deposit growth.
During H1:2024-25, the median 1-year marginal cost of
funds based lending rate (MCLR) of SCBs increased by
10 bps, indicating a slightly higher cost of borrowing.
During April-August 2024, the weighted average
lending rates (WALRs) on fresh and outstanding rupee
loans increased by 4 bps and 6 bps, respectively. In
the current tightening cycle, i.e., May 2022 to August
2024, in which the policy repo rate was cumulatively
increased by 250 bps, the WALR of SCBs on fresh and
outstanding rupee loans increased by 190 bps and 119
bps, respectively.

* Data till September 6, 2024

On the deposit side, the weighted average domestic
Source: RBI.
term deposit rates (WADTDRs) on outstanding rupee

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Table IV.4: Transmission from the Repo Rate to Banks’ Deposit and Lending Rates
(Variation in basis points)

Term Deposit Rates Lending Rates

WADTDR-
Repo WADTDR - Fresh Deposits Outstanding WALR-
Period 1-Yr. MCLR WALR - Fresh
Rate Deposits EBLR Outstanding
(Median) Rupee Loans
Retail Retail and Retail and Rupee Loans
Deposits Bulk Deposits Bulk Deposits
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Easing Phase
-250 -209 -259 -188 -250 -155 -232 -150
Feb 2019 to Mar 2022
Tightening Period
+250 186 243 190 250 170 190 119
May 2022 to Aug 2024*
Of which
Apr 2023 to Aug 2024* 0 12 -2 77 - 40 9 19
Apr 2024 to Aug 2024* 0 21 -16 4 - 10 4 6
Notes: Data on EBLR pertain to 32 domestic banks.
*: Latest data on EBLR and MCLR pertain to September 2024.
WALR: Weighted average lending rate; WADTDR: Weighted average domestic term deposit rate;
MCLR: Marginal cost of funds-based lending rate; EBLR: External benchmark-based lending rate.
Source: RBI.

deposits of SCBs increased by 4 bps in H1:2024-25 Bank group-wise, the transmission to WALRs on fresh
(up to August 2024); however, it moderated by 16 bps rupee loans of PSBs was higher than that of PVBs,
for fresh deposits. Banks have increased their rates while it was lower for outstanding loans (Chart IV.27a).
on fresh retail deposits by 21 bps during the same The lending rates of PVBs remained above those of
period. The WADTDRs on fresh and outstanding PSBs (Chart IV.27b). The maximum pass-through to
rupee deposits of SCBs increased by 243 bps and 190 lending rates was witnessed in the case of foreign
bps, respectively, during May 2022 to August 2024 banks, reflecting their higher share of low-cost and
(Table IV.4). wholesale deposits of lower maturity. Moreover, the

Chart IV.27: Bank Group wise Transmission to Lending Rates

Source: RBI.

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Chart IV.28: Outstanding Floating Rate Rupee Loans of SCBs across Interest Rate Benchmarks

Notes: 1. Data pertain to 73 scheduled commercial banks.

2. ‘Others’ include benchmark prime lending rate, base rate and other internal benchmarks.
3. ‘Other benchmarks’ include any other market interest rate published by FBIL.
Source: RBI.

higher share of external benchmark-based lending share of EBLR-linked loans is higher among private
rate (EBLR)-linked loans in foreign banks further banks (Chart IV.28d). The persistence of loans linked
facilitated monetary policy transmission13. to MCLR and other legacy rates – based on internal
benchmarks and having longer reset periods – are
The share of EBLR-linked loans in total outstanding
impediments to faster monetary policy transmission.
floating rate loans increased to 57.5 per cent at end-
June 2024 from 56.6 per cent at end-March 2024. During May 2022 to August 2024, the transmission to
Concomitantly, the share of MCLR-linked loans WALRs on fresh and outstanding loans has been broad-
declined to 38.6 per cent from 39.2 per cent over the based across sectors (Chart IV.29a). The differential
same period (Chart IV.28a,b). The increasing share of pace of transmission in various sectors is on account
EBLR-linked loans with shorter reset periods aided of the proportion of credit portfolios linked to fixed
transmission to WALRs of SCBs in the current tightening and floating interest rates in the particular sector
cycle. There is still a significant proportion of loans and the varied spreads charged by banks. In the case
linked to MCLR in the case of PSBs (Chart IV.28c). The of floating rate loans that are mandatorily linked to

13 The proportion of EBLR-linked loans for foreign banks was 90.1 per cent as at end-June 2024.

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Chart IV.29: Sector-wise Transmission to WALRs of Domestic Banks (May 2022 to August 2024)

Source: RBI.

EBLR, the WALRs on fresh loans of domestic banks The combination of sustained credit demand and
increased by 210 bps for education loans, 197 bps for persistent gap between credit and deposit growth
vehicle loans, 164 bps for housing loans and 160 bps prompted banks (especially PSBs) to increase their
for MSME loans (Chart IV.29b). term deposit rates to bridge the funding gap (Chart
Banks have reduced their spreads (WALRs on IV.30a). Across bank groups, the pass-through to
fresh floating rate rupee loans over the policy repo WADTDRs on fresh and outstanding deposit rates was
rate), which moderated the extent of transmission higher for PSBs than PVBs (Chart IV.30b).
(Table IV.5). Despite deregulation of interest rates by the Reserve
Bank in October 2011, savings bank deposit rates have
Table IV.5: Spread of WALR (Fresh Loans) over
remained mostly sticky and unresponsive to evolving
the Repo Rate for the Loans linked to External
Benchmark macro-financial conditions (Chart IV.30c). Given that
(Per cent) savings deposit comprise about 30 per cent of total
Sectors Apr-22 Aug-24 deposits, the overall transmission to deposit rates
Public Private Domestic Public Private Domestic remains low if savings deposit rates remain immune
sector sector banks sector sector banks
banks banks banks banks to policy rate changes. Moreover. the decline in the
MSME Loans 4.27 3.93 4.04 3.18 3.13 3.14 share of current account and savings account (CASA)
Personal Loans deposits in total deposits, along with the higher
Housing 2.91 3.32 3.21 2.11 2.44 2.35 increase in term deposit rates vis-a-vis lending rates
Vehicle 3.37 4.39 3.55 2.62 3.86 3.02 have exerted downward pressure on the net interest
Education 4.42 5.71 4.71 3.62 4.78 4.31 margins (NIMs) of banks (Chart IV.30d).
Other personal 3.54 7.35 4.01 2.97 5.44 3.37
loans Since Q3:2022-23, interest rates on various small
Note: Other personal loans include loans other than housing, vehicle, savings instruments have been cumulatively increased
education and credit card loans.
Sources: RBI; and RBI staff estimates. in the range of 70-250 bps by the GoI (Chart IV.31).

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Chart IV.30: Deposit Rates and Bank’s Profitability

Source: RBI.

With these adjustments, the rates on most of the rates, except for those on public provident funds and
instruments are now aligned with the formula-based post office recurring deposits. Competitive rates are
now being offered on post office time deposits of
Chart IV.31: Increase in Interest Rates on Small
shorter tenor (Table IV.6).
Savings Schemes (May 2022 to Sep 2024)
IV.3 Liquidity Conditions and the Operating
Procedure of Monetary Policy
The Reserve Bank of India (RBI) Act, 1934 requires
the RBI to place the operating procedure relating to
the implementation of monetary policy and changes
thereto from time to time, if any, in the public domain.
During H1:2024-25, the monetary policy committee
(MPC) kept the policy repo rate unchanged at 6.50 per
cent and continued with the stance of withdrawal of
accommodation to ensure that inflation progressively
aligns to its target of 4 per cent, while supporting
growth. In view of the changing liquidity dynamics,
Sources: GoI; and RBI.
the Reserve Bank conducted two-way operations

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Table IV.6: Interest Rates on Small Savings Instruments – Q3:2024-25

Small Savings Schemes Maturity (years) Spread Average G-sec Formula based GoI Announced Difference
(Percentage yield (%) of rate of Interest Rate of interest (Percentage
point) $ corresponding (%) (applicable for Q3:2024-25 point)
maturity for Q3: 2024-25) (in %)
(Jun 2024-Aug
2024)
(1) (2) (3) (4) (5) = (3) + (4) (6) (7) = (6) - (5)
Savings Deposit - - - - 4.00 -
Public Provident Fund 15 0.25 7.09 7.34 7.10 -0.24
Term Deposits
1 Year 1 0 6.81 6.81 6.90 0.09
2 Year 2 0 6.81 6.81 7.00 0.19
3 Year 3 0 6.82 6.82 7.10 0.28
5 Year 5 0.25 6.83 7.08 7.50 0.42
Recurring Deposit Account 5 0 6.82 6.82 6.70 -0.12
Monthly Income Scheme 5 0.25 6.79 7.04 7.40 0.36
Kisan Vikas Patra 115 Months #
0 7.09 7.09 7.50 0.41
NSC VIII issue 5 0.25 7.01 7.26 7.70 0.44
Senior Citizens Saving Scheme 5 1.00 6.83 7.83 8.20 0.37
Sukanya Samriddhi Account Scheme 21 0.75 7.09 7.84 8.20 0.36
$: Spreads for fixing small saving rates as per Government of India Press Release of February 2016.
#: Current maturity is 115 months.
Note: Compounding frequency varies across instruments.
Sources: GoI; FBIL; and RBI staff estimates.

under the LAF to ensure orderly evolution of financial (OMOs) under the NDS-OM14 in Q2. Consequently,
markets. average daily net absorption under the LAF stood at
₹1.3 lakh crore in Q2 (Table IV.7).
Drivers and Management of Liquidity
During H1:2024-25, average daily net absorption
System liquidity transited from deficit in H2:2023-24
under the LAF at ₹0.4 lakh crore was sharply in
to surplus in H1:2024-25. Within H1, system liquidity contrast to an average daily net injection of ₹1.1
was in deficit in Q1 with seasonal expansion in lakh crore during H2:2023-24. Consequently, average
currency in circulation (CiC), build-up of government borrowings under the MSF declined to ₹8,004 crore in
cash balances, and the increase in excess cash reserve H1:2024-25 from ₹71,574 crore in H2:2023-24. Of the
ratio (CRR) balances held by banks. As a result, average average total absorption under the LAF, placement
daily net injection under the LAF (including MSF) of funds under the SDF was ₹0.84 lakh crore (73.2
stood at ₹0.5 lakh crore in Q1:2024-25. The liquidity per cent), while the remaining was absorbed through
dynamics changed in Q2 with the return of currency variable rate reverse repo (VRRR) auctions during H1.
to the banking system, the Reserve Bank’s forex The Reserve Bank remained nimble and flexible
purchases and the pick-up in government spending in liquidity management and conducted two-way
after the elections. The Reserve Bank modulated operations during H1 in view of the shifting liquidity
excess liquidity through open market operations dynamics. With system liquidity remaining in surplus
14 Negotiated Dealing System - Order Matching.

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 OCTOBER 2024 Monetary Policy Report

Table IV.7: Liquidity – Key Drivers and Management

(₹ crore)

2023-24 2024-25
Q1 Q2 H1 Q1 Q2 H1
Drivers
(i) CiC [withdrawal (-) /return (+)] 18,103 71,253 89,356 -47,264 80,820 33,556
(ii) Net Forex Purchases (+)/ Sales (-) 1,60,738 -16,071 1,44,667 -13,016 83,418 70,402
(iii) GoI Cash Balances [build-up (-) / drawdown (+)] -2,37,937 -1,79,913 -4,17,850 -97,774 -52,720 -1,50,494
(iv) Excess Reserves [build-up (-) / drawdown (+)] -31,485 -3,440 -34,925 -58,523 21,755 -36,768
Management
(i) Net OMO Purchases (+)/ Sales (-) 0 -8,480 -8,480 0 -24,040 -24,040
(ii) Required Reserves [including both change in NDTL and CRR] -33,712 - 1,01,508 -1,35,220 - 30,413 - 25,200 -55,613
Memo Item
Net Absorption (+)/ Injection (-) as at end-period 1,29,194 -40,636 -40,636 37,004 1,54,395 1,54,395
CiC: Currency in Circulation.     GoI: Government of India
Note: (+) / (-) sign suggests accretion/depletion in banking system liquidity.
Data pertain to the last Friday of the respective period.
Source: RBI.

during April 2024 (up to April 19), the Reserve Bank lakh crore into the system during the second half of
conducted one main and seven fine-tuning VRRR September to ease liquidity conditions.
auctions (1-3 days maturity), cumulatively mopping The fine-tuning VRRR auctions, on average, elicited
up ₹2.3 lakh crore from the banking system. As better response from the banks than the fortnightly
liquidity turned into deficit since the latter half of main operations in H1.16 Given the tepid response of
April, five main and 17 fine-tuning variable rate
repo (VRR) auctions were conducted, cumulatively
Chart IV.32: Liquidity Operations
injecting ₹15.5 lakh crore into the system to ease
liquidity tightness in Q1:2024-2515. A 3-day VRR
auction was conducted on June 28 (Reporting Friday)
instead of the main operation as liquidity conditions
were expected to improve significantly in the near
term. As systemic liquidity turned into surplus at
the beginning of July, the Reserve Bank switched to
variable rate reverse repo (VRRR) auctions to absorb
surplus liquidity. Overall, 49 VRRR auctions – 5
main and 44 fine-tuning operations of maturities
ranging 1-7 days – were conducted during Q2 to
absorb surplus liquidity (Chart IV.32). As liquidity
turned into deficit in the latter half of September,
the Reserve Bank conducted one main and 3 fine-
Source: RBI.
tuning VRR operations, cumulatively injecting ₹2.1

15 During this period, 3 fine-tuning VRRR operations were conducted on May 6 and June 4, cumulatively absorbing liquidity to the tune 0.7 lakh crore.
16 The average bid-offer ratio of fine-tuning auctions was 0.48 as compared to 0.17 for the fortnightly main auctions.

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accelerated to 5.7 per cent in September 2024 from

Table IV.8: Banking and Monetary Aggregates
(y-o-y growth, per cent) 4.1 per cent at end-March 2024. Money supply (M3)
Indicator March March June September growth decelerated to 10.8 per cent (y-o-y) as on
2023 2024 2024 2024 September 20, 2024, from 11.2 per cent in end-March
Reserve money 10.0 6.7 7.4 4.7 2024 (Table IV.8).
(Adjusted for CRR changes) (7.6) (6.7) (7.4) (6.8)
Broad money (M3) 9.0 11.2 9.7 10.8 IV.4 Conclusion
Currency in circulation 7.8 4.1 6.0 5.7
In contrast to volatile global financial markets,
Aggregate deposits 9.6 12.9 10.6 12.0
domestic market conditions remained stable in
Demand deposits 5.2 12.1 6.2 13.3
H1:2024-25. Money market rates evolved in tune with
Time deposits 10.2 13.7 11.8 11.3
liquidity shifts, consistent with the monetary policy
Bank credit 15.0 16.3 13.9 14.4
Note: Data is as on last reporting fortnight of the quarter. Data on broad stance. Domestic long-term bond yields eased amidst
money, deposits and credit growth exclude the impact of merger of a bank an improving inflationary outlook and positive global
with a non-bank.
Source: RBI. sentiment on India’s prospects. Equity market scaled
new highs, mainly supported by domestic investors.
banks in parking surplus liquidity for longer tenors The INR traded with a depreciating bias but remained
as reflected in the lower bid-offer ratio in the main among the least volatile EME currencies during H1.
VRRR operations, the Reserve Bank conducted more Monetary transmission continued with credit growth
fine-tuning operations in Q2. continuing to outpace deposit expansion. Going
As on September 20, 2024, reserve money (RM) forward, the Reserve Bank will remain agile and
expanded by 6.8 per cent (y-o-y) (adjusted for the nimble in conducting market operations to ensure
first-round impact of the change in CRR) as against financial stability while providing liquidity to meet
6.7 per cent at end-March 2024. The growth in CiC the productive requirements of the economy.

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 OCTOBER 2024 Monetary Policy Report

V. External Environment reversing its earlier trend. Risks to the global growth
outlook remain broadly balanced.

Global growth remains resilient. Headline inflation V.1 Global Economic Conditions
decelerated at a sluggish pace as sticky services prices
In 2024 so far, global economic activity has
hindered strong disinflation in goods. Most central banks
moderated in the face of tight financial conditions
tread the path of monetary policy normalisation but with
and persistent geopolitical risks. High frequency
measured cuts and cautious pace, while others retain their
indicators for Q3:2024 point to faltering momentum
restrictive stance. Fluctuating perceptions on the
in manufacturing but a durable expansion in services
monetary policy trajectory imparted volatility to global
sector activity. In its World Economic Outlook (WEO)
financial markets. Stubborn services inflation, high public
update of July 2024, the International Monetary
debt, geopolitical risks, potential escalation of trade
Fund (IMF) retained global growth projections at 3.2
tensions, and extreme weather events pose downside risks
per cent for 2024 while increasing it to 3.3 per cent
to the global growth outlook.
for 2025.1
Global economic activity remains resilient. World
Amongst the AEs, the US economy grew by 3.0 per cent
trade has firmed up, propelled by strong exports
(quarter-on-quarter seasonally adjusted annualised
from Asia. Both headline and core inflation (headline
rates (q-o-q, saar)) in Q2:2024, faster than in Q1 (1.6
excluding food and energy) continue to decelerate,
per cent) (Table V.1). This improvement was driven by
albeit at a sluggish pace, with strong disinflation in
consumer spending, private inventory investment,
goods hindered by persistence of higher-than-average
and non-residential fixed investment, while imports
services inflation. With inflation still above target for
also increased. Labour market conditions have been
some inflation targeting advanced economies (AEs),
easing, with the unemployment rate picking up to
central banks remain cautious while unwinding their
4.1 per cent in September (3.8 per cent in March).
restrictive stance. Some emerging market economies
The US composite Standard and Poor's (S&P) global
(EMEs), on the other hand, that had initiated pre-
purchasing managers’ index (PMI) was robust at 54.0
emptive tightening to curb inflation persistence at
in September 2024, though increasingly uneven as
elevated levels have continued to normalise their
services activity exhibited solid expansion while
monetary policies while others retain policy rates
manufacturing output declined.
at restrictive levels. Global financial markets remain
volatile in response to fluctuating perceptions on Real GDP growth in the euro area decelerated in
the monetary policy trajectory and how it impacts Q2 to 0.8 per cent (q-o-q, saar) from 1.3 per cent in
the growth-inflation trade-off. Equity markets have Q1 due to decline in gross fixed capital formation.
broadly gained notwithstanding intermittent bouts Labour markets remained resilient, with the
of sharp spikes in volatility. Sovereign bond yields unemployment rate at 6.4 per cent in August, its
have softened, while the US dollar has pared strength lowest level since the start of the euro. The Eurozone
since April 2024. Off-late, however, both sovereign composite PMI hit a seven-month low of 49.6 in
bond yields and US dollar index have inched up, September from 51.0 in August as downturn in

1 The Organisation for Economic Co-operation and Development (OECD) in its Interim Economic Outlook (September 2024) revised up global growth
forecast for 2024 by 10 bps to 3.2 per cent from May 2024 projections and retained it at 3.2 per cent for 2025.

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slower upturns reflected in both the sectors. Japan’s

Table V.1: Real GDP Growth
(Per cent) GDP rebounded strongly and grew by 2.9 per cent in
Country Q3- Q4- Q1- Q2- 2023 2024 2025 Q2:2024 (q-o-q, saar) vis-à-vis a contraction of 2.4 per
2023 2023 2024 2024 (P) (P)
cent in Q1, driven by robust private consumption
Quarter-on-quarter, seasonally adjusted, annualised rate (q-o-q, saar)
and capital expenditure. The composite PMI (au
Canada -0.3 0.1 1.8 2.1
Euro area 0.2 0.3 1.3 0.8
Jibun Bank) remained elevated at 52.0 in September
Japan -4.3 0.2 -2.4 2.9 following a 15-month high of 52.9 in August, driven
South Korea 3.0 1.8 5.3 -0.9 by resilient services activity.
UK -0.4 -1.3 2.8 1.8
US 4.4 3.2 1.6 3.0 Amongst EMEs, China’s real GDP moderated to 4.7
Year-on-year per cent (y-o-y) in Q2:2024 from 5.3 per cent in Q1,
Advanced Economies amidst continued downturn in the real estate sector
Canada 0.7 1.0 0.6 0.9 1.2 1.3 2.4 and tepid consumer demand. Secondary and tertiary
Euro area 0.0 0.2 0.5 0.6 0.5 0.9 1.5
industries also witnessed a slowdown in the second
Japan 1.3 0.9 -0.9 -1.0 1.9 0.7 1.0
South Korea 1.4 2.1 3.3 2.3 1.4 2.5 2.2
quarter. Nonetheless, the economy grew by 5.0 per
UK 0.3 -0.3 0.3 0.7 0.1 0.7 1.5 cent in the first half of 2024 – propelled by monetary
US 3.2 3.2 2.9 3.0 2.5 2.6 1.9 easing and regulatory relaxations for the real estate
Emerging Market Economies sector – meeting the official target of 5.0 per cent for
Brazil 2.0 2.1 2.5 3.3 2.9 2.1 2.4
2024 so far. The composite PMI (Caixin) posted 50.3 in
China 4.9 5.2 5.3 4.7 5.2 5.0 4.5
September, down from 51.2 in August due to slower
India 8.1 8.6 7.8 6.7 8.2 7.0 6.5
Indonesia 4.9 5.0 5.1 5.1 5.0 5.0 5.1 expansions in both manufacturing and services
Philippines 6.0 5.5 5.8 6.3 5.5 6.0 6.2 sectors.
Russia 5.7 4.9 5.4 4.1 3.6 3.2 1.5
South Africa -0.9 1.4 0.5 0.3 0.7 0.9 1.2
Among other major EMEs, Brazil’s GDP growth
Thailand 1.4 1.7 1.6 2.3 1.9 2.9 3.1 accelerated to 3.3 per cent (y-o-y) in Q2:2024 vis-à-
Memo: vis 2.5 per cent in Q1, driven by expansion in the
World 2023 2024 (P) 2025 (P) services and industrial sectors. The labour market,
Year-on-year however, remained tight as the unemployment rate
Output 3.3 3.2 3.3 continued to decline to 6.6 per cent in August 2024,
Trade volume 0.8 3.1 3.4
P: Projection.
its lowest level since 2014. The composite PMI was up
Note: India’s data correspond to fiscal year (April-March); e.g., 2024 from an eight-month low of 52.9 in August to 55.2 in
pertains to April 2024-March 2025. September due to quicker upturn in services activity
Sources: Official statistical agencies; Bloomberg; IMF WEO Update, July
2024 and RBI staff estimates. and a renewed expansion in factory production. The
South African economy grew at a tardy pace of 0.3 per
manufacturing output deepened amidst a sustained
cent (y-o-y) in Q2:2024 (0.5 per cent in Q1) as financial
reduction in new orders.
industry expansion was offset by the decline in the
GDP growth in the UK, despite moderating from 2.8 per transport, storage and communication industry.
cent (q-o-q, saar) in Q1:2024, remained resilient at 1.8 The composite PMI for South Africa rose from 50.5
per cent in Q2 supported by increases in gross capital in August to 51.0 in September signalling improved
formation, government consumption and household demand conditions. The Russian economy grew by 4.1
spending. The unemployment rate increased to per cent (y-o-y) in Q2:2024 (5.4 per cent in Q1), partly
4.3 per cent in April-July 2024 from the average of driven by higher military and defence spending. The
4.0 per cent in 2023. The UK composite PMI posted composite PMI, however, posted 49.4 in September,
52.6 in September, down from 53.8 in August with down from 52.1 in August.

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 OCTOBER 2024 Monetary Policy Report

The ASEAN2 economies recorded resilient growth Turning to high frequency indicators, the OECD
in Q2:2024 amidst higher new orders and increased composite leading indicators (CLIs) for September
activity. Southeast Asian economies are projected to 2024 showed that most economies remained above
grow at a robust pace3, driven by improved domestic the long-term trend (Chart V.1a). The global composite
and external demand conditions, stable prices, and PMI remained in expansion zone for the eleventh
increased tourism-related activities. In Q3:2024 so consecutive month in September at 52.0 as strong
far, growth has decelerated marginally but remains expansion in the services sector offset weakness in
healthy due to positive sentiments on future output manufacturing (Chart V.1b). The global manufacturing
amidst persistent price pressures. PMI, however, plunged to an eleven-month low of 48.8
in September as output, new orders and employment
Among the BRICS economies barring South Africa,
contracted.
GDP growth for 2024 is projected to moderate
marginally (Table V.2). The inflation scenario in Global merchandise trade volume grew for the
these countries is expected to improve in 2024 for fourth consecutive month in July 2024, recording
all, barring Russia where inflation has risen due to an expansion of 1.7 per cent (y-o-y). EMEs remained
demand-supply imbalance. China is facing weak the major driver for the sixth consecutive quarter in
rise in prices amidst a property slump and subdued Q2:2024, while trade volume continued to contract in
consumer confidence. AEs (Chart V.2a). In July 2024, however, trade volume

Table V.2: Select Macroeconomic Indicators for BRICS

Real GDP growth rate Country 2023 2024(P) 2025(P) General Government Country 2023 2024(P) 2025(P)
(y-o-y, per cent) Brazil 2.9 2.1 2.4 gross debt (per cent Brazil 84.7 86.7 89.3
of GDP)#
Russia 3.6 3.2 1.5 Russia 19.7 20.8 21.9
India 8.2 7.0 6.5 India 82.7 82.5 81.8
China 5.2 5.0 4.5 China 83.6 88.6 93.0
South Africa 0.7 0.9 1.2 South Africa 73.9 75.4 77.9
CPI inflation rate Country 2023 2024(P) 2025(P) Current account Country 2023 2024(P) 2025(P)
(y-o-y, per cent) Brazil 4.6 4.1 3.0 balance (per cent of Brazil -1.3 -1.4 -1.5
GDP)
Russia 5.9 6.9 4.5 Russia 2.5 2.7 2.7
India 5.7 4.6 4.2 India -1.2 -1.4 -1.6
China 0.2 1.0 2.0 China 1.5 1.3 1.4
South Africa 5.9 4.9 4.5 South Africa -1.6 -1.8 -1.9
General Government Country 2023 2024(P) 2025(P) Forex reserves* Country 2022 2023 2024
net lending/ Brazil -7.9 -6.3 -5.5 (in US$ billion) Brazil 324.7 355.0 369.2
borrowing (per cent
of GDP) Russia -2.3 -1.9 -1.2 Russia 582.0 598.6 602.0
India -8.6 -7.8 -7.6 India 562.7 622.5 704.9
China -7.1 -7.4 -7.6 China 3466,8 3610.0 3695.3
South Africa -6.0 -6.1 -6.3 South Africa 60.6 62.5 63.2
P: Projection.
*: Forex reserves for 2024 pertain to August 2024 for all countries except for Russia (July 2024) and India (September 2024).
#: Gross debt refers to the nonfinancial public sector, excluding Eletrobras and Petrobras, and includes sovereign debt held by the central bank.
Note: India’s data correspond to fiscal year (April-March) except data on forex reserves which are as per calendar year.
Sources: Official statistical agencies; WEO April 2024 database and July 2024 Update, IMF; and International Reserve and Foreign Currency Liquidity
(IRFCL), IMF; and RBI.
2 Association of Southeast Asian Nations (ASEAN) includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and
Vietnam.
3 As per Asian Development Bank’s (ADB) Asian Development Outlook July 2024, Southeast Asian economies are projected to grow at a robust pace of
4.6 per cent in 2024 from 4.1 per cent in 2023.

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Chart V.1: Survey Indicators

Note: For PMI indices a reading above 50 indicates an overall increase compared to the previous month, and below 50 an overall decrease. The indices are seasonally adjusted.
Sources: OECD; and Bloomberg.

marginally revived in AEs. The Freightos Baltic Global in freight costs and an uptick in war-risk premia. In
Index – the global ocean freight container pricing index September, however, the Freightos Baltic Global Index
that measures 40-feet container prices – remained fell on m-o-m basis as demand moderated. Global trade
elevated on y-o-y basis in September 2024 as attacks on value continued to expand in Q1:2024, with around 1
commercial shipping continued in the Red Sea trade per cent growth in merchandise trade (q-o-q) on the
route (Chart V.2b). These attacks necessitated rerouting back of higher exports from China, India, and the
of maritime trade from the Suez Canal to around the US.4 Trade in green energy and Artificial Intelligence
Cape of Good Hope, leading to longer transit time, rise related products increased strongly in Q1. The latest

Chart V.2: World Trade Volume

Sources: CPB Netherlands; Refinitiv Eikon; and RBI staff estimates.

4 Global Trade Update, July 2024, UNCTAD.

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OCTOBER 2024 Monetary Policy Report

WTO trade barometer (September 2024) indicates that end of the month and early June due to a significant
global merchandise trade volume continued to grow drop in crude oil prices. Prices softened by 0.6 per
in Q3:2024. The global trade outlook for 2024 remains cent (q-o-q) in Q3 due to moderating energy and metal
positive; however, persistent geopolitical tensions, prices amidst weak demand from China (Chart V.3a).
rising shipping costs and emerging industrial policies According to the Food and Agriculture Organization
could impact trade patterns. According to the IMF's (FAO), global food prices edged up by 2.0 per cent
WEO update of July 2024, global trade volume is (q-o-q) in Q2 and by 1.4 per cent in Q3, primarily due
estimated to grow by 3.1 per cent and 3.4 per cent in to increase in the prices of vegetable oil, dairy and
2024 and 2025, respectively, with faster expansion in meat, though partly offset by decline in sugar and
trade in emerging market and developing economies cereals prices (Chart V.3b).
(EMDEs).
Crude oil prices have moderated since the April 2024
V.2 Commodity Prices and Inflation MPR. Brent prices hovered above US$ 90 per barrel in
In Q2:2024, global commodity prices as measured the first half of April following heightened geopolitical
by the Bloomberg commodity price index remained tensions, but corrected over the rest of the period in
volatile but maintained the levels attained in Q1. Q2 (till early June) in the wake of weak demand and
Gains recorded in May were corrected towards the increased oil inventories. Crude oil prices fell to a low

Chart V.3: Commodity Prices

Sources: FAO; World Bank; Bloomberg; and PPAC, Ministry of Petroleum & Natural Gas, GoI.

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of US$ 76 per barrel in early June after the meeting record highs buoyed by improved odds of the US Fed’s
of OPEC+, wherein eight members agreed to reverse rate cut, renewed weakening of the US dollar and safe
some “voluntary” cuts from October 2024.5 Thereafter, haven flight (Chart V.3d).
with escalation of geopolitical tensions and larger Consumer Price Inflation
than expected decline in US crude oil inventory,
Consumer price inflation grudgingly eased further
prices rose for a short while before again moderating
as sticky services prices posed a drag on the pace
in July over demand concerns, fuelled by lower-than-
of disinflation. Nonetheless, inflation is already
expected Chinese GDP growth and signs of cooling
close to pre-pandemic levels for the median EMDEs
US labour market. Crude prices firmed up in August
owing to declining energy prices.6 Stronger nominal
with tensions escalating in the Middle East, however,
wage growth in some countries and escalating
it began to soften in early September, prompting the
postponement of the scheduled unwinding of the Table V.3: Consumer Price Inflation
“voluntary” production cuts by eight OPEC+ members (Y-o-y, Per cent)

from October to December 2024. Notwithstanding the Country Inflation Q3: Q4: Q1: Q2: Jul- Aug- Sep-
Target 2023 2023 2024 2024 24 24 24
announcement, prices dropped below $70 per barrel Advanced Economies
on September 10 – the first time since December Canada 2.0 ± 1.0 3.7 3.2 2.9 2.8 2.5 2.0
2021 – but recouped some losses thereafter. Natural Euro area 2.0 4.9 2.7 2.6 2.5 2.6 2.2 1.8
gas prices (according to the World Bank’s natural gas Japan 2.0 3.0 2.6 2.5 2.4 2.7 2.8
South Korea 2.0 3.2 3.4 3.0 2.7 2.6 2.0 1.6
index) increased in Q2 and Q3 due to unplanned
UK 2.0 6.7 4.2 3.5 2.1 2.2 2.2
outages in Europe and increased demand for power US 3.5 3.2 3.3 3.2 2.9 2.5
generation in the US (Chart V.3c). (2.0) (3.4) (2.8) (2.7) (2.6) (2.5) (2.2)
Emerging Market Economies
Base metal prices peaked in May, fuelled by economic
Brazil 3.0 ± 1.5 4.6 4.7 4.3 4.0 4.5 4.2
stimulus undertaken by China, the largest consumer Russia 4.0 5.2 7.2 7.6 8.2 9.1 9.1
of base metals, but corrected later over a muted India 4.0 ± 2.0 6.4 5.4 5.0 4.9 3.6 3.7
demand outlook. Overall, the prices of most base China -0.1 -0.3 0.0 0.3 0.5 0.6
South Africa 3.0-6.0 5.0 5.5 5.4 5.2 4.6 4.4
metals firmed up in Q2 and continued to rise in Q3 as
Mexico 3.0 ± 1.0 4.6 4.4 4.6 4.8 5.6 5.0
positive sentiments from Chinese stimulus measures Indonesia 2.5 ± 1.0 3.0 2.7 2.8 2.8 2.1 2.1 1.8
overwhelmed negative sentiments emanating from Philippines 3.0 ± 1.0 5.4 4.3 3.3 3.8 4.4 3.3 1.9
muted demand outlook. Gold prices (q-o-q) rallied Thailand 1.0-3.0 0.5 -0.5 -0.8 0.8 0.8 0.4 0.6
Turkey 5.0 ± 2.0 56.1 62.7 66.8 72.3 61.8 52.0 49.4
in Q2 and Q3 by 5.5 per cent and 13.9 per cent,
Memo:
respectively, with prices surpassing their record highs 2022 2023 2024(P) 2025(P)
in every successive month. Yellow metal prices surged World consumer price inflation 8.7 6.7 5.9 4.4
in April over a potential escalation in geopolitical P: Projection.
tensions that triggered safe-haven demand. Prices Notes: 1. Japan's inflation pertains to CPI inflation in all items less fresh
food - the Bank of Japan's target measure.
moderated briefly as tensions eased but firmed up 2. Figures in the parentheses for US are year-on-year change in
personal consumption expenditure (PCE) price index.
again in May above April levels due to weakening US
3. Brazil’s inflation target for 2024 is 3.0 ± 1.5 per cent and was
dollar and softening treasury yields. Prices corrected 3.25 ± 1.5 per cent for 2023.
4. Indonesia’s inflation target for 2024 is 2.5 ± 1.5 per cent and
in late May and June over weak seasonal demand and was 3.0 ± 1.5 per cent for 2023.
a stronger US dollar, but rebounded in Q3 to touch Sources: Central bank websites; IMF; and Bloomberg.

5 Voluntary cuts, representing 2.2 million barrels per day, introduced in January, and scheduled to end in June were extended till September. The same
were announced to be unwound gradually over the following 12 months beginning in October. However, besides unwinding of these “voluntary” cuts,
OPEC+ also announced extension of deep cuts in oil production to support prices till the end of 2025.
6 As per IMF's WEO Update released on July 16, 2024.

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trade tensions pose upside risks to the disinflation from 3.0 per cent to 2.7 per cent over the same period
momentum, causing monetary policy to remain (Chart V.4b).
restrictive. Notwithstanding the decline, inflation still
In the Euro area, CPI inflation moderated from 2.4
ranges above the target in some inflation-targeting
per cent in April to 1.8 per cent in September. Core
economies. According to the IMF's WEO Update, July
inflation (inflation excluding energy, food, alcohol, and
2024, global inflation is projected to fall from 6.7 per
tobacco) remained stable at 2.7 per cent in September
cent in 2023 to 5.9 per cent in 2024 and further to 4.4
(same as in April), with a mild uptick during May-
per cent in 2025 (Table V.3).
August. In the UK, CPI headline inflation decelerated
In the US, headline and core CPI inflation (y-o-y) sharply by 100 bps from 3.2 per cent in March to 2.2
decelerated from 3.5 per cent and 3.8 per cent, per cent in August, with core inflation declining from
respectively, in March 2024 to 2.5 per cent and 3.2 4.2 per cent to 3.6 per cent. In Japan, CPI inflation
per cent, respectively, in August. Inflation, in terms (all items less fresh food), the Bank of Japan (BoJ)’s
of the personal consumption expenditure (PCE) price inflation target metric, eased briefly during March
index – the Fed’s preferred measure – softened at a and April but started firming up since May. In August,
tardy pace from 2.8 per cent in March to 2.2 per cent inflation at 2.8 per cent was well above the BoJ’s target
in August (Chart V.4a), while core PCE inflation eased of 2 per cent. Core inflation (inflation excluding both

Chart V.4: CPI Inflation (y-o-y) – Select Economies

Notes: 1. For India, core CPI, i.e., CPI excluding food and fuel is worked out by eliminating the groups 'food and beverages' and 'fuel and light' from the headline CPI.
2. Japan's data in Chart V.4a refers to CPI inflation in all items less fresh food – the Bank of Japan's target measure, while data in Chart V.4b refers to CPI inflation in
all items less fresh food and energy.
Sources: Official statistical agencies; Bloomberg; and RBI staff estimates.

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Monetary Policy Report OCTOBER 2024

fresh food and energy), however, declined to 2.0 per V.3 Monetary Policy Stance
cent in August from 2.4 per cent in April. Following the most aggressive and highly
Amongst major EMEs, CPI inflation edged up in Brazil synchronised monetary policy tightening to counter
to 4.2 per cent in August from 3.9 per cent in March multi-decadal high inflation in 2022-23, the strength
2024 (Chart V.4c). In Russia, it accelerated from 7.7 and credibility of central bank policies were tested
per cent to 9.1 per cent over the same period due to as they tried to curb inflation without hampering
western sanctions and an overheating economy. In growth, necessitating a revamp of the monetary policy
South Africa, however, CPI inflation receded to 4.4 operating frameworks of some countries in the context
per cent in August from 5.3 per cent in March. China of changing dynamics of policy trade-offs (Box V.1). In
recorded positive inflation during March (0.1 per 2024, particularly during Q2 and Q3, monetary policy
cent) to August (0.6 per cent) after it exited deflation cycles diverged as central banks across AEs and EMEs
in February. Similar to AEs, core inflation is also responded to their own evolving growth-inflation
receding, albeit grudgingly in EMEs (Chart V.4d). dynamics. While continuing to emphasise on caution

Box V.1: Recent Changes in Global Monetary Policy Operating Frameworks:

Response to Evolving Macro-Economic Developments
While successfully navigating through the two black swan to the ECB, the RBA also planned to shift from a system
events of the COVID-19 pandemic and the conflict in of excess to ample reserves in April 2024 (Kent, 2024).
Europe, central banks worldwide had to quickly change According to the RBA, the move towards ample reserves,
gears from providing large-scale stimulus that resuscitated that lies somewhere between the current ‘floor’ system
economic activity to battling decadal-high inflation to with excess reserves and the pre-pandemic ‘corridor’
restore price stability. This prompted central banks to system with scarce reserves, eliminates (i) the need for
undertake synchronised and aggressive interest rate hikes precise estimation of demand for reserves; (ii) minimises
in decades accompanied by ultra-hawkish stances even as risk of volatile money markets; and (iii) is more resilient
they started to taper their bloated balance sheets. to future balance sheet expansions during periods of
financial stress.
Monetary policy operating frameworks underwent
significant refinements in two major systemic countries There are also instances of countries shifting to simpler
– the European Central Bank (ECB) and the Reserve mandates for monetary policy for better management
Bank of Australia (RBA). The ECB, faced with mounting of trade-offs. In February 2024, the RBA announced a
post-pandemic inflation pressures, recognised the switch towards a dual mandate of price stability and full
imperative of moving from abundant excess liquidity to employment with the clarification that, in practice, the
one of less ample liquidity. In response, it announced a dual mandate is not a substantial departure from the
new operational framework effective September 2024, status quo (PoA, 2024). In this regard, the deleted ‘third
wherein the main refinancing operations (MRO) rate is goal’ of contributing to Australian people’s economic
adjusted and anchored at 15 bps (as opposed to 50 bps prosperity and welfare will henceforth be an “overarching
earlier) above the deposit facility rate (DFR) while the objective”, rather than a policy objective for monetary
rate on marginal lending facility (MLF) remains at 25 bps policy. On a similar but more focussed move, the Reserve
above the MRO rate (EP, 2024). This adjustment would Bank of New Zealand (RBNZ) highlighted the necessity for
retain the asymmetric corridor but narrow the corridor a more precise and focused monetary policy target in June
width to 40 bps from 75 bps, which would deter upward 2023. Recognising that the shift to a dual mandate in 2018
deviations and contain volatility as rate gets anchored was a mistake, it recommended a shift back to the single
closer to the DFR (Chart V.1.1) (ECB, 2024).7 Analogous mandate in order to remain focussed on price stability
(Contd.)

7 Additionally, two new instruments – a structural portfolio of assets and long-term refinancing operations – will be introduced going forward for ECB.

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OCTOBER 2024 Monetary Policy Report

Chart V.1.1: ECB’s Operating Framework

Source: European Central Bank.

and enhance its policy credibility. The RBNZ amended decades, despite undertaking large scale monetary
the Remit for the Monetary Policy Committee (MPC) in stimulus through Quantitative and Qualitative Monetary
December 2023, recommending that the MPC remain Easing (QQE) along with Yield Curve Control (YCC). The
solely focussed on achieving an inflation target of 1-3 per surge in inflation led to a rise in inflation expectations
cent over the medium-term, with added emphasis on the and, therefore, the BoJ made a pivotal decision to exit its
2 per cent mid-point (RBNZ, 2023). negative interest rate policy in March 2024, discontinuing
In the case of Japan, the pandemic served as a catalyst QQE with YCC (Chart V.1.2) (Kazuo, 2024). It removed the
to emerge from the deflationary environment of several long-standing target of controlling the 10-year Japanese

Chart V.1.2: Japan’s Operating Framework

Source: Bank of Japan.

(Contd.)

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Monetary Policy Report OCTOBER 2024

Government Bonds (JGBs) rate and started targeting the and consequentially, the roles of other rates on monetary
uncollateralised overnight call rate. It also embarked on policy instruments with different tenures may soften. It
tapering of the bond buying programme in a predictable also pointed out that the existing corridor of the standing
manner. lending facility (SLF) acting as the ceiling and the rate on
excess reserves (ERR) being the floor is relatively wide
As countries prioritise inflation control, the role of central
and may be narrowed, going forward. PBOC announced
bank credibility and transparent communication gains
a new cash management tool of temporary overnight
prominence. With a view towards enhancing transparency repo (ORR) and reverse repo operations (ORRR), with the
and ensuring effective policy communication, the interest rates fixed at the seven-day repo rate minus 20
People's Bank of China (PBoC) announced changes in bps and plus 50 bps, respectively (Chart V.1.3). The PBoC
its monetary policy operating framework in June 2024 also intends to expand its policy toolkit by including
and placed greater emphasis on price-based regulatory the purchase and sale of China government bonds in
measures involving interest rates (Gongsheng, 2024). The the secondary market. Going ahead, the changes in the
PBoC indicated that the seven-day reverse repo rate will framework will be tested and reviewed in response to
be the central bank’s main short-term operational rate evolving macro-economic developments.

Chart V.1.3: China’s Operating Framework

Source: The People’s Bank of China.

References:
European Central Bank (2024), Statement by the Governing Council, March 13.
European Parliament (2024), Briefing, A new operational framework for the European Central Bank, May 22.
Gongsheng, P., (2024), “China’s current monetary policy stance and evolution of monetary policy framework in the
future”, Lujiazui Forum.
Kazuo, U., (2024), “On the Recent Changes in the Bank of Japan’s Monetary Policy Framework”, Peterson Institute for
International Economics.
Kent, C., (2024). “The future system for monetary policy implementation”, Bloomberg Australia Briefing.
Parliament of Australia (2024), Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023, February 12.
Reserve Bank of New Zealand (2023), Monetary Policy Remit amended, December 13.

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 OCTOBER 2024 Monetary Policy Report

and data dependence for future decisions, central by 25 bps in June 2024, marking its first cut in the
banks of major systemic AEs embarked on policy current easing cycle. It again announced a cut in its
pivots even as some others have paused. Given their deposit facility rate (DFR) by 25 bps in September after
pre-emptive tightening at the onset of the inflation keeping it unchanged in July. It reiterated that it would
surge, some EME central banks continued with policy continue to remain data-dependant to determine
normalisation while few others continued with the the appropriate level and duration of restriction.
restrictive stance. Besides, the Asset Purchase Programme (APP)
portfolio continues to shrink as principal payments
The US Fed initiated a pause in policy tightening in
from maturing securities are no longer reinvested.
September 2023 and continued to maintain the target
The Pandemic Emergency Purchase Programme
range for the federal funds rate at 5.25-5.50 per cent (PEPP) portfolio is also set to decline by €7.5 billion
in all its subsequent meetings. In September 2024, per month, on average, with reinvestments ceasing
however, it lowered the target range for the federal entirely by the end of 2024. The Bank of England
funds rate by 50 bps to 4.75-5.00 per cent (Chart V.5a). (BoE) continued with its status quo stance initiated
As per the Summary of Economic Projections released in September 2023, followed by first cut of 25 bps
in the September meeting, the Federal Open Market in August as inflation risks abated, but paused in its
Committee (FOMC) participants expected the target September meeting. The BoE indicated that a gradual
range for the federal fund rates to be at 4.25-4.50 per approach in removing policy restraint is warranted,
cent by end 2024 and at 3.25-3.50 per cent by end 2025, emphasising that monetary policy will need to remain
indicating a further 50 bps rate cut in the remaining restrictive for sufficiently long until the risks for
part of 2024 and 100 bps rate cut in 2025. The Fed also inflation to return sustainably to the 2 per cent target
continued with its balance sheet normalisation policy. dissipate further.
After continuing with the pause that ECB initiated in Amongst other major AEs, the RBA, the Central Bank
October 2023, it lowered its three key interest rates of Iceland8, the Bank of Israel, the Norges Bank, and

Chart V.5: Policy Rate Changes – Select Major Economies

Source: Bloomberg.

8 The Bank of Iceland cut its policy rate by 25 bps on October 02, 2024.

104 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

the Bank of Korea maintained status quo in all their reserve requirement ratio by 50 bps and seven-day
meetings during Q2 and Q3 of 2024. After keeping its reverse repo rate by 20 bps to 1.5 per cent. The Bank
policy rate unchanged since September 2023, the Bank of Russia (BoR) maintained status quo in Q2:2024 but
of Canada reduced it by 25 bps each in all its meetings increased its policy rate by 200 bps and 100 bps in
starting June 2024. The RBNZ cut its official cash rate July and September, respectively, of 2024 as inflation
by 25 bps in August 2024, following a pause since remained elevated much above the target.
July 2023. The Sveriges Riksbank slashed its policy
Among Asian EMEs, the Bank of Thailand kept its
rate by 25 bps each in May, August and September
benchmark rate unchanged in Q2 and Q3 of 2024.
2024 meetings, with a pause in the month of June.
The Bank Indonesia cut its key rate by 25 bps in
The Swiss National Bank also lowered its policy rate
September 2024 following a hike in April while
by 25 bps in its June and September meetings. The
pausing in intermittent meetings, while the central
Czech National Bank reduced its key rate by 50 bps
bank of Philippines cut its policy rate by 25 bps in
each in both May and June meetings and by 25 bps in
August 2024 after maintaining status quo in Q2. In
its August and September meetings. In contrast, the
Latin America, the central bank of Mexico maintained
BoJ raised its key rate by 15 bps in July, following a
the policy rate in Q2 but announced two consecutive
period of status quo in April and June. Moreover, the
rate cuts of 25 bps each in August and September
BoJ announced its plan to taper its outright purchase
after the first rate cut in March 2024. The central
of JGBs at a predictable pace of 400 billion yen each
bank of Colombia continued with monetary policy
quarter, reaching around 3 trillion yen by January-
easing by paring its benchmark rate by 50 bps in each
March 2026. The BoJ, however, maintained status quo
of its April, June, July and September meetings. Chile
in its September meeting.
cumulatively lowered its policy rate by 175 bps to
In the BRICS economies, the Banco Central do Brasil, 5.50 per cent during April-September 2024 with an
continued to maintain its accommodative stance that intermittent pause in July. Peru cut its reference rate
started in August 2023 by cutting its Selic rate by 25 by 25 bps each in April, May, August and September
bps in May 2024, but paused thereafter in the months meetings but maintained status quo in its June and
of June and July. In September, however, it pivoted by July meetings. Among European EMEs, Hungary
raising the Selic rate by 25 bps due to emerging upside lowered its policy rate by 50 bps each in its April
risks to inflation. The South African Reserve Bank and May meetings and by 25 bps in June, July and
cut its repo rate by 25 bps in September 2024 for the September while maintaining a pause in August.
first time after keeping it unchanged in May and July Poland maintained a pause in Q2 and Q3 of 2024
meetings. The People’s Bank of China (PBoC) reduced (Chart V.5b).
the one-year Loan Prime Rate (LPR) by 10 bps in July
V.4 Global Financial Markets
after keeping it unchanged in Q2:2024. It reduced the
one-year Medium-term Lending Facility (MLF) rate by Global financial markets remained in a state of flux
20 bps in July and 30 bps in September. In September, during Q2 and Q3, responding somewhat unexpectedly
it also announced a slew of stimulus measures to to changing perceptions on the monetary policy
support the economy, recoup the housing sector and trajectory and data releases.9 Markets turned buoyant
restore market confidence including reduction in during May-September 2024 as expectation of rate
9 Bauer, M.D., C.E. Pflueger, and A. Sundaram (2024), “Changing Perceptions and Post-Pandemic Monetary Policy,” unpublished manuscript, FRBKC Jackson
Hole conference.

RBI Bulletin October 2024 105

OCTOBER 2024 Monetary Policy Report

cuts gained momentum. Notwithstanding the gains, consequent to the BoJ’s rate hike. After undergoing
equity markets retreated intermittently since the last a sharp dip in late July and early August, US stock
MPR – in April over continued restrictive monetary markets rebounded in August as investors moved
policy; in the beginning of August over a confluence back to riskier assets on dovish guidance from the BoJ
of factors, including underwhelming data releases for and abatement of recessionary fears. In the first week
the US and landmark rate hike by Japan; and in early of September, however, market underwent another
September over increased risk-off sentiment amidst correction upon the release of below expectations
data releases. Overall, bond yields have moderated PMI data and labour market indicators but soon
since the last MPR while the US dollar has pared gains. rallied overhauling the previous loss. Overall, the US
Consequently, EME currencies broadly appreciated in S&P index rose by 9.7 per cent during April-September
Q3:2024. 2024. European stocks underperformed as bullish
Equity markets, in terms of the Morgan Stanley sentiments in other markets attracted investors
Capital International (MSCI) world index, gained 8.7 interest. The UK’s stock indices modestly tracked
per cent since end-March, reflecting gains in both AEs the US markets in Q2, performing well following
and EMEs, with recurrent episodes of volatility (Chart the Labour party’s landslide electoral performance
V.6a). Among AEs, the US S&P 500 shed gains in April but relatively underperformed in Q3. The Japanese
as strong consumer demand and high PCE inflation market reflected domestic factors exhibiting a sharp
rekindled concerns about ‘higher for longer’ interest correction post the BoJ’s rate hike causing yen
rates. It, however, rallied starting end-April till mid- appreciation and raising risks on exporters’ earnings’
July amidst easing geopolitical tensions and increased outlook. EME equities gained since end-March,
expectations of a rate cut over moderating inflation tracking global cues and lower domestic inflation
prints. Thereafter, market sentiment turned sour with prints (Chart V.6b). Chinese stocks, that were losing
incoming data sparking recessionary fears in the US ground amidst flagging economic activity and the
on top of disorderly unwinding of yen carry trade persistent downturn in real estate, rebounded sharply

Chart V.6: Equity Markets

Sources: Bloomberg; and RBI staff estimates.

106 RBI Bulletin October 2024

Monetary Policy Report OCTOBER 2024

Chart V.7: 10-Year Sovereign Bond Yields

Source: Bloomberg.

post the stimulus announcement on September 24, between April and July, pushed up by the BoJ’s policy
2024. rate hike, including tapering of their bond purchase
programme, but softened by 20 bps since August on
In tandem with Q1:2024, sovereign bond yields across
a dovish stance (Chart V.7a). Bond yields in several
major AEs continued to harden in April in response to
EMEs exhibited a softening bias, driven by easing of
expectations of a firmer future path of interest rates,
domestic financial conditions as well as global cues
sensitivity to rising fiscal risks and tight liquidity
(Chart V.7b). Bond yields in Brazil, however, hardened
conditions. Beginning May, however, yields softened
till July as investors trimmed their portfolios but
as incoming data signaled an improving inflation
remained volatile thereafter.
outlook for the US, raising the odds for an imminent
rate cut. Illustratively, the US 10-year treasury yield In the currency markets, the US dollar remained
rose by 48 bps in April but shed 78 bps between range bound in Q2:2024, with an upward bias over
May-August over evolving perceptions of rate cuts. changing bouts of optimism about policy easing and
Subsequently, yields fell precipitously in August and intermittent escalation of geopolitical and electoral
early September, remaining below the 4 per cent mark risks increasing safe haven demand. Cooling labour
in response to the release of underwhelming high- market conditions, easing inflation and flagging high-
frequency indicators. Since mid-September, however, frequency indicators of economic growth, however,
yields hardened as market expectations of the led to a policy pivot by the Fed, causing a depreciation
Federal Reserve rate cut for November shifted from of the US dollar in Q3:2024 (Chart V.8a). However, in
50 bps to 25 bps. Also, the yield curve inversion i.e. late September the dollar index, changed its course
negative 10- minus 2-year spread that had persisted upon the release of better-than-expected labour
since July 2022, has reversed to become positive in market data. These movements were mirrored in the
September 2024. The UK 10-year bond yield broadly EME currencies, exacerbated by swings in capital flows
tracked the US market while the German 10-year yield (Chart V.8b). The MSCI Emerging Market Currency
softened in response to the ECB’s rate cut actions and Index remained rangebound in Q2:2024 but rose by
forward guidance. Yield on 10-year JGBs rose by 33 bps 4.0 per cent in Q3:2024.

RBI Bulletin October 2024 107

OCTOBER 2024 Monetary Policy Report

Chart V.8: Currency Movements and Capital Flows

Sources: Bloomberg; and Institute of International Finance (IIF).

V.5 Conclusion tread the path of policy normalisation, they remain

Global growth remains resilient though flaring cautious on rate cuts and the level of restrictiveness.
geopolitical tensions, flagging recovery in China, Greater uncertainty about the evolving policy path
and extreme weather events pose downside risks is reflected in financial markets, which are buoyant
to the outlook. Inflation remains vulnerable to yet volatile, reacting sharply to policy changes and
weak progress in services disinflation, easing economic data releases. Although prospects for EMEs
financial conditions, high public debt, strong wage are improving, they remain susceptible to external
growth, potential escalation of trade tensions and geopolitical risks and evolving financial conditions
geoeconomic fragmentation. Even as most nations in advanced economies.

108 RBI Bulletin October 2024

SPEECHES

Central Banking at Crossroads

Shri Shaktikanta Das

Central Banking in the 21st Century: Changing Paradigm

Shri Shaktikanta Das

Assessing Inflation Targeting

Michael Debabrata Patra

Central Banks and Financial Stability

Shri Swaminathan J.

Governance in SFBs - Driving Sustainable Growth and Stability

Shri Swaminathan J.

Reaching the Unreached – Ensuring Last Mile Connectivity of Banking Services

Shri Swaminathan J.
Central Banking at Crossroads SPEECH

Central Banking at Crossroads* For the Reserve Bank of India (RBI), as we

commemorate its 90th year, it has been an eventful
Shri Shaktikanta Das journey since its establishment in 1935. In many
significant ways, the Reserve Bank embodies the
I feel highly privileged to be here at this High developmental aspirations of India. The landmarks
Level Conference on ‘Central Banking at Crossroads’ of its journey are equally milestones in the progress
and share some of my thoughts. When the definitive of India. At the current juncture and looking ahead,
history of our times is written, the turn of the developments around the world are impacting
current decade will, in all probability, be regarded as India on a continuous basis and challenging us as
a watershed in the evolution of central banking. In practitioners of central banking.
the aftermath of the COVID-19 pandemic and the
Today’s conference gives us an opportunity to
persistent geopolitical strife thereafter, central banks
introspect on the journey of central banking so far
are treading in the uncharted terrain of a twilight and how we want to visualise and shape our role in
zone. Today, like never before in the five centuries the future. In my remarks today, I propose to briefly
of their existence, central banks are confronted with focus on three areas where central banking is likely to
a future where their mandates, their functions and be redefined in the future: monetary policy; financial
their performances are all up for unforgiving scrutiny. stability; and new technologies. In fact, these are
Around them, the environment in which central among the themes of specific sessions in today’s
banks have been operating is undergoing tectonic conference. My observations would be mainly in the
transformations. Structural changes are underway that context of central banking across countries.
have the power to fundamentally alter the context of Monetary Policy
central banking with headwinds from geo-economic
The three decades of restrained volatility of
fragmentation; muscular industrial, trade and financial
business cycles and the co-existence of price stability
policies that are already reshaping supply chains and
and uninterrupted growth that preceded the global
the availability of critical minerals, intermediates,
financial crisis (GFC), perhaps lulled central banks into
resources and services; new technologies; and
the belief that inflation expectations are enduringly
climate change. In this rapidly evolving environment,
anchored. The beast of inflation of the 1970s and
central banks are required to navigate not just known
early 1980s seemed completely behind our times.
unknowns but unknown unknowns too.
Conditioned by that experience, central banks shed
Yet, even at these exceptional intersections, central their role of ‘lender of the last resort’ and became
banks are exploring new pathways and striving to lender of the first resort to defend their financial
reinvent their remit and functioning as the guardians systems when they responded to the GFC. They
of financial stability. Their effort is to stay ahead of continued from their GFC moment and once again
these developments by strengthening guardrails and rushed to the frontline as warriors of the first resort
leveraging on technological innovations. to protect and preserve lives and livelihood when the
COVID-19 pandemic hit the world. They took interest
* Keynote Address by Shri Shaktikanta Das, Governor, Reserve Bank of
India At the RBI@90 High-Level Conference organised by the Reserve
rates to all-time lows, undertook unconventional
Bank of India, October 14, 2024 at New Delhi. policy measures to reach out to interest rates across

RBI Bulletin October 2024 109

SPEECH Central Banking at Crossroads

the spectrum, including at the longer end, and gave For emerging market economy (EME) central
assurances about low for longer interest rates. This banks, the international dimensions of monetary
was an uncharacteristic departure from the monetary policy continues to be a testing challenge. For them,
mysticism that had prevailed up to the 1990s. the trilemma is real. Today the global economy is more
Clearly, central banking has evolved in line with the financially integrated than ever before. Monetary
developments of the 21st century. policy actions in systemic economies produce large
fluctuations in capital flows and exchange rates, which
While the pandemic time measures provided
can then feed into domestic liquidity, inflation and
the much needed support to the economies, in the
eventually affect the real economy. While monetary
aftermath of the pandemic the limits and downsides
policies in the systemic economies are determined by
of easy monetary policy in protecting economic
their domestic inflation-growth considerations, they
activity in a crisis period became evident. Today,
have large spillovers to the emerging and developing
rightly or wrongly, the central banks are accused of
economies and even to other advanced economies.
distributional consequences of their actions. The
These spillovers can be expected to accentuate as
negative equity that weighs in the balance sheets of
capital flows dwarf trade flows. Quite naturally,
certain central banks is seen as compromising their
emerging economies are having to strengthen their
independence in the conduct of monetary policy. The
policy frameworks and buffers to manage this external
story in India was, however, different as most of our
flux and mitigate its adverse consequences.
liquidity measures were calibrated and carried end
dates at the time of their announcement itself. Financial Stability

Another challenge staring at central banks Financial stability is the essential reason why
today emanates from soaring public debt caused, in central banks exist. Price stability as a central bank
a considerable measure, by the pandemic-related objective is of more recent vintage. There is a growing
fiscal stimuli and the subsequent efforts for fiscal opinion today that ‘low for long’ policies practiced
consolidation not gaining adequate traction. Such during the GFC and again during the pandemic,
a situation is becoming a binding constraint on apart from providing support to the real economy,
monetary policy in several countries. Global public also produced exuberant financial asset prices that
debt has surged post the pandemic to 93.2 per cent have come back to haunt central banks in their role
of GDP in 2023 and is likely to increase to 100 per as guardians of financial stability. Amidst ultra-
cent of GDP by 20291. In major economies, debt-GDP low interest rates and super abundant liquidity,
ratios are on an upward trajectory, raising concerns leveraging and risk-taking were celebrated as if there
about their sustainability and their negative spillovers is no tomorrow. Consequently, when central banks
for the broader global economy. In several other were confronted with inflation surges in 2022 in the
countries, central banks are willy-nilly expected to shadow of the war in Ukraine, they reacted with one
facilitate financing of such huge public debts. In fact, of the most aggressive and synchronised tightening
the debt overhang is simmering underneath the radar of monetary policies in history. This resulted in risks
of central banks, threatening to un-anchor inflation to financial stability, especially when these risks
expectations and undermine macroeconomic stability. morphed into banking crises in certain countries
in March 2023 and sell-offs in financial markets in
1 IMF Fiscal Monitor, April 2024. August and September 2024. These developments

110 RBI Bulletin October 2024

Central Banking at Crossroads SPEECH

have once again brought to fore the role of central worker remittances, the growing size of gross flows
banks in securing and preserving financial stability. of capital, and the increasing importance of cross-
Specifically, how should they account for financial border e-commerce have acted as catalysts to this
stability considerations in their pursuit of price growth.2,3 Remittances are the starting point for many
stability? emerging and developing economies, including India,
Let me now address some of the emerging to explore cross-border peer-to-peer (P2P) payments.
risks to financial stability. First, the divergence in We believe there is immense scope to significantly
global monetary policies – monetary easing in some reduce the cost and time for such remittances.
economies, tightening in a few, and pause in several India is one of the few large economies with a
other economies – can be expected to lead to volatility 24×7 real time gross settlement (RTGS) system. The
in capital flows and exchange rates, which may disrupt feasibility of expanding RTGS to settle transactions
financial stability. We saw a glimpse of this with the in major trade currencies such as USD, EUR and GBP
sharp appreciation of the Japanese Yen in early August can be explored through bilateral or multilateral
which led to disruptive reversals in the Yen carry trade arrangements. India and a few other economies have
and rattled financial markets across the globe. already commenced efforts to expand linkage of cross-
Second, private credit markets have expanded border fast payment systems both in the bilateral and
rapidly with limited regulation. They pose significant multilateral modes.4
risks to financial stability, particularly since they have India has developed a world-class digital public
not been stress-tested in a downturn. infrastructure (DPI), which has facilitated the
Third, higher interest rates, aimed at curtailing development of high-quality digital financial products
inflationary pressures, have led to increase in debt with enormous potential for cross-border payments.
servicing costs, financial market volatility, and risks India is now home to the world’s third most vibrant
to asset quality. Stretched asset valuations in some startup ecosystem, with over 140,000 recognised
jurisdictions could trigger contagion across financial startups, more than a hundred unicorns, and over
markets, creating further instability. The correction US$150 billion in funding raised. India’s experience
in commercial real estate (CRE) prices in some in DPI can be leveraged by other countries to improve
jurisdictions can put small and medium-sized banks and usher in a global digital revolution.
under stress, given their large exposures to this Central bank digital currencies (CBDCs) is
sector. The interconnectedness between CRE, non- another area which has the potential to facilitate
bank financial institutions (NBFIs), and the broader efficient cross-border payments. India is one of the
banking system amplifies these risks.
2 The value of global cross-border payments is estimated to surpass US$
New Technologies 250 trillion by 2027 (Cross-border payments | Bank of England)
3 The global cross-border B2C e-commerce market which was valued at
In recent years, the technology-driven US$ 889 billion in 2022 is estimated to grow by more than six times to US$
5.6 trillion in revenue by 2030 (Cross-border B2C E-commerce Market Size
digitalisation wave in the payments sphere has been Report, 2030)
revolutionary. While most of the innovations have been 4 These include Project Nexus, a multilateral international initiative to
enable instant cross-border retail payments by interlinking domestic Instant
at the national level focusing on retail payments, the Payment Systems (IPSs) of four ASEAN countries (Malaysia, Philippines,
market for cross-border payments has also expanded Singapore, and Thailand) and India. Under bilateral arrangements, cross-
border payment linkages have already been established by India with
substantially. The significant volume of cross-border Singapore, UAE, Mauritius, Sri Lanka, Nepal, etc.

RBI Bulletin October 2024 111

SPEECH Central Banking at Crossroads

few countries that have launched both wholesale and concentration risks, especially when a small number
retail CBDCs. Programmability, interoperability with of tech providers dominate the market. This could
the UPI retail fast payment system and development amplify systemic risks, as failures or disruptions in
of offline solutions for remote areas and underserved these systems may cascade across the entire financial
segments of the population, are some of the value sector. Moreover, the growing use of AI introduces
added services which we are now experimenting as new vulnerabilities, such as increased susceptibility
part of our CBDC pilot. to cyberattacks and data breaches. Additionally,
AI’s opacity makes it difficult to audit or interpret
Going forward, harmonisation of standards
the algorithms which drive decisions. This could
and interoperability would be important for CBDCs
potentially lead to unpredictable consequences in the
for cross-border payments and to overcome the
markets. Banks and other financial institutions must
serious financial stability concerns associated with
put in place adequate risk mitigation measures against
cryptocurrencies. A key challenge could be the fact
all these risks. In the ultimate analysis, banks have to
that countries may prefer to design their own systems
ride on the advantages of AI and Bigtech and not allow
as per their domestic considerations. I feel we can
the latter to ride on them.
overcome this challenge by developing a plug-and-play
system that allows replicability of India’s experience Conclusion
while also maintaining the sovereignty of respective Despite the difficult trials and trade-offs, central
countries. banking in the current decade is a success story. In
It is well recognised that growing digitalisation of the realm of monetary policy, central banks have been
financial services has enhanced the efficiency of the successful in bringing inflation closer to targets. Major
financial sector across the globe. At the same time, it financial collapses or recessions, seen during earlier
has brought in several challenges which central banks episodes of crisis, have been averted. Central banks
have to deal with. For instance, in the modern world are now at the forefront of technological innovations
with deep social media presence and vast access to and are driving them through sandboxes, innovation
online banking with money transfer happening in hubs and hackathons.
seconds, rumours and misinformation can spread As we navigate the high intensity tail events and
very quickly and can cause liquidity stress. Banks black swans of the current decade, the lessons imbibed
have to remain alert in the social media space and also can well form the basis of our deliberations today to
strengthen their liquidity buffers. chart out a course for the future. Central banks must
Latest technological advancements such as remain vigilant, adaptable, continuously assess risks
artificial intelligence (AI) and machine learning and build resilience. They should remain prepared
(ML) have opened new avenues of business and to navigate complex challenges, support sustainable

profit expansion for financial institutions. At the growth, maintain price stability and promote sound
and vibrant financial systems.
same time, these technologies also pose financial
stability risks. The heavy reliance on AI can lead to Thank you.

112 RBI Bulletin October 2024

Central Banking in the 21st Century: Changing Paradigm SPEECH

Central Banking in the 21st to examine how central banking has evolved over the
years, draw lessons from the past crises, and prepare
Century: Changing Paradigm* for the challenges that lie ahead in the 21st century.
Today, therefore, I have chosen to speak on “Central
Shri Shaktikanta Das Banking in the 21st Century: Changing Paradigm”.

I am delighted to have been invited by the Nepal I have structured my talk in the following manner.
Rastra Bank (NRB) to deliver the inaugural Himalaya First, I propose to speak on the established paradigm
Shumsher Memorial Lecture. I deem it as a privilege. of central banking at the turn of the last century.
I place on record my appreciation of the Nepal Rastra Thereafter, I would like to describe how this paradigm
Bank for initiating this lecture series in honour of has evolved, learning from the crisis experiences of
Shri Himalaya Shumsher Rana, the first governor of the 21st century, followed by brief remarks on the
NRB from 1956 to 1961. He contributed immensely to Reserve Bank’s approach to policymaking that has
the development of Nepalese monetary and financial helped the Indian economy emerge stronger in the
systems. His efforts laid the foundation for many of last few years. Finally, I shall attempt to outline some
Nepal’s key financial institutions and contributed of the challenges that central banks will confront in
significantly to the country’s economic development. the 21st century.
Nepal and India have enjoyed a long standing The Established Paradigm at the Turn of Last Century
relationship that goes back into history. It is not just
By the end of the 20th century, the theory and
a relationship between the two countries, it is also a
practice of central banking had converged to certain core
close people to people relationship. The Nepal Rastra
principles. The first of these core principles was that
Bank and the Reserve Bank of India also share a close
price stability would be the primary responsibility of a
relationship based on mutual co-operation.
central bank. This principle had its origin in the Great
Central banks have traditionally functioned as the Inflation of the 1970s. Subsequently, inflation targeting
guardians of macroeconomic and financial stability. as a monetary policy framework gained prominence
In recent years, central banks were at the forefront from the early 1990s, both in advanced and emerging
protecting their economies and financial systems from market economies (EMEs). The second core principle
the onslaught of multiple global shocks. They were put had its roots in the famous ‘rules versus discretion’
to ultimate test in this extraordinary period of global debate in macroeconomics1 of the 1970s and 1980s,
turbulence and uncertainties. They had to change following which a consensus emerged in favour of
gear to revive their COVID-19 pandemic-ravaged rules or constrained discretion in policy making. This
economies to waging an all-out war against inflation was followed by institutional reforms under which
in quick succession. Many standard central banking inflation targeting got embedded in rule-based policy
theories and practices were debated; and while some making with some flexibility. The third core principle
survived, others had to adapt to the new realities. As was about central bank independence which was
we still transit through this challenging period which considered as critical for achieving the goals of price
is now dominated by geopolitical conflicts and global and economic stability. While the target was given to
geoeconomic fragmentation, it would be appropriate the central bank by elected representatives, the central
* First Himalaya Shumsher Memorial Lecture by Shri Shaktikanta Das, 1 Kydland, F.E. and Prescott, E.C. (1977). “Rules Rather Than Discretion:
Governor, Reserve Bank of India - September 24, 2024 - Nepal Rastra The Inconsistency of Optimal Plans,” Journal of Political Economy, 85
Bank, Kathmandu, Nepal. (June), 473–92.

RBI Bulletin October 2024 113

SPEECH Central Banking in the 21st Century: Changing Paradigm

bank was free to deploy instruments at its disposal to It is evident that measures for promoting financial
achieve the given target.2 Central bank independence stability can complement or constrain monetary policy
went hand in hand with increased accountability and depending upon its usage. Financial stability measures
transparency of the monetary policy decision making aimed at effective regulation and supervision of
process. banks, non-banking financial companies (NBFCs) and
markets can enhance monetary transmission and help
Evolving Paradigm of the 21st Century
price stability. On the other hand, financial stability
In the 21st century, the global economy has measures via extraordinary monetary expansion, if
gone through a global financial crisis (GFC), a global not corrected in time, can risk price stability. It is,
pandemic, a global surge in inflation and geopolitical therefore, evident that the relationship between price
conflicts with global ramifications. Not too long ago, stability and financial stability runs in both directions
central banks were fighting deflationary tendencies in and the impact depends upon the policy choices we
the aftermath of GFC by cutting their policy rates to make.3
the zero lower bound and implementing a heavy dose
Second, the 20th century orthodoxy of central
of quantitative easing. After the onset of the war in
banking was in terms of single objective (price
Ukraine, they had to fight against inflation by raising
stability) and single instrument (short-term interest
policy rates to historically high levels.
rate). Today, central banks have a broader mandate of
In fact, the eventful first quarter of the 21st overall macroeconomic stability which includes price
century has provided important lessons for central stability, sustained growth and financial stability.
banks, as it brings about quite a few changes in the Sometimes, the pursuit of price stability could be
established paradigm of the 20th century. First, there in conflict with financial stability as experienced
is now a better recognition of the interconnections recently by some advanced economies when tighter
between price stability and financial stability. A key monetary policy raised concerns about the banking
lesson from recent experience is the need to avoid system stability. The trade-off between price stability
looking at price and financial stability in isolation. and growth emerges when the pursuit of price
The linkage from price to financial stability operates stability entails large growth sacrifice. It is, therefore,
in two ways. First, extended periods of low and stable important, that central banks employ their multiple
inflation could lull central banks into complacency instruments, viz., monetary policy, macroprudential
with regard to regulation and supervision of the regulation and micro-prudential supervision in an
financial system as witnessed during the Great optimal manner to reduce such trade-offs and achieve
Moderation era of 1990s and early 2000s, germinating better outcomes for the economy.
the seeds of financial instability. Second, periods of
To best serve all these objectives, central banks
high inflation that are addressed by strong monetary
have greatly enhanced their toolbox. In addition
policy tightening can jeopardise financial stability if
to conventional policy tools, central banks have
interest rate risks are not adequately factored in. We
an enlarged toolbox of unconventional policy
saw this in March 2023 when a few banks in some
instruments. These include negative interest rates,
advanced economies faced sudden stress situations.
3 Das Shaktikanta (2023), ‘Price and Financial Stability: Managing
2 A whole host of literature developed establishing that macroeconomic Complementarities and Trade-Offs’, Plenary Address at the Kautilya
performance was superior in countries with more independent central Economic Conclave Organised by the Institute of Economic Growth and
banks (Alesina and Summers, 1993; Cukierman, 1993). Ministry of Finance, Government of India, New Delhi; October 20, 2023.

114 RBI Bulletin October 2024

Central Banking in the 21st Century: Changing Paradigm SPEECH

term lending facilities, asset purchase programmes years,6 but the EMEs have probably learnt from their
and forward guidance. Central banks also rely on past experience and played it well this time. While the
proactive macro-prudential measures to promote resilience of EMEs will be tested in the face of new
systemic stability. challenges cropping up frequently, some lessons can
be drawn as central banks prepare for rest of the 21st
Third, central bank communication has gained
century. The foremost lesson is that strengthening
prominence as an important policy tool in the 21st
one’s fundamentals is the best buffer against global
century. In older days, central bankers believed that
spill overs in today’s uncertain world. Fundamentals
their communication should be “shrouded in mystery”,
would include commitment to an inflation target,
“say as little as possible” and “say cryptically”.4 Those
maintaining buffers in the form of reserves, and
times are gone. Now, managing expectations through
following a prudent and forward looking approach in
effective communication is a vital instrument in the financial sector policies. This approach, together with
monetary policy toolkit. Forward guidance or the prudence in fiscal management, will go a long way in
absence of it on the future path of policy interest enhancing the resilience of EMEs.
rates, both state and time based, has evolved as a new
The Indian Context
feature to deal with expectations. Central banks have
learnt to build trust and confidence through social Let me now turn to the Indian context. I wish to
media, official speeches, press releases and public highlight some aspects of the Reserve Bank’s approach
interactions.5 Clear and effective communication and that have worked well for us. We have not only
transparency have played an important role in the managed to shield the Indian economy from multiple
success of the inflation targeting framework. shocks in the last few years but have also enabled it to
emerge stronger from the crisis. The Indian economy
Fourth, recent experience has underscored the
today demonstrates vastly improved macroeconomic
importance of monetary-fiscal coordination for better fundamentals and buffers.
economic outcomes. During the pandemic, central
Unlike many central banks which are narrowly
banks worked in close coordination with governments
focused on price stability using monetary policy, the
to deal with the unprecedented crisis. Later, when
Reserve Bank has a wider canvas of functions. It is
central banks were battling against multi-decade high
not just responsible for maintaining price stability,
inflation, governments took measures on the supply
but also has the larger responsibility of maintaining
side to ease inflationary pressures. Consequently, the
financial stability as the regulator and supervisor of
output sacrifice needed to bring down inflation was
banks and other financial sector entities, financial
minimised.
markets and payment systems.7 This helps us to take
Fifth, the emerging market economies (EMEs) a holistic view of the economy, appreciate the synergy
have exhibited greater resilience unlike previous
6 Some of these drivers include global slowdown, high inflation and
episodes. Notably, all traditional drivers of EME concomitant high interest rates in AEs, strong dollar, bank failures in
crises of the 20th century were present in the last few AEs and associated contagion risk, high commodity prices, tapering of
quantitative easing and associated capital outflows from EMEs.
4 7 The preamble to the RBI Act 1934 describes RBI’s main functions as:
Shaktikanta Das (2023), “The Art of Monetary Policy Making: The
Indian Context” Speech by Governor, Reserve Bank of India at Delhi School “….to regulate the issue of Bank notes and keeping of reserves with a
of Economics (DSE) Diamond Jubilee Distinguished Lecture, September 5, view to securing monetary stability in India and generally to operate
2023. the currency and credit system of the country to its advantage; to have
a modern monetary policy framework to meet the challenge of an
5 Central Banking in the 21st Century – A crisis of accountability? increasingly complex economy, to maintain price stability while keeping
European journal of political Economy, 74, 2022. in mind the objective of growth.”

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SPEECH Central Banking in the 21st Century: Changing Paradigm

and trade-offs involved in various objectives, and New Challenges for Central Banks in the 21st Century
act appropriately using multiple instruments at our
Let me now reflect upon some of the challenges
disposal.
that could significantly impact the central banking
The Flexible Inflation Targeting (FIT) framework landscape in the 21st century. First and foremost,
which got embedded into the law in 2016, established climate change is emerging as a huge challenge. It
the primacy of price stability among the objectives of can become a systemic risk, if not addressed in time.
monetary policy, but not unconditionally. It defined Severe climate or weather related events which are
the objective as maintaining price stability, while becoming more frequent and intense can impact
keeping in mind the objective of growth. The FIT central bank’s core mandates of price and financial
framework retained the essence of the earlier multiple stability by causing sudden price pressures, damage
indicator approach without any ambiguity about the to infrastructure, loss of economic activity and stress
hierarchy of objectives. FIT provides flexibility to on fiscal balances. They can also impact the balance
support growth if the situation so demands. Financial sheet of banks and other lenders. In recent years,
stability which is a pre-condition for price stability there has been a growing role of regulatory policies
and sustained growth is thus implicitly embedded as in the climate policy toolkit.9 More work needs to be
part of the broader mandate of the Reserve Bank. It is done in this front while recognising that central banks
this approach which has helped us to effectively deal can supplement the efforts of governments and other
with the multiple challenges in the recent period and authorities who will be at the forefront of climate
address issues of anchoring price stability, supporting related initiatives.
growth and maintaining financial stability. Details of
the specific measures undertaken by the Reserve Bank Second, continuing geopolitical disturbances
are given in a footnote8. and geoeconomic fragmentations will pose daunting
8 challenges to the central banks. Experience of the
When the COVID-19 pandemic struck, the Reserve Bank reduced the
policy rate sizeably by 115 bps in a span of two months (March-May 2020); past few years shows that the journey ahead may
however, we refrained from being ultra-accommodative by not reducing
the policy repo rate below our inflation target of 4 per cent. In tandem, be marked by dynamic shifts in geopolitics, with
financial conditions were eased substantially through liquidity augmenting frequent incidences of supply chain disruptions and
measures amounting to ₹17.2 lakh crore (equivalent to 8.7 per cent of GDP
of 2021-22). All these measures were nuanced, against good collaterals, greater barriers in trade, technology and capital flows.
with banks as counterparties and preferably with sunset clauses, keeping
in mind the price and financial stability challenges that may arise in future.
These will be the new sources of shocks, often not
During 2021, surplus liquidity was gradually migrated from the short end well captured in existing macroeconomic models. It
to the longer horizon, which lifted short-term rates from ultra-low levels,
thereby obviating financial stability challenges. The pandemic measures has become important for central banks to remain
exemplified how the Reserve Bank could effectively balance different
vigilant and respond in a nimble, timely and calibrated
objectives – maintaining price stability within the flexibility provided by
the FIT framework, while also addressing financial stability considerations manner while navigating such turbulences.
simultaneously. Even during the COVID-19 pandemic when we eased
policy rates significantly and in the subsequent inflation upsurge when Third, technology has permeated through
policy was tightened sharply, we gave banks greater flexibility by adjusting
the proportion of securities they could hold under the held to maturity every aspect of human life. It is bringing about
(HTM) category to avoid marked to market (MTM) losses that triggered
the banking crisis of March 2023. Besides, we adopted a prudent approach
transformational shifts in the financial services
and have taken several initiatives to revamp regulation and supervision of sector. The traditional banking system has undergone
banks, NBFCs and other financial entities by developing an integrated and
harmonized architecture. As a result, our banking system remains resilient an unprecedented technological transformation
and healthy, as reflected in sustained growth in bank credit backed by
over the last decade. In times of crisis, as during the
improved asset quality, adequate capital and liquidity buffers and robust
earnings growth. Thus, through our financial stability measures that
strengthened market functioning, we facilitated price stability by ensuring 9 (RBI, 2023) Report on Currency and Finance 2022-23, “Towards a
smoother policy transmission. Greener Cleaner India”.

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Central Banking in the 21st Century: Changing Paradigm SPEECH

COVID-19 pandemic, India and a few other countries if well supervised and properly channelised, can help
were able to leverage digital financial infrastructure in enhancing productivity and reducing costs. The
(DFI) for targeted transfer payments. Technology has net effect will depend, to a great extent, upon central
enabled India to achieve, in less than a decade, levels banks’ own capabilities in harnessing the potential
of financial inclusion that would have otherwise while managing the transition. This in turn will
taken several decades or more.10 DFI, thus, offers great determine the financial landscape of the 21st century.
potential for the future. Concluding Observations
Fourth, fintech innovations are also opening up Every crisis brings with it new lessons and ideas.
new possibilities. The challenge for central banks in The frontier of knowledge and ideas in economics have
this journey will be to steer digital innovation towards advanced with each crisis in the past. For example,
a more efficient, prudent and stable financial system, the Great Depression of the 1930s underlined the
reaping the benefits of DFI while further building importance of fiscal and demand management
on their track record as trusted safekeepers of price policies; the Great Inflation of the 1970s brought
and financial stability.11 Central banks will also have to focus the need for credibility and consistency
to deal with issues of regulation and supervision of in policy frameworks; the global financial crisis of
digital lenders; observance of fair practices code by 2008 underscored that financial stability can not be
the stakeholders; data security and privacy; and third separated from overall macroeconomic stability; and
party service providers, etc. now the sequence of unprecedented shocks since the
The fifth challenge relates to the advent of pandemic have driven home the need for policymakers
artificial intelligence and machine learning (AI/ML) to be agile, proactive, innovative and prudent in
tools in financial services. While its application and their policy responses, without being constrained by
usage in central banking and financial services has orthodoxies or dogmas. Thus, economic theory and
tremendous scope, it also poses challenges of data policies have evolved over the years with experience
privacy, algorithmic bias and discrimination, cyber gained and lessons learnt from each crisis. In fact, this
security and ethical issues.12 Central Banks and other has indeed been the story of central banks over the
years.
players in the financial services ecosystem have
to enhance their own capacities to deal with these With several crisis of global proportion occurring
challenges. in quick succession in the last few years, central
banking theory and practice are undergoing subtle and
To sum up, central banks in the 21st century will
sometimes significant changes. At the Reserve Bank
have to gear up for all these challenges. While climate
of India, our effort has been to pursue proactive and
change and geopolitics may work as supply shocks
prudent policies so that the Indian economy evolves
to fuel inflationary pressures and slowdown global
along a sustainable growth path. I am glad that our
growth and trade; innovation and artificial intelligence,
efforts have yielded positive outcomes. The Indian
10 Das Shaktikanta (2024), “Digital Public Infrastructure and Emerging economy has rebounded strongly from the pandemic
Technologies”, Inaugural address at the RBI@90 Global Conference on
August 26, 2024, Bengaluru and is contributing more than 18 per cent to the
11 Silva L.A.P. (2023), “Central Banks at the Crossroads” BIS speech, August. global growth. Inflation is on a declining trajectory.
12 12 Acemoglu, Daron (2024). “Harms of AI”. In: The Oxford Handbook External sector remains resilient with strong buffers.
of AI Governance. Ed. by Justin B. Bullock, Yu-Che Chen, Johannes The health of banking and corporate sectors remains
Himmelreich, Valerie M. Hudson, Anton Korinek, Matthew M. Young, and
Baobao Zhang. Oxford University Press. strong. Fiscal consolidation is under way.

RBI Bulletin October 2024 117

SPEECH Central Banking in the 21st Century: Changing Paradigm

As preeminent macro-financial policy institutions, the central banks will rise to the occasion and lead
central banks have to keep reinventing themselves in from the front to safeguard their financial systems
tune with the times. They have to anticipate future and economies from the emerging challenges of the
risks and undertake suitable pre-emptive measures to 21st century.
avert or mitigate potential risks, if any. I am confident, Thank you. Namaskar.

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Assessing Inflation Targeting SPEECH

Assessing Inflation Targeting* price shocks have actually had relatively short-lived
effects in comparison with the persistence of the
Michael Debabrata Patra price shocks of the 1970s on the wider acceptance
that monetary policy will do whatever it takes3. The
The Context effectiveness of inflation targeting is also found to be
Over the past three and a half decades since underpinned by its institutional quality,4 reinforcing
the formal adoption of inflation targeting (IT), it pre-pandemic evidence pointing to IT being a better
has proliferated across continents, regardless of the absorber of shocks than other regimes.5 The taming
position of host jurisdictions in the developmental of the post-pandemic surge in inflation down to its
ladder. By the turn of this century, it has been last lap provides further validation of the framework.
increasingly embraced by emerging market economies Everywhere, long-term inflation expectations remain
(EMEs) so much so that they now outnumber broadly anchored6 in spite of heightened uncertainty.7
advanced economies (AEs) as practitioners. A unique II. What the Reviews Revealed
feature of IT is its operationalisation even before the
Unlike other monetary policy regimes, periodic
development of a formal theory1. The journey of IT
reviews have been an integral part of the IT framework,
has been tumultuous, navigating as it has the Great
and have, in fact, been hard coded into legislative
Moderation and ‘once in a century’ shocks such as the
mandates. While there have been notable operational
global financial crisis (GFC), the COVID-19 pandemic,
similarities in target setting, policy communication and
and persisting geopolitical conflicts that have had
performance assessment within subtle adaptations
a direct bearing on both inflation’s evolution and
to country specific requirements, there is variation
on financial conditions. Yet, there is no evidence
in the way IT frameworks are reviewed.8 The latest
of any major country abandoning it2. On the other
reviews of IT frameworks in several countries provide
hand, central banks have drawn lessons from these interesting insights about the future of IT.
humungous challenges and innovated and refined
The key motivations for these framework reviews
their policy frameworks. The endogenous evolution
were (i) the decline in the neutral interest rate and
of IT has rendered it the longest surviving monetary
the higher risk of hitting the zero lower bound;
policy framework in modern times.
3
Three pillars of the framework – flexibility; Bernanke, B. S. and Blanchard, O. (2024). An Analysis of Pandemic-Era
Inflation in 11 Economies. Hutchins Center Working Paper #91, May.
transparency and, therefore, accountability; and 4 Milas, C., Dergiades, T., Panagiotidis, T., and Papapanagiotou, G. (2024).
credibility – have enabled IT to stand the test of time. An Assessment of Inflation Targeting. Quarterly Review of Economics and
Finance 97, 101897.
Empirical evidence suggests that the post-pandemic 5 Fratzscher, M., Grosse-Steffen, C. and Rieth, M. (2020). Inflation
Targeting as a Shock Absorber. Journal of International Economics 123,
* Address delivered by Michael Debabrata Patra, Deputy Governor, 103308.
Reserve Bank of India (RBI) at the High Level Conference “Central 6 Schnabel, I. (2024). The Future of Inflation (Forecast) Targeting. Keynote
Banking at Crossroads” organised by the Reserve Bank of India as a part of speech at the thirteenth conference organised by the International
commemoration of its 90th year on October 14, 2024 at New Delhi, India. Research Forum on Monetary Policy, “Monetary Policy Challenges during
Valuable comments received from Binod B Bhoi, Indranil Bhattacharya, Uncertain Times”, at the Federal Reserve Board, Washington, D.C. April 17.
Soumasree Tiwari, and editorial help from Vineet Kumar Srivastava and 7 Lagarde, C. (2022). Monetary Policy in an Uncertain World. Speech
Samir Ranjan Behera are gratefully acknowledged.
delivered at “The ECB and Its Watchers XXII” conference, Frankfurt am
1 King, Mervyn A. (2024). Inflation Targets: Practice Ahead of Theory. Main, March 17.
NBER Working Paper No. 32594, June. 8 Wadsworth, A. (2017). An International Comparison of Inflation
2 Argentina moved out of IT in 2018, and it is under an IMF program Targeting Frameworks. Reserve Bank of New Zealand Bulletin, Vol.80,
currently with an ambitious stabilization plan. No.8, August.

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SPEECH Assessing Inflation Targeting

(ii) the lowering of inflation expectations which further banks to forcefully respond to both high and low
constrained policy space; and (iii) the flattening of the inflation, there is no clear assessment of the manner
Phillips Curve giving recoveries ‘more room to run’.9 and extent to which financial stability considerations
should be accounted for in the pursuit of price stability.
Overall, the reviews have reaffirmed faith in the
In the event, the excesses of ‘too low for too long’ and
broad framework of IT, but with some refinements.
also of ‘higher for longer’ have been exposed and the
Common outcomes include (i) specification of the
absence of a settled position makes policy responses
target range in terms of headline inflation with a focus
vulnerable to banking crises of the March 2023 type,
on mid-points; (ii) re-emphasising accountability
the unwinding of carry trade as in August 2024 and
criteria for meeting the target over a period rather than
recession fears on a single data release on September
at every point in time; (iii) specifying the periodicity of
3, 2024 which left data dependent IT practising
reviews; and (iv) assessing other measures of inflation
central banks awash in an ocean of uncertainty due
- including core - for policy deliberations but not for
to sudden large revisions in market expectations.
specifying the target.
Second, the reviews are silent on the effects of putting
Distinctive outcomes include (i) the US Federal central bank balance sheets on the line in the conduct
Open Market Committee (FOMC) defining the target of unconventional monetary policy. Consequently,
in terms of average inflation of 2 per cent over time; the difficulties encountered in too prolonged a
(ii) the ECB changing the target from “below but normalisation and in the incurring of financial losses
close to 2 per cent” to “ 2 per cent” as a reference by central banks will stare at the credibility of the
point to ensure that the medium-term inflation rate independent conduct of IT-based monetary policy.
neither exceeded nor remained below this symmetric Third, communication – a much feted aspect of IT –
threshold10; (iii) New Zealand including maximum has run into asymmetry complications underneath
sustainable employment as an additional objective the radar of the reviews. What seemed fashionable
effective from 2019 but reverting to solely targeting and comforting in the context of easing monetary
price stability in December 2023; (iv) Japan exiting policy appears confusing and even blasé on the way
its negative interest rate policy and discontinuing up.
quantitative and qualitative monetary easing (QQE) III. Innovations
along with yield curve control (YCC) in March 202411;
The post-pandemic experience has been similar
and (vi) Thailand, Brazil and Indonesia lowering
in some respects across inflation targeting AEs and
targets/target ranges.
EMEs. The fight against the deep contraction and
What the reviews did not reveal is also interesting financial stability risks brought on by the pandemic
because of more recent developments. For instance, triggered unprecedentedly forceful responses from
even while formal IT frameworks enabled central both. Interest rates were taken down to historical
lows. Balance sheets of central banks were expanded
9 Adrian, T. (2021). Review of Monetary Policy Frameworks. Remarks at
Central Banking Magazine’s, Reserve Management Americas Workshop,
to distended dimensions; and communication was
March 16. reimagined in an effort to restore petrified confidence.
10Benigno P., Canofari, P., Dibartolomeo, G. and Messori, M. (2021).
Likewise, the global outbreak of inflation following
The Implementation and Rationale of the ECB›s New Inflation Target.
Monetary Dialogue Papers, European Parliament, November. the war in Ukraine drew forth from both among the
11 Kazuo, U. (2024). On the Recent Changes in the Bank of Japan›s most aggressive tightening of monetary policy in the
Monetary Policy Framework. Remarks at the Peterson Institute for
International Economics, April 19. history of each once it was realised that the inflation

120 RBI Bulletin October 2024

Assessing Inflation Targeting SPEECH

was pernicious and there to stay. The mornings after Macro prudential policies are designed to address
were, however, somewhat different - while AEs faced side effects and fallouts that slip through the cracks
banking and sovereign debt problems, EMEs had to of FX interventions. If they are not fully sterilised,
deal with spillovers from AEs and wild swings in fluctuations in capital flows and exchange rates can
financial asset prices, especially exchange rates. These cause overheated credit expansions, rising leverage
discrete experiences have brought forth innovations and amplified financial cycles. Macro prudential
in the practice of inflation targeting that have been measures temper the build-up of these financial
conditioned by distinct and different realities. imbalances, enhance resilience in the face of rising
stress, dampen oscillations of financial cycles and
In the case of AEs, an attractive innovation is the
reduce the likelihood of financial crises.
concept of averaging inflation targets propounded
by the US Fed. Scarred by the severe constriction of Both FX interventions and macro prudential
policy space at the zero interest rate bound or going policies are intended as complementary tools that
even lower, its new make-up strategy allows the Fed expand the room for manoeuvre for inflation targeting
to let inflation run moderately above target following monetary policy. The experience of EMEs illustrates
a period when it has persistently fallen below the how forex interventions and the deployment of
target. The promise of higher inflation in the future macroprudential tools can help improve the trade-off

lowers real interest rates even when the policy rate between price and financial stability12. In the context
of AE and EME inflation targeters, therefore, different
is pinned at zero, thus boosting output and inflation
strokes for different folks.
today.
IV. IT – The Indian Experience
In the case of EMEs, the adoption of IT has
undoubtedly strengthened their monetary policy India was a relatively late entrant to the IT
frameworks as evident in the greater external and club ; this enabled cherry picking the best of country
13

financial stability they now enjoy than in past experiences. India’s flexible inflation targeting (FIT)
decades in spite of amplified spillovers from AEs framework is centred around an inflation target set
and larger destabilising effects. This bonus has at 4 per cent with a tolerance band of +/– 2 per cent
largely accrued from following assignment rules around it. The target is medium-term in nature, initially
committing monetary policy to price stability, while set for a five-year period (2016-21) and renewed by the
dealing with capital flows and exchange rate volatility government for another five years (2021-26). The ‘F’
with foreign exchange (FX) interventions and macro in India’s FIT consists of (i) a mandate that accords
prudential measures. FX Interventions, supported primacy to price stability while being cognisant of
by accumulation of foreign exchange reserves, have growth; (ii) an inflation target defined in averages
squelched volatility by leaning against the tsunamis rather than as a point; (iii) achievement of the target
unleashed by AE monetary policies. In a world in over a period of time rather than continuously; (iv) a
which a global financial safety net is non-existent or tolerance band to accommodate measurement issues,

inadequate, spillovers are global but financial stability forecast errors and supply shocks; and (v) failure to

is national. In this environment, the benefits of this 12BIS (2024). Monetary Policy in the 21st Century: Lessons Learned and
Challenges Ahead. Annual Economic Report, June 30.
risk minimisation strategy overwhelmingly outweigh 13The framework was formally adopted in 2016, but the pre-conditions
costs of holding large reserves. and glidepath were put in place from February 2015.

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SPEECH Assessing Inflation Targeting

achieve the target being defined as three consecutive a decline in productive capacity which can translate
quarters of deviation of inflation from the tolerance to inflation volatility. Demand shocks can also arise
band, rather than every deviation from the target14. due to the loss of wealth of firms and households
During the pre-pandemic period upto end-2019, on account of frequent natural disasters. Physical
inflation was low and stable, averaging around 4 and transition risks can affect the balance sheets of
per cent. With the outbreak of the pandemic and financial institutions and banks, limiting the flow of
associated lockdowns, inflation breached the upper credit to the real economy. Climate induced uncertainty
tolerance band in many months during 2020–21 can make households save more for precautionary
and 2021-22. Following the Russia-Ukraine conflict, purposes, bringing down the real equilibrium interest
inflation again veered away from its target under the rate. There are also several channels through which
impact of multiple and overlapping food and energy climate change can affect monetary transmission.
shocks. By April 2022, it reached a peak of 7.8 per cent. For instance, depreciation pressures on currencies
The monetary policy response was front-loaded with a of countries frequently affected by climate disasters
cumulative hike of 250 bps during May 2022-February can cause financial instability, higher import costs
2023. In July and August 2024, inflation has fallen as well as negative terms of trade all of which have
below the target. It is projected to average 4.5 per cent implications for the mandate of inflation targeting
in 2024-25 before aligning with the target on a durable central banks. Already, several central banks,
basis in 2025-26. including the RBI, have started taking steps to put in
place guardrails, including incentives for bank lending
The Indian experience is unique in view of the
for green energy sources; measuring and managing
incidence of repetitive shocks to food and fuel prices,
climate-related risks, including through stress testing;
which challenged the conduct of monetary policy.
developing appropriate ecosystems for green bonds,
In India, price stability is a shared responsibility
collateral policies and green deposits; funds-supplying
under which the government sets the target, and
operations to support financing for climate change
the central bank achieves it. This allows monetary-
responses; and differentiated reserve requirements.
fiscal coordination without posing risks to financial
The consensus is hence coalescing to the position
stability, fiscal consolidation or growth15 - perhaps
that central banks are uniquely placed to address
a template for countries vulnerable to inflationary
climate change. The challenge is to incorporate it into
pressures emanating from supply shocks.
inflation targeting frameworks.
V. New Vistas
Innovations in payment systems, fintech, and
In the years ahead, the conduct of IT-based central bank digital currencies can also change
monetary policy may face even greater challenges. the nature of policy trade-offs facing IT in the
Central banks face an existential threat to their future.16 Digitalisation can directly lower inflation
central mandates from climate change through supply rates through a decline in the prices of information
shocks such as food and energy shortages and through and communication technology (ICT)-related goods.
14 Digital technologies can also influence inflation
Patra, M. D. (2021): “Monetary Policy: Trial by Pandemic,” RBI Bulletin,
October. indirectly through changes in firms’ price-setting
15 Patra, M.D., and Bhoi, B. B (2024). Quelling the Post-pandemic Inflation
Surge: The Indian Experience. Chapter 10 in the book Monetary Policy 16 Allen, F., Kim, J. H. and Walther, A. (2024). Inflation Targeting and
Responses to the Post-Pandemic Inflation edited by Bill English, Kristin Financial Stability. Paper presented at the conference on “The Quest for
Forbes and Ángel Ubide, Centre for Economic and Policy Research (CEPR), Nominal Stability: Lessons from Three Decades with Inflation Targeting”
February. held at the Sveriges Riksbank, May 23-24.

122 RBI Bulletin October 2024

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behaviour and market dynamics, with competition transmission could be dampened if digitalisation
enabled by e-commerce. Dynamic pricing of goods leads to shifting of credit supply from banks to less-
and services becomes possible, making prices more regulated/unregulated nonbanks20 or by offsetting
responsive to economic changes by reducing menu reductions in bank deposits.21
costs, improving access to information and enhancing
To conclude,
price update flexibility17. By reducing price stickiness,
these developments can potentially make the Phillips While formulating monetary policy, it is considered
curve steeper, enhancing the efficacy of monetary good housekeeping to evaluate the balance of risks.
policy in securing price stability . On the other 18
From this perspective, IT policy frameworks of the
hand, algorithmic pricing strategies in the digital future need to be more robust, realistic and nimble,
realm may result in prices settling above competitive while exploiting synergies with prudential, fiscal and
levels. Additionally, the large initial investment in
structural policies22 and leveraging on technological
digital technologies, coupled with lower scaling costs,
transformations. Adaptability and flexibility built
can lead to a higher level of market concentration,
into the framework would ensure that the central
higher mark-ups and profit margins, and consequent
bank would be able to nudge the economy towards
inflation pressures.
desirable societal outcomes. The so-called Darwinian
Digitalisation can improve access to financial
principle of ‘Natural Selection’ is not Darwinian at all.
services and enhance financial inclusion, thereby
It is actually attributable to Herbert Spencer. In my
improving the transmission of interest rate-based
view, Herbert Spencer best describes the future of IT
monetary policy19. Financial digitalisation tends to
– the survival of the fittest.
amplify the effects of monetary policy by loosening
credit constraints. On the other hand, monetary policy Thank you

20 Buchak, G., Matvos, G., Piskorski, T., and Seru, A. (2018). FinTech,
17Glocker, C., and Piribauer, P. (2021). Digitalization, Retail Trade and Regulatory Arbitrage, and the Rise of Shadow Banks. Journal of Financial
Monetary Policy. Journal of International Money and Finance, 112, 102340. Economics, 130(3), 453-483; Elliott, D., Meisenzahl, R., Peydró, J.L., and
18 Ari, M. A., Garcia-Macia, M. D., and Mishra, S. (2023). Has the Phillips Turner, B. C. (2022). Nonbanks, Banks, and Monetary Policy: US Loan-Level
Curve Become Steeper? IMF Working Paper No. 2023/100; Friedrich, C., Evidence since the 1990s. Federal Reserve Bank of Chicago Working Paper,
and Selcuk, P. (2022). The Impact of Globalization and Digitalization on the No. WP 2022-27, June; Chen, K., Ren, J., and Zha, T. (2018). The Nexus
Phillips Curve. Bank of Canada Staff Working Paper No. 2022-7. of Monetary Policy and Shadow Banking in China. American Economic
19 Review, 108(12):3891–3936.
Patra, M.D. (2021). Financial Inclusion Empowers Monetary Policy.
21Xiao, K. (2020). Monetary Transmission Through Shadow Banks. The
Address Delivered in the Project on Financial Inclusion, a Joint
Initiative by the IIMA, IRMA and CIIE organised by the IIM, Ahmedabad, Review of Financial Studies, 33(6):2379–2420.
December 24. 22 BIS (2024), op. cit.

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Central Banks and Financial Stability SPEECH

Central Banks and Financial In today’s world, challenges are more complex
and unpredictable than ever. Traditional risks, like
Stability* credit and liquidity risks, now have new and faster
drivers. For example, bank runs that once unfolded
Shri Swaminathan J.
over days, giving regulators time to respond, can
now occur within hours due to the speed of internet
Distinguished panellists - Prof. Randall S.
and mobile banking. The increasing reliance on
Kroszner, Professor, University of Chicago and Former
Governor, Federal Reserve Board; Ms. Emmanuelle technology also introduces vulnerabilities, such as
Assouan, Director General, Financial Stability and dependence on third-party service providers and
Operations, Banque de France; Ms. Sarah Breeden, heightened cybersecurity threats, all while customers
Deputy Governor for Financial Stability, Bank of expect uninterrupted services. Additionally, we face
England; Dr. Sajjid Chinoy, Managing Director and emerging risks, such as climate risk.
Chief Economist India, JP Morgan; esteemed delegates In this increasingly volatile environment,
and colleagues from the Reserve Bank. A very good building resilience is crucial to maintaining financial
afternoon to all of you. stability. However, resilience is a balancing act—too
It is an honour to open this discussion on this much emphasis on safeguarding can stifle innovation
very important and pertinent topic in today’s financial and growth, while too little can expose the system to
world - “Central Banks and Financial Stability: significant vulnerabilities. Finding that right balance
Assessing Risks and Building Resilience.” so that we can have a robust financial system that
The financial sector is the backbone of the can weather crises without constraining economic
economy, enabling efficient allocation of resources, progress is one of the key challenges that we face
managing risks through various instruments, and today.
ensuring smooth payments and settlements. It Indeed, central banks are much like wicketkeepers
performs crucial functions that support investments in cricket or goalkeepers in football—often unnoticed
and drives economic growth. Therefore, the financial in success but always in the spotlight during failure.
sector becomes the cornerstone of a well-functioning
When everything works seamlessly, their efforts
economy.
remain behind the scenes, often taken for granted.
The financial sector is vulnerable to risks— However, when a crisis occurs, they are asked as to
especially systemic ones that, which if left unchecked, how they could allow the ball to slip through their
can have far-reaching consequences. As you are aware fingers! In addition, Central Bankers are also tasked
these systemic risks manifest across two dimensions: with preventing further damage and restoring stability
time and interconnectedness. On the one hand, quickly.
financial risks can build up over time, especially
Let me offer an analogy: imagine a person teetering
in periods of economic euphoria. On the other,
the growing interconnections between financial on the edge of a cliff, seemingly about to fall, only to be
institutions, markets, and the broader economy make pulled back just in time by a watchful observer. When
the system more open to shocks. central banks intervene in such a manner to prevent
a potential crisis, those they protect may claim they
* Address by Shri Swaminathan J, Deputy Governor, Reserve Bank of
India at the RBI@90 High Level Conference on “Central banking at Cross
didn’t need saving at all. This highlights a common
Roads” in New Delhi on October 14, 2024 paradox—while regulators work tirelessly to maintain

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SPEECH Central Banks and Financial Stability

stability and avert disasters, their successes often go industry through regular engagements/ interactions
unnoticed, and their actions are sometimes viewed as including conferences with the Boards of supervised
unnecessary, intrusive or excessive by those unaware entities, periodic meetings with the MDs & CEOs,
of the risks. Yet it is precisely this proactive oversight Heads of Assurance functions as well as interactions
that ensures the safety and soundness of the financial with auditors.
system, allowing it to function smoothly even in times Having discussed the importance of domestic
of uncertainty. coordination, I would also like to emphasise the
Over the years, the role of central banks has significance of global supervisory cooperation.
significantly evolved. Initially seen as the lender of Historically, crises have acted as catalysts for bringing
last resort, today, central banks are equipped with a supervisors together to address shared challenges. For
broad range of tools—regulatory, supervisory, and instance, the Basel Committee on Banking Supervision
monetary—to ensure the stability of the financial was formed in the aftermath of the Herstatt Bank
system. In some countries, central banks do not have failure, highlighting the necessity for a coordinated
supervisory roles, with the supervision being carried response to systemic risks. However, we should
out by a separate agency, but a coordinated approach not wait for crises to play out before strengthening
is essential. Governments, central banks, financial international collaboration. Greater engagement for
regulators, and the industry must all work together proactive horizon scanning of potential risks and
to ensure appropriate and timely action is taken to vulnerabilities, along with discussions on strategies
safeguard financial stability. to mitigate and address these challenges, can enhance
our collective resilience and crisis preparedness.
In India, the Financial Stability and Development
Council (FSDC), chaired by the Union Finance Indeed, as a part of our agenda for the next
Minister, along with its sub-committee led by the decade, RBI@100, the Reserve Bank intends to engage
Governor of the Reserve Bank, has been effectively more with the central banks of the global south. The
facilitating discussions and enhanced understanding Reserve Bank also aims to establish a global model
of risks across the financial sector. Biannually, of risk-focused supervision by fostering a strong risk
Reserve Bank publishes Financial Stability Reports discovery and compliance culture, building a “through-
that deliver a thorough risk assessment of India’s the-cycle” risk assessment framework. Reserve Bank
financial landscape. These reports utilise macro stress is working to create a comprehensive data analytics
tests, sensitivity analyses, network and contagion ecosystem to support its supervisory functions.
assessments, and systemic risk surveys to provide With these thoughts in mind, I look forward to a
valuable insights into potential vulnerabilities that rich and insightful panel discussion on how central
affect the financial sector. Apart from inter-regulatory banks can continue to enhance financial stability and
coordination, RBI also actively engages with the build a resilient global financial system. Thank you!

126 RBI Bulletin October 2024

Governance in SFBs - Driving Sustainable Growth and Stability SPEECH

Governance in SFBs - Driving sustainable growth, and (iii) important considerations

regarding business models and risks that Boards
Sustainable Growth and Stability* should be mindful of.

Shri Swaminathan J. Important Financial Inclusion Objective of SFBs

As you are aware, the licensing of Small Finance
Chairpersons and Directors of the Boards of Small Banks was introduced a decade ago, in 2014, with the
Finance Banks; Chief Executive Officers of SFBs; primary objective of advancing financial inclusion.
Executive Directors, Chief General Managers and Beyond serving as a vehicle to mobilise savings, SFBs
colleagues from the Reserve Bank of India; ladies and were also envisioned to extend affordable credit to
gentlemen. A very good morning to all of you. underserved and unorganised sectors, such as small
It is an honour to address this distinguished and marginal farmers as well as small business units,
gathering in the inaugural conference of Board of by leveraging technology to reduce costs and improve
Directors of Small Finance Banks organised by the accessibility.
RBI. As has been mentioned, this conference is in India, today, stands at a pivotal moment in her
continuation of the Reserve Bank’s efforts to reach development trajectory. In the last 75 years, we have
out to its supervised entities through a direct dialogue transformed ourselves from an agrarian economy
with their Boards and Top Management. Our objective into one driven by industry and services. However,
is to reaffirm the importance of good governance translating our GDP into higher per capita Gross
for maintaining financial stability and fostering National Income comparable to developed economies
sustainable growth. will require a comprehensive approach towards
In his address1 to the Directors of Public and inclusive and sustainable economic growth. This
Private Sector Banks last year, the Governor outlined will inter-alia entail education, skill development,
a comprehensive 10-point charter that addressed key employment generation, and more pertinently further
aspects such as the role of the Board, its independence, deepening of financial inclusion. Thus, the goal for
the importance of setting the tone from the top, small finance banks is not ‘small’. On the contrary,
etc. His speech serves as an excellent blueprint for it is very significant, as SFBs play a crucial role in
regulatory expectations from the Boards of Directors, extending financial services to the underserved,
and I encourage you to review it if you haven’t already. fostering entrepreneurship, and driving inclusive
growth that will be essential for India’s progress
Today, I would like to discuss three key issues
towards becoming a high-income economy.
with you: (i) the vital role of Small Finance Banks in
promoting financial inclusion, (ii) the necessity of In a developing country like India, it is imperative
strengthening governance and assurance functions for for the financial sector, including small finance banks
to strike a balance between profitability and social
* Keynote Address by Shri Swaminathan J, Deputy Governor Reserve
Bank of India at the Conference of Directors of Small Finance Banks in
objectives. This can be achieved through a strategic
Bengaluru on September 27, 2024. focus on sectors that deliver high social impact,
1 ‘Governance in Banks: Driving Sustainable Growth and Stability’,
ensuring that financial growth is aligned with the
Inaugural Address by Shri Shaktikanta Das, Governor at the Conference
of Directors of Banks organised by the Reserve Bank of India for Public broader goal of inclusive development. It is therefore
Sector Banks on May 22, 2023 in New Delhi and Private Sector Banks on
May 29, 2023 in Mumbai. https://www.rbi.org.in/Scripts/BS_SpeechesView. essential for SFBs to actively participate in extending
aspx?Id=1364 credit under various Government Sponsored Schemes

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SPEECH Governance in SFBs - Driving Sustainable Growth and Stability

to promote greater accessibility of affordable credit, management accountable for executing the bank’s
especially among the vulnerable sections of the strategy within the agreed risk appetite.
society. In this context, it is imperative that the views of
As the target group of such lending is mostly the the Board are clearly articulated and documented in the
marginalised and underserved sections of the society, minutes of the meetings of the Board and its various
it is essential for the SFBs to adopt responsible lending sub-committees. It is said that the ‘palest ink is better
practices. It is disheartening to come across egregious than the best memory’. Proper documentation serves
practices by some SFBs, such as charging excessive as a vital record of the Board’s deliberations, decisions,
interest rates, collecting instalments in advance as and rationale behind those decisions, ensuring
well as not adjusting such advance collections against transparency and accountability in governance. Clear
loan outstanding, levying of usurious fees, etc. It is minutes not only provide a historical account of the
also observed that grievance redressal mechanism is Board’s discussions but also serve as a reference
far from adequate in most SFBs. for future decision-making, helping to maintain
continuity and clarity in governance practices.
I therefore feel that periodically reviewing
how your bank is fulfilling its financial inclusion Boards should prioritise proper succession
objectives is an area that Boards should give much planning for top management. Having just one
deeper consideration to. It is not just about meeting Whole Time Director (WTD) can create potential
regulatory requirements such as priority sector vulnerabilities, especially in times of transition or
lending but also about assessing the true impact of unforeseen circumstances. Without a well-thought-
your efforts on underserved communities. Boards out succession plan, the bank may face leadership
can reflect on whether the bank is genuinely reaching gaps that could disrupt operations and affect strategic
marginalised groups, such as low-income households, decision-making. A broader pool of experienced
small businesses, and rural populations, and how leaders also contributes to better governance and
effectively it is using technology and innovative more resilient management structures. We observe
products to bridge financial gaps, as these were the that while the SFBs are strengthening their Boards by
objectives of having a differentiated licensing for SFBs. bringing in new directors, some SFBs are yet to ensure
the presence of at least two Whole Time Directors. I
Strengthening Governance
would request these banks to expeditiously consider
An effective governance framework is the appointing more WTDs.
foundation of resilient and well managed institutions,
Empowering Assurance Functions
especially in the context of banks. There needs to be
a clear division of responsibilities between the Board Boards should accord due importance to assurance
and the management to ensure smooth functioning functions, namely, risk management, compliance and
of the bank. While the Board is responsible for setting internal audit. These functions play a critical role in
the overall strategic direction, establishing policies, identifying and mitigating risks, ensuring compliance
and ensuring that the bank adheres to regulatory with laws and regulations as well as safeguarding the
frameworks and ethical standards, the management organisation’s integrity.
is responsible for the execution of the Board’s strategy Boards should ensure that heads of assurance
and operations. It is the Board’s role to provide functions are positioned appropriately within the
oversight, asking the right questions and holding the organisational hierarchy and granted direct access

128 RBI Bulletin October 2024

Governance in SFBs - Driving Sustainable Growth and Stability SPEECH

to the Board. Dual-hatting, or combining assurance is an underlying correlation risk that becomes more
responsibilities with operational or management pronounced during economic downturns. In such
duties, undermines the independence and objectivity scenarios, the credit profile of a large segment of
of assurance functions by creating conflicts of interest. borrowers can be significantly impacted, leading to
Therefore, any dual hatting of assurance functions, higher default rates. This highlights the importance of
should be avoided. rigorous underwriting processes that carefully assess
the creditworthiness of borrowers, rather than relying
Key Risks to Reflect Upon
solely on automated systems or algorithms. Effective
Small Finance Banks have demonstrated strong underwriting should consider a comprehensive range
growth since their inception, now accounting for 1.18 of factors, including income stability, credit history,
percent of total banking assets (as of March 2024). and the overall economic environment, to ensure that
This is a substantial rise from 0.44 percent in March loans are made judiciously.
2018. The deposit base has grown at a 32 per cent
compounded annual growth rate (CAGR) over the Further, while digital lending solutions have
last five years whereas net advances recorded a CAGR streamlined the process and made access to credit
of 26 per cent. While the business growth in Small easier, on-the-ground presence for collections remains
Finance Banks is indeed impressive, it is imperative crucial. Resorting to coercive recovery practices as a
that Boards remain vigilant for hidden and emerging means of mitigating risk is not a sustainable solution.
risks that could jeopardise their long-term success. Such practices not only harm the bank’s reputation but
can also lead to legal and regulatory repercussions. A
In this context, I would like to highlight a few better approach is to implement collection strategies
areas that Boards could keep in mind. that prioritise communication and collaboration with
Business Model borrowers. This includes strictly adhering to fair
practices code and adopting an empathetic approach
Firstly, I would urge Boards to consider the
while dealing with stressed loan book.
sustainability of their growth strategies and business
models by conducting a thorough review of both Cyber-security Risk and Third-party Dependencies
the liability and asset sides of the balance sheet. Thirdly, I would like to address the issue of cyber
Specifically, they should assess whether there is an security and IT vulnerabilities. Being relatively new
overdependence on high-cost term deposits or bulk entities, SFBs have used technology to enhance their
deposits from a limited number of institutions. product offerings and customer service. However,
Additionally, they should evaluate any substantial with their increasing digital footprint, these banks
asset exposures that could adversely impact the bank face significant operational risks from growing cyber
if they were to sour. These are essential aspects that
threats, digital frauds, and possible data breaches.
the Board and its Risk Management Committee must
scrutinise to ensure long-term stability and resilience. The cyber security landscape is evolving rapidly,
and SFBs must stay ahead of emerging threats
Credit Risks
to protect their customers’ data and maintain
Secondly, I would like to emphasise proper operational resilience. The SFBs should adopt robust
credit risk underwriting. While many banks have business continuity plans and effective IT outsourcing
expanded into unsecured retail lending, hoping to strategies. There is also a need to ensure rigorous
leverage the diversification benefits it offers, there change management processes, comprehensive

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SPEECH Governance in SFBs - Driving Sustainable Growth and Stability

data protection measures, vigilant transaction all levels. Further, the absence of succession planning
monitoring, stringent access controls and network for critical managerial positions is a common issue
security protocols. These measures will help SFBs across SFBs, which requires immediate attention from
to significantly enhance their IT resilience against Boards to ensure a smooth transition of leadership
possible disruptions. and maintain operational effectiveness.

Operational Risk Conclusion

Fourthly, while I have covered cybersecurity In conclusion, SFBs with their outreach to rural
threats, I would also like boards of SFBs to be mindful and semi-urban areas, are intended to be one of the
of the larger issue of operational risks. During periods key enablers in credit offerings to individuals, weaker
of rapid growth, the focus on increasing market share, sections, entrepreneurs, SHGs/JLGs and MSMEs. They
launching new products, and acquiring customers have a large role to play in achieving our aspirational
can lead to a neglect of essential risk management goal of becoming a developed nation by 2047.
practices. For example, hastily onboarding new As RBI celebrates 90 years of its foundation this
customers without thorough KYC due diligence or year, we have set deepening financial inclusion as
rushing the deployment of technology solutions one of our cherished objectives for RBI@100. RBI,
without adequate testing can increase the likelihood with its continued commitment towards a financially
of frauds, errors and service disruptions. Growth is inclusive India, has taken several measures to support
important for the success of Small Finance Banks. these segments ranging from Priority Sector Lending
However, it must not come by overlooking operational targets to the introduction of TReDS for MSMEs. A new
controls. chapter in this book is the Unified Lending Interface
(ULI) platform which aims at “enabling frictionless
Another significant area of concern for
credit” with the ‘new trinity’ of JAM-UPI-ULI, further
operational risk is the high attrition rate among
propelling India’s growth story.
staff in Small Finance Banks. While the branch
network and employee headcounts are expanding, SFBs should strive to harness this opportunity
and other such opportunities offered by latest
the sector faces a very high attrition rate of nearly
technological innovations for efficient and cost-
40 per cent, particularly among frontline staff and
effective service delivery. Further, with robust
junior management. Such elevated turnover, though
governance and effective board oversight, SFBs can
mostly at the entry and junior management levels,
capitalise on their strengths while meeting growth
poses substantial operational risks, as it can lead
and stability objectives.
to a loss of institutional knowledge, disruption in
service delivery, and increased training costs for new With this, I wish you all the best for the coming
hires. To mitigate these risks, Board-level efforts are sessions and hope that you find these sessions
essential to focus on employee retention strategies at professionally enriching and stimulating. Thank you!

130 RBI Bulletin October 2024

Reaching the Unreached – Ensuring Last Mile Connectivity of Banking Services SPEECH

Reaching the Unreached – seen tremendous progress. Ensuring that the benefits
of economic growth are shared by all segments of
Ensuring Last Mile Connectivity society, including marginalised groups has been
of Banking Services* the cornerstone of these initiatives. It has been a
multifaceted journey with significant achievements
Shri Swaminathan J. in terms of economic growth, poverty alleviation,
improvements in education and health care, etc.
Regional Director of RBI for Karnataka, Smt. In the relatively early days of this journey, the
Sonali Sen Gupta; Chief General Manager, NABARD, Lead Bank Scheme was institutionalised in 1969 and
Shri KVSSLV Prasada Rao; Chief General Manager, since then the Scheme has served as an important tool
Canara Bank and Convenor, SLBC Karnataka, Shri K.J. in enhancing credit flow to the sectors that have been
Shrikanth; Area Heads of Union Bank of India and Bank identified as national priority and to the underserved
of Baroda, senior executives from banks; Lead District population of the country, boosting economic growth
Managers (LDMs); District Development Managers at all levels, e.g., block level, district level and state
(DDMs); LDOs and other officers of RBI, present here. level.
Ellarigu Namaskara and a very good morning to all.
Over more than half a century since its inception,
Let me begin by complimenting Bengaluru the Scheme has evolved in line with the development
Regional Office of the Reserve Bank of India for agenda for the country. The Lead Bank Scheme relies
organising this conference with an apt theme - on a co-ordinated approach at all levels amongst
Reaching the Unreached – Ensuring Last Mile banks, financial institutions and the government
Connectivity of Banking Services. The theme reminds machinery for effective delivery of banking services
us that financial inclusion is an ongoing journey. to all sections of the economy. This co-ordinated
While significant progress has been made in this approach has yielded significant results in terms of
journey, there is still some distance to be traversed. expanding banking access and improvement in the
I must also thank the Bengaluru Regional Office for flow of priority sector credit.
selecting this place, Hubballi, for this conference, a More recently it has also led to the expansion of
place where I served as a young officer of State Bank digital payments with SLBCs taking the lead role in
of India, some thirty years ago – which brings back the objective of making every district in the country
lots of nostalgic memories of the basic banking that digitally enabled. I am happy to note that 354 districts
we used to do over three decades ago. are now digitally enabled. Ten states including
Karnataka and six Union Territories have achieved
India’s journey towards inclusive development
100 per cent coverage of districts under this initiative.
after independence has been marked by several
initiatives aimed at reducing poverty and improving Indeed, the Lead Bank Scheme can be a powerful
living standards. Measures like expanding access to tool to bring about transformative change. As LDMs,
essential services such as education, healthcare and DDMs and LDOs, you are the very pillars on which
sanitation, and creating productive employment this scheme rests, playing a crucial role in driving
opportunities for all sections of the population have financial inclusion at grassroots level. Your efforts
in extending banking services and credit access
* Keynote Address by Shri Swaminathan J, Deputy Governor Reserve
to underserved regions would undoubtedly bring
Bank of India at the Conference of Lead District Managers and District
Development Managers in Hubballi on September 20, 2024. immense satisfaction to all involved. Having served

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SPEECH Reaching the Unreached – Ensuring Last Mile Connectivity of Banking Services

as the Convenor for the SLBC in Telangana, I can inclusion, assess the credit needs of different sectors,
personally attest to the deep fulfilment that comes and design targeted strategies for intervention. It will
from making a tangible difference in people’s lives also help you to identify the root causes of the various
through the LBS fora. issues observed in your districts. By staying attuned
A common question we face is, are we doing to your districts, you can provide invaluable feedback
enough? How much more remains to be done? In to the SLBCs, enabling the formulation of targeted and
2021, the Reserve Bank introduced the Financial effective credit plans, and foster sustainable economic
Inclusion Index (FI-Index), which tracks progress growth and development.
across 97 indicators in three key dimensions: (i) Formulation of Targeted and Effective Credit Plans, a
Access (ii) Usage (iii) Quality. The Index which was at Bottom Up Approach
53.9 in March 2021 now stands at 64.2 for March 2024
Secondly, building upon your strong
as a testimony to the efforts that has been put in by
understanding of your district, the formulation,
all of you.
monitoring, and implementation of Credit Plans must
India has made significant strides in enhancing follow a granular bottom-up approach.
‘access’ to banking and financial services, reaching
The principal phase of credit planning is done by
even the most remote areas. However, there is still
DDMs by preparing the Potential Linked Credit Plans
considerable ground to cover in deepening financial
(PLPs) for all the districts in the State by mapping
inclusion. This requires greater focus on promoting
credit potential under Priority Sector Lending (PSL).
‘usage’ and improving the ‘quality’ of services. In both
The preparation of PLPs involves assessment of block-
these critical areas, the role of Lead District Managers
wise and sector-wise potential. LDMs conceptualise
from the banks and District Development Managers
the block credit plans at the grassroots level which
from NABARD is indispensable.
aggregate into district credit plans, ultimately
In this context, I would like to outline a few key converging to shape the comprehensive state-level
expectations. Annual Credit Plan. While doing so, target setting for
Know Your District Well credit disbursement needs to be aspirational while
being realistic. LDMs must take into account the scope
Firstly, it is imperative that you cultivate a deep
for lending indicated in the Potential Linked Plan
understanding of your respective districts—so, you
as well as the past record of achievement in credit
should truly ‘Know Your Districts’ well. This knowledge
disbursement while formalising the credit plans for
will form a solid foundation for comprehensive
the blocks and districts under their charge.
district profiles, covering a wide range of critical data.
Such profiles could include detailed demographic Address the Gaps
information, agricultural trends, banking penetration Thirdly, we need to address the remaining
and activities, industrial profiles, and the various gaps. Although credit delivery to priority sectors has
performance metrics under the Annual Credit Plans progressed over time, there is still significant work
(ACP). to be done especially with regard to Micro, Small and
Knowing your districts well, you can leverage upon Medium Enterprises. Similarly, nearly half of Self-
data analytics and field surveys to gain insights into Help Groups (SHGs) are yet to be linked to formal
economic activities, local credit needs, and barriers credit, and a large proportion of small and marginal
to credit access. A holistic understanding of your farmers still lack access to bank financing. Therefore,
district will enable you to identify gaps in financial we must factor in the credit requirements of these

132 RBI Bulletin October 2024

Reaching the Unreached – Ensuring Last Mile Connectivity of Banking Services SPEECH

segments in PLPs as well as in block and district-level schemes, which will cover their risks or loan products
credit strategies. with significant subsidies that will enable them to
MSMEs are crucial to India realising her undertake productive economic activities. A special
demographic dividend. One of the key requirements focus needs to be given to Digital Financial Literacy
in this regard is increasing the female labour for improving public confidence in undertaking
participation rate. Various studies1 have shown that digital transactions. This will enable banks to explore
businesses with at least one women founder have a avenues for wider adoption of fintech, to provide
more inclusive work culture, employ more women seamless and frictionless credit.
than men and generate more revenue. However, less At the block level, financial literacy is being
than 20 per cent of MSMEs are owned by women. promoted through Centres for Financial Literacy
Women entrepreneurs often encounter major hurdles, (CFLs), established by NGOs with funding support
such as limited access to funding, societal barriers, from the RBI, NABARD, and banks. The reach of CFLs
and challenges in obtaining affordable finance. has expanded significantly, with 2,421 CFLs now
It is therefore crucial to bridge the gender operating across almost every block in the country. In
gap. At the district level, this can be addressed by Karnataka alone, 79 CFLs and 177 Financial Literacy
offering support to women-led enterprises through Centres (FLCs) are spreading awareness of financial
government-sponsored programmes and tailored products at the grassroots level. LDMs must play
banking schemes for women-owned businesses. a crucial role in ensuring that FLCs perform their
Additionally, efforts must be made to raise awareness functions effectively, supporting CFLs, participating
among potential women entrepreneurs about these in CFL camps, and facilitating the linkage of financial
opportunities and provide them with necessary services while overseeing the proper conduct of these
guidance and support. camps.
Financial Literacy In conclusion, I encourage you to give your best,
Fourthly, we need to bolster financial literacy. set exemplary standards, and become pioneers in
Strengthening the supply-side is crucial, but holistic developmental activities, ensuring continued progress
financial inclusion also necessitates demand-side of your districts and the State of Karnataka.
initiatives. Financial literacy stands as a fundamental As you may be aware, the Reserve Bank of India
building block. It is not just about access, it is about is celebrating 90 years of its foundation this year.
empowering individuals to make informed choices. Looking ahead to the next decade, our journey towards
Financial literacy is the ability of people to understand RBI@100, we have formulated strategies aimed at
and effectively use various financial skills, including positioning the Reserve Bank as a model central
personal financial management, budgeting, and bank of the Global South. One of our key objectives
investing. is to deepen financial inclusion by enhancing the
Members of public should be made aware of Accessibility, Availability, and Quality of financial
various financial products available to them, be it services for all segments of society. I urge each of
social security products such as insurance and pension you to actively support us in realizing this vision by
1
contributing to inclusive growth, ensuring that no
Jaitly, S., Thangallapally, L. S., & MicroSave. (2022). Decoding Government
support to women entrepreneurs in India. In NITI Aayog, www.microsave. one is left behind in accessing essential financial
net [Report]. https://www.niti.gov.in/sites/default/files/2023-03/Decoding-
services, and fostering economic empowerment at the
Government-Support-to-Women-Entrepreneurs-in-India.pdf (last accessed
on September 16, 2024) grassroots level.

RBI Bulletin October 2024 133

SPEECH Reaching the Unreached – Ensuring Last Mile Connectivity of Banking Services

I would like to leave you with a quote from Yavudoo alla vyartha
Rashtrakavi Kuvempu (an extract from his epic work Nothing is useless
“Malegaḷalli madumagaḷu”):
ನೀರೆಲ್ಲವೂ ತೀರ್ಥ!
ಇಲ್ಲಿಯಾರೂ ಮುಖ್ಯರಲ್ಲ Neerellevoo theertha!
Illi yaaroo mukhyaralla All the water is holy!
No one is precious here In the context of today’s gathering, it would
ಯಾರೂ ಅಮುಖ್ಯರಲ್ಲ mean: All groups of people are equally important and
Yaroo amukhyaralla should be financially included; every effort taken for
No one is unimportant here financial inclusion is meaningful and nothing goes
wasted.
ಇಲ್ಲಿ ಎಲ್ಲಕ್ಕೂ ಇದೆ ಅರ್ಥ
Illi ellakkoo ide artha With this I would like to end with my best wishes
Everything has significance here to each one of you.
ಯಾವುದೂ ಅಲ್ಲ ವ್ಯರ್ಥ Thank you!

134 RBI Bulletin October 2024

ARTICLES

State of the Economy

Monetary Policy Transmission in India: The Recent Experience

Nowcasting Food Inflation in India: Leveraging Price and

Non-Price Signals through Machine Learning

How Indian Banks are Adopting Artificial Intelligence?

COVID-19 and Performance of MSME Clusters in India

Cash Usage Indicator for India

New Digital Economy and the Paradox of Productivity

State of the Economy ARTICLE

State of the Economy* accomplished in the fight against inflation; guarding

against adverse spillovers from Europe and China;
exceptionally high real interest rates at the starting
The global economy remained resilient in H1:2024,
point; and insurance with which to navigate the
with declining inflation supporting household spending.
reality of a highly uncertain landscape3, especially
Stable growth momentum amidst monetary policy easing
as monetary policy is transmitted with long and
is becoming the prevailing theme across most economies.
variable lags. The conjecturing is understandable.
In spite of geopolitical tensions, India’s growth outlook
Large opening rate cuts are distress signal to
is supported by robust domestic engines. Some high
markets, warning that the economy is in dire shape.
frequency indicators have, however, shown a slackening
The FOMC’s action took place, however, against the
of momentum in the second quarter of 2024-25 partly
backdrop of a robust economy as evident in revisions
attributable to idiosyncratic factors like unusually heavy
in estimates of GDP for the second quarter of 2024
rains in August and September. Looking ahead, private
and also for the preceding quarter. Many believe that
investment is showing some encouraging signs in terms
the FOMC is singed by criticism about its delayed
of lead indicators while consumption spending is shaping
rate hikes and, therefore, wants to be ahead of the
up for a festival season revival. After remaining below
curve in this phase of rate actions. The US rate
target for two consecutive months, inflation surged
move provides a cue for other central banks among
in September, as an adverse statistical base effect was
advanced economies (AEs), including the holdouts,
compounded by a resurgence in food price momentum.
and especially those that have succeeded in bringing
Introduction inflation to target and hence have the elbow room
to support their weak economies. Yet, even as
As they approached October – a month of
monetary easing is becoming the prevailing theme,
symphony of permanence and change1 − central
some countries are likely to see tightening instead −
banks in systemically important economies assumed
Japan; Brazil; and Russia.
the driver’s seat to steer the global economy with
shock and awe. Their specific actions are set out On the other side of the world, China gave up its
in Section II. As regards the unusually aggressive drip-feeding support to its economy and unleashed
start of the rate-cutting cycle by the US Federal a fusillade of stimulus measures to put a floor
Open Market Committee (FOMC), speculations on underneath its ailing economy, including property
the motive range widely: the economy is “in a good and stock markets. The response followed a torrent
place” with “growing confidence that the strength of warning signs: shrinking tax revenue; falling
in the labour market can be maintained”2; mission prices of homes and industrial goods; slowing retail
sales; depressed consumer confidence; and weak
* This article has been prepared by Michael Debabrata Patra, G. V. industrial output and investment. The measures
Nadhanael, Arpita Agarwal, Rajni Dahiya, Garima Wahi, Yamini Jhamb,
Harendra Behera, K M Neelima, Vrinda Gupta, Sakshi Chauhan, Madhuresh electrified financial markets. Equity prices fell across
Kumar, Aayushi Khandelwal, Debapriya Saha, Ragini, Suganthi D, Pratibha
Kedia, Ayan Paul, Agamani Saha, Ayushi Agarwal, Dilpreet Sharma, Khushi
the world as the stock markets in Shanghai and Hong
Sinha, Avnish Kumar, Nikhil Prakash Kose, Supriyo Mondal, Yuvraj Kong notched up their biggest gains in four years.
Kashyap, Sakshi Awasthy, Asish Thomas George, Samir Ranjan Behera,
Vineet Kumar Srivastava, and Rekha Misra. Views expressed in this article Across Asia, currencies tumbled and the yuan rose
are those of the authors and do not represent the views of the Reserve as capital flows rotated and surged into China. It
Bank of India.
1 Bonaro W. Overstreet, American author, poet, psychologist and remains to be seen how much further the Chinese
columnist in the Washington Post.
2 “Economic Outlook”, Speech by Jerome Powell, Chair of the Federal 3 Mohamed El-Erian, The Fed Takes out an Insurance Policy on Rates,
Reserve of the United States, September 30, 2024. Financial Times, October 1, 2024.

RBI Bulletin October 2024 135

ARTICLE State of the Economy

authorities will go to solve the long festering real relative to wages are still higher”.4 Key near term
estate crisis, the ageing and shrinking workforce, risks include persisting global and trade tensions;
industrial overcapacity, trade tensions and severely the possibility of a growth slowdown as labour
strained local government finances. market pressures fade; and potential disruptions
in financial markets if disinflation stalls. Overall,
In its latest economic outlook, the Organisation
the OECD is of the view that the global economy is
for Economic Cooperation and Development (OECD)
‘turning the corner’.
assessed that the global economy remained resilient
in the first half of 2024, with declining inflation The large interest rate cut in the US is likely to
supporting household spending. High frequency ease pressure on indebted EMEs and fire up demand
indicators suggest stable growth momentum across for local currency bonds. Several of their central
most economies. Business surveys point to stronger banks have lowered their own policy rates or provided
activity in services than in manufacturing. Surveys dovish forward guidance, anticipating the reduction
also indicate that subdued consumer confidence is in US interest rates. The anticipated support to EME
improving in Europe as well as in several emerging fixed income assets appears to be favouring the ‘late
market economies (EMEs). The recovery in global cutters’ among them. EME equities have generally
trade is strengthening, with trade volumes rising for rallied after the FOMC’s decision, albeit interrupted
both goods and services. Global container shipping by the recent sway towards China and the escalation
has mostly adapted to disruptions in the Red Sea of conflict between Iran and Israel. For the world’s
and Panama Canal routes, but journey times have poorest countries, however, it has been a brutal
lengthened and congestion has risen in key Asian decade5 - the number of people exiting extreme
ports. Shipping costs are estimated to have risen poverty has slowed, as has progress in fighting
around 160 per cent than a year ago, which will infectious diseases.
eventually feed into inflation. Amidst all these, gold prices have breached all-
Global financial conditions are easing from time highs on bullish market sentiment combined
restrictive levels, with financial markets continuing with geopolitical tensions. On the other hand, a
to front run central banks in their expectations of strange stability characterises crude oil prices, despite
policy rate reductions. While long-term bond yields the recent flaring up of West Asian hostilities. This
have declined, corporate bond issuances have picked reflects a more favourable balance between demand
up and equity markets reflect ebullience, heightened and supply. Sanctions have not acted as a squeeze
risk aversion has gripped market participants on global supply. Output from non-OPEC countries
with the escalation of hostilities into war in the like the US, Canada, Brazil and Gayana has surged.
middle east. The outlook for global output growth OPEC plus is a divided house, with cut backs in
has been slightly upgraded (details in Section II). production running the risk of losing market share
without revenue gains. There is also divergence in
An important point made by the OECD is about
the assessment of demand – while the international
persistent dissatisfaction among consumers with
energy agency (IEA) expects that an additional
economic performance – linked to the fact that food
9,00,000 barrels oil a day will be needed in 2024,
prices remain well above their pre-pandemic level:
the OPEC is far more bullish and expects an extra 2
“for people who go to the super market, food prices
million barrels will be required.
4 Alvaro Pereira, Chief Economist, Quoted in World Street Journal on
September 25, 2024. 5 The Economist, End of the Road, September 21, 2024.

136 RBI Bulletin October 2024

State of the Economy ARTICLE

Recent updates by multilaterals and credit Diwali last year.8 This is expected to be driven
rating agencies indicate that India’s medium-term by off-line retail, followed by the online channel.
prospects remain bright on the back of continuing Quick commerce (Q-COMM) platforms are bringing
reforms, infrastructure development, and sustainable about a rapid change in the behaviour of on-line
technologies. Improving prospects for foreign shoppers, with an increasing proportion relying on
direct investment (FDI) would support growth and fast delivery options for grocery needs and ready-to-
investment, particularly in manufacturing.6 eat meals.9 Q-COMM is changing Indian consumers’
In spite of recent geopolitical tensions, India’s behaviour: rather than reaching into the cupboard,
growth outlook is supported by robust domestic they swipe an app; they prefer to make a trip to
engines. Some high frequency indicators have, the front door than to a store. The mass end has
however, shown a slackening of momentum in the remained soft while premiumisation is strong. With
second quarter of 2024-25, partly attributable to finance companies having expanded their reach,
idiosyncratic factors like unusually heavy rains in smaller towns and rural areas that are traditionally
August and September, and Pitru Paksha7 - goods cash dominated are seeing a rise in credit-driven
and services tax (GST) collections; automobile consumption, particularly two wheelers, electronics
sales; bank credit growth; merchandise exports; and smart phones. Q-COMM shoppers are becoming
and the manufacturing purchasing managers’ index increasingly discerning, price conscious, and channel
(PMI). The slowing of speed is also reflected in our agnostic. At top private banks, there is a hiring spree
nowcast of real GDP growth given in Section III. underway, which is a positive for consumption.10
There are also expectations of a surge in hiring of gig
In parallel, there are other high frequency
workers for the festival season.11
indicators which show steady growth. Consumption
spending is shaping up for a festival season Private investment is showing some encouraging
revival, especially in small towns and lower tier lead indicators, although the slack continues.
cities. Despite high prices tempering some of the Corporates results for the first quarter of 2024-25
enthusiasm, many buyers are prioritising discounts. had shown a deceleration in real gross value added
Survey respondents are pointing to higher spending, by non-government non-finance companies.12 Real
driven by wardrobe updates, electronics, home décor investments in plants and machinery remained
and jewellery purchases. Packaged food companies subdued while net fixed assets have slowed down.
are ramping up supply chains and offerings for Apparently, the crowding in effect of government
the festival seasons in expectations of an uptick in capex is lagged. Given the moderation in sales
demand in both urban and rural regions. Unique on- growth, corporates appear to be protecting margins
platform innovations on retail media are helping to by conserving spending on both raw materials and
drive their brands. Although initial e-commerce sales manpower while delaying an aggressive capex push.
have been underwhelming, retailers are expecting a 8 Deloitte; Red Seer; Confederation of All India Traders, Financial
late season push. Consumer spending is expected to Express, September 30, 2024.
9 NielsenIQ, September 24, 2024.
be about 25 per cent higher than during Dussehra- 10 The Economic Times, “At Top Private Banks, Post-Covid Boom Fuels

Hiring Spree”, September 21, 2024.

6 Asian Development Bank, Asian Development Outlook – September 11 Financial Express, “Over Million Gig Workers set to be Hired this
2024. Festival Season”, September 25, 2024.
7 Pitru Paksha is a 16-lunar day period in the Hindu calendar when 12 If nominal GVA is deflated with WPI manufacturing, the real GVA
Hindus pay homage to their ancestors (Pitrs), especially through food growth of listed private manufacturing companies during Q1:24-25
offerings. recorded a pick-up from the previous quarter.

RBI Bulletin October 2024 137

ARTICLE State of the Economy

There is a view gaining ground that the time for private booming initial public offering (IPO) market and the
investment is now; delay risks loss of competitiveness. increasing weight of India in global indices. In fact,
The stage is set for the private sector to deploy India has led the global IPO market during 2024 so
capital and invest in growth, build capacities, create far, with both small and medium enterprises (SMEs)
employment and improve efficiencies. Corporate and the mainboard segment contributing to the
India needs to reinvest its profits to digitize the surge. The stage appears set for mega IPOs14 to shine
production value chain with the goal of designing, this Diwali.
building and selling innovative products and Recent data suggest that credit card transactions
services that cater to the needs of the increasingly volumes have slowed as lenders are adopting caution
differentiating Indian consumer. In conjunction with in view of risks flagged in unsecured loans. Incipient
schemes announced in Union Budget 2024-25, it also stress in the microfinance sector appears to have
needs to invest in an employable manufacturing been driven by lenders’ drive to disburse loans
workforce. rather than borrowers’ demand.15 The self-regulatory
Among recent lead indicators, valuations are organisation – Microfinance Institutions Network
getting heft in the tech sector on earnings upgrades, (MFIN) - points to guardrails to mitigate asset
based on an anticipated revival of demand in quality challenges such as capping a borrower’s loan
the US and Europe – indicative of new shoots of repayment obligations at 50 per cent of household’s
investments in this sector. Furthermore, greenfield income, limiting the number of microfinance lenders
hotel investments have returned to pre-pandemic and capping total indebtedness.16 Credit bureau data
levels. Project announcements have picked up speed indicate that retail credit growth has moderated as
following the election slump, led by manufacturing - lenders have tightened personal loan supply.17 In
electric vehicle manufacturing plants feature among the banking space, deposit rates are expected to stay
the top project announcements. In the second elevated despite some slowing down of credit growth,
quarter, the streak of contractions in new projects although more recently, bulk deposit rates appear to
appears to have come to an end. The project pipeline have peaked. Banks are also launching innovative
is growing but completion remains a challenge. deposit schemes Banks have also continued to rely
on certificates of deposits (CDs) to mobilise funds.
Turning to financial markets which are
A sharp decline in default rates in the infrastructure
discussed in greater detail in Section IV, the equities
sector has boosted investors’ confidence, driving
outlook is positive, with the broad medium-term
strong demand for infrastructure bond issuances
uptrend remaining intact.13 Volatility have generally
by banks. non-banking financial companies (NBFCs)
remained low, indicating reduced market risk in
are also looking at raising finance through bond
spite of stretched valuations. Abstracting from the
issuances going forward.
China flavour in October so far, foreign portfolio
14 Business Standard, “Mega IPOs to shine this Diwali: Hyundai, Swiggy,
investments (FPIs) in equities and debt have been
NTPC Green set for launch”, September 26, 2024.
buoyant through June to September 2024, drawn 15 Business Standard, “Microfinance Growth Driven more by Lenders’

Loan Disbursement than Demand”, September 29, 2024.

by pull factors in the form of India’s growth story, a 16 https://mfinindia.org/assets/upload_image/news/pdf/08_Jul_MFIN%20

takes%20proactive%20steps%20for%20strengthening%20responsible%20
13 https://www.jpmorgan.com/insights/global-research/markets/india- lending.pdf.
stock-market-outlook. 17 TransUnion CIBIL, Credit Market Indicator - September 2024.

138 RBI Bulletin October 2024

State of the Economy ARTICLE

Globally, digital ecosystems in banking, finance is also tapping into the growing potential of niche
and payments are expected to gain accelerated segments with variable income streams and limited
momentum, with countries exploring or launching credit histories.23
instant payment solutions and central bank digital
After two consecutive monthly below target
currencies (CBDCs). 134 countries, representing
readings, inflation touched 5.5 per cent in September,
98 per cent of the global economy, are developing as an adverse statistical base effect was compounded
digital fiat currencies.18 The Society for Worldwide by a resurgence in food price momentum. The
Interbank Financial Telecommunication (SWIFT) sharp pick-up was driven by the food group, but
plans to integrate traditional banking systems with core inflation also registered an uptick along with a
CBDCs and digital assets to seamlessly handle a narrowing of the deflation in fuel prices. Food price
range of asset and currency types.19 On September pressures in respect of vegetables could turn out
22, 2024 the Summit of the Future held in New to be transitory with robust kharif harvest arrivals,
York adopted a Pact for the Future that includes a although the surge in the price momentum of oils
Global Digital Compact with the key objectives of and fats can have second order effects impacting
improving connectivity, promoting digital literacy, overall inflation through inputs costs of fast moving
and ensuring equitable access to the digital economy consumer goods (FMCGs). The typical easing of food
while fostering a safe and inclusive digital space. It prices in the winter aided by improving prospects
also advocates responsible data governance, privacy for rabi crops should, however, lead to a recalibration
protection, and international cooperation in artificial of headline inflation to engender its alignment with
intelligence (AI) governance, emphasising human the target from Q4:2024-25.
rights and equitable participation.
Set against this backdrop, the remainder of
In India, digitalisation is poised on a self- the article is structured into four sections. Section
propelling growth path. India’s FinTech ecosystem II covers the rapidly evolving developments in
is thriving, with the number of registered FinTech the global economy. An assessment of domestic
startups surging from 2,100 in 2021 to 10,200 in macroeconomic conditions is set out in Section III.
2024, a fivefold increase.20 A bulk of the personal Section IV encapsulates financial conditions in India,
loans under ₹one lakh were sourced through while the last Section sets out concluding remarks.
FinTechs in 2023-24.21 In the first quarter of 2024-25,
II. Global Setting
FinTech loan disbursals grew by 27 per cent year-on-
year (y-o-y), underscoring robust customer demand The global economy has exhibited resilience in
for digital credit.22 The financial services sector the midst of heightened geopolitical uncertainty. As
inflation continued to ease towards targets in most
18 Atlantic Council. CBDC Tracker. Accessed September 2024. AEs, several central banks have embarked on the
19 SWIFT Press Releases. October 3, 2024. Global banks to use Swift for
trialling live digital asset transactions from 2025. path of policy easing. In its September 2024 Interim
20 Beams FinTech Fund & JM Financial. (2024). “Indian FinTech Journey Economic Outlook, the OECD revised upwards its
From Evolution to Mega Public Listings”.
21
projection of global growth for 2024 by 10 basis points
Experian (2024). “Small is Big - How Fintechs are Revolutionising
Lending Report.” (bps) to 3.2 per cent (from their earlier projection in
22 FinTech Association for Consumer Empowerment (FACE), “Facets. May 2024) due to stronger momentum witnessed
Trends from FACE members on digital lending, Q1 FY 24-25, Issue 11”.
23 The Livemint, “Banks, fintechs roll out red carpet for creator economy.”, in services sector activity (Chart II.1). The growth
September 28, 2024. projection for 2025 was retained at 3.2 per cent.

RBI Bulletin October 2024 139

ARTICLE State of the Economy

Chart II.1: OECD Global Growth Projections

Notes: 1. *: PPP weighted. ^: India’s data is on a fiscal year basis.

2. Darker (lighter) shaded circles pertain to 2024 (2025) forecasts in Chart II.1a.
Source: OECD.

Our model-based nowcast points to a slowdown remain high (Chart II.3b). The port workers strike along
in global growth momentum in Q3:2024, weighed the East Coast and Gulf of Mexico drove up freight and
down by heightened geopolitical risks (Chart II.2). shipping costs in September, leading to around 15 per
The global supply chain pressures index (GSCPI) cent increase in the Baltic Dry Index, which more than
remained above its historical average levels although it reversed in October as workers reached an agreement
eased marginally in September (Chart II.3a). Container (Chart II.3c). Geopolitical risks remained elevated due
shipping costs recorded some moderation from the to ongoing tensions in the Middle East, albeit with
peak levels recorded in July 2024 but their levels some moderation since July 2024 (Chart II.3d).

Chart II.2: Global GDP Growth Nowcast (Q-o-Q)

Sources: CEIC; OECD; and RBI staff estimates.

140 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart II.3: Trends in Global Supply Chain Pressures and Geopolitical Risks

Notes: 1. GSCPI reflects data on transportation costs and manufacturing indicators.

2. The WCI assessed weekly by Drewry reports actual spot container freight rates for major east west trade routes. The composite represents a weighted average of
the 8 shipping routes by volume and is reported in USD per 40-foot container.
Sources: Federal Reserve Bank of New York; BlackRock Investment Institute, September 2024; and Bloomberg.

In September 2024, consumer confidence worsened in the UK (Chart II.4a). Financial conditions
improved in the US, Euro area, India and Japan but eased in major AEs and EMEs (Chart II.4b).

Chart II.4: Consumer Sentiment and Financial Conditions

Notes: 1. Japan: A score above 50 indicates consumer optimism, below 50 shows lack of consumer confidence and 50 indicates neutrality.
2. Euro zone and UK: -100 indicate extreme lack of confidence, 0 denotes neutrality while 100 indicates extreme confidence.
3. India and US: Higher the index value, higher is the consumer confidence.
4. For financial condition index (pertaining to EMEs constructed by Goldman Sachs), a reading below 100 is accommodative and vice versa. As for the AEs, the
index constructed by Bloomberg is a z-score where a positive value indicates accommodative/easy financial conditions and vice versa.
Source: Bloomberg.

RBI Bulletin October 2024 141

ARTICLE State of the Economy

Chart II.5: Global PMI Chart II.6: Global PMI: Export Orders

Note: A level of 50 corresponds to no change in activity and a reading above 50 Note: A level of 50 corresponds to no change in activity and a reading above 50
denotes expansion and vice versa. denotes expansion and vice versa.
Source: S&P Global. Source: S&P Global.

The global composite purchasing managers’ index since March 2022. Price indices for all categories
(PMI) slowed to an eight-month low in September, increased, with a notable uptick in sugar prices by
driven by a downturn in manufacturing which slipped 10.4 per cent during the month (Chart II.7b). Metal
to an eleven-month low due to contraction in output, prices increased in September on an improved
new orders and employment growth. Services activity, demand outlook after China, the largest consumer of
however, expanded for the twentieth consecutive base metals, announced a slew of stimulus measures
month, offsetting the weakness in manufacturing to to support its economy. The momentum, however,
keep the global composite PMI in the expansionary faded in October as metal prices partly reversed
zone, albeit with a sequential moderation (Chart II.5). their September gains. Gold prices increased by
The composite PMI for export orders declined in 5.0 per cent (m-o-m) in September to scale record
September as an increase in services export orders highs, buoyed by the US Fed’s rate cuts and safe
was more than offset by a decline in manufacturing haven demand amidst escalating global geopolitical
export orders (Chart II.6). tensions (Chart II.7c). Brent crude oil prices,
however, registered a sharp decline of 8.8 per cent
Global commodity prices recorded a sharp
uptick in September as the fall in energy prices (m-o-m) in September - from around $81 per barrel
was offset by gains in metal prices. The Bloomberg in August to around $74 per barrel in September - as
commodity index increased by 4.4 per cent (m-o-m) improved supply outlook over Saudi Arabia’s official
in September (Chart II.7a). It, however, partly announcement of unwinding of “voluntary cuts”
reversed the gains in the first fortnight of October, starting December negated the headwinds emerging
as the index fell by around 2 per cent. The Food from geopolitical tensions and demand concerns.
and Agriculture Organization’s (FAO’s) food price Following the escalation of geopolitical tensions in
index registered an increase of 3 per cent (m-o-m) the Middle East in early October, however, oil prices
in September, marking the largest m-o-m increase rebounded, recording an increase of 1.8 per cent

142 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart II.7: Commodity and Food Prices

Sources: Bloomberg; World Bank Pink Sheet; and FAO.

from end-September levels to reach US$ 74 per barrel downwards in most AEs; however, it remained higher
as on October 17, 2024 (Chart II.7d). than the headline (Chart II.8c and 8d).

Inflation continued to moderate across major Global equity markets rebounded from the
economies, albeit unevenly. In the US, consumer correction in the first week of September, buoyed by
price index (CPI) inflation eased to 2.4 per cent (y-o-y) the decision of US Fed to reduce the policy rate by 50
in September from 2.5 per cent in August. Inflation in bps. The Morgan Stanley Capital International (MSCI)
terms of the personal consumption expenditure (PCE) world index recorded a 2.2 per cent (m-o-m) increase in
deflator softened to 2.2 per cent in August from 2.5 September (Chart II.9a). The MSCI Emerging Markets
per cent in July. Headline inflation in the Euro area Index surged by 6.4 per cent as equity markets in
and the UK decelerated to 1.8 per cent and 1.7 per China recorded their best week since 2008, following
cent, respectively, in September. Inflation in Japan the announcement of stimulus measures in the last
(CPI excluding fresh food) softened to 2.4 per cent week of September. Equity markets in China pared
in September (Chart II.8a). Among EMEs, inflation some of its gains in the second week of October amidst
increased in Brazil in September but softened in Russia market disappointment on economic recovery and
and China in September and South Africa in August anticipated economic stimulus. The US government
(Chart II.8b). Core and services inflation trended securities yields on both 10-year and 2-year bonds

RBI Bulletin October 2024 143

ARTICLE State of the Economy

Chart II.8: Inflation - AEs and EMEs

Sources: Bloomberg; and OECD.

softened by 12 bps and 28 bps, respectively, in demand over escalation of geopolitical tensions in
September as markets priced in the Fed rate cut. As the Middle East. Concomitantly, EME currencies
yields softened relatively more for 2-year securities, depreciated in October so far (up to October 17, 2024)
the spread (10-year minus 2-year) reversed and Among AE central banks, Euro area, South Korea
turned positive in September (Chart II.9b). The US and Iceland cut their policy rates by 25 bps while
10-year bond yields, however, rebounded to above New Zealand cut its benchmark rate by 50 bps in
4 per cent in early October for the first time since October. Sweden, Switzerland and Czech Republic
early August as stronger than expected job market lowered their benchmark rates by 25 bps each in their
data pared expectations of large policy rate cuts. In September meetings. Australia, however, continued
the currency markets, the US dollar continued to to hold its policy rate unchanged in September (Chart
weaken, shedding 0.9 per cent (m-o-m) in September. II.10a). Among EME central banks, Thailand and
Concomitantly, the MSCI currency index for EMEs Philippines cut their policy rates by 25 bps in October.
increased by 1.7 per cent in September, mainly due In September, South Africa, Mexico and Hungary
to capital inflows in the equity segment (Chart II.9c cut their key rates by 25 bps each, while Colombia
and II.9d). In early October, however, the US dollar reduced its policy rate by 50 bps (Chart II.10b). China
strengthened sharply on account of safe haven announced a series of stimulus measures to resurrect

144 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart II.9: Global Financial Markets

Sources: Bloomberg; and IIF.

the flagging economy, including a 20 bps cut in the the medium-term lending facility rate and a 50 bps
seven-day reverse repo rate, a 30 bps reduction in cut in the reserve requirement ratio.
Chart II.10: Changes in Policy Rates

Source: Bloomberg.

RBI Bulletin October 2024 145

ARTICLE State of the Economy

III. Domestic Developments the current situation and their future expectations

The Indian economy has exhibited marked improved sequentially (Chart III.1a). Manufacturers
resilience in spite of a sequential ebb in momentum also maintained a positive outlook on capacity
in the second quarter of 2024-25 on account of a host utilisation (CU) in the ensuing quarters (Annex 1).
of factors mentioned in the Introductory section. Inputs from various industry stakeholders also point
According to the latest round of the Reserve Bank’s towards continued optimisim towards future growth
survey of households, consumer perceptions of prospects in India (Box 1).

Box 1: Feedback from the Reserve Bank’s Industry Monitoring Group (IMG)
The Reserve Bank conducts a semi-annual survey of • Global Capability Centers (GCCs) and hospitality are
representatives from industry associations, including expected to attract more private investment in the
several industry bodies, credit rating agencies and services sector.
banks. The major highlights from the September 2024
• The medium-term capital expenditure outlook
round of the survey.
(2024-2028) remains positive, partly backed by the
Consumption government’s infrastructure push and substantial
investment intentions across critical sectors.
• Consumption of non-durable goods showed
buoyancy as growth in rural consumption outpaced Other Growth Propellors
urban consumption, particularly in the non-food
• Rating upgrades continued to outpace downgrades,
category.
with a credit ratio of 2.224. Power, real estate, and
• Consumer durables registered double digit volume infrastructure sectors saw improved credit ratios,
growth, with spending in small towns on premium/ while auto components, exports, and services
feature-rich segments recording a rise. experienced moderation.
• The upcoming festival season is expected to boost • Rising demand for emerging technologies, i.e.,
demand for consumer products. artificial intelligence (AI); cloud transformation, data
analytics; and internet of things (IoT) is expected
Investment
to drive growth in the information technology
• The momentum in investment demand is being segment, with more hiring and better margins.
driven by infrastructure related sectors and certain
• Revenue growth in micro, small, and medium
manufacturing segments, i.e., chemicals, electronics,
enterprises (MSME) sector is expected to be driven
semiconductors, automobiles, and green energy.
by healthcare, consumption, agriculture linked
• With the manufacturing sector’s capacity utilisation sectors and export-oriented businesses such as
ranging between 70 to 80 per cent across industries, textiles and seafood.
a majority of survey respondents expect an
Credit delinquencies moderated consistently for
improvement in private investment in H2:2024-25.
MSMEs and overall retail segments over the past three
• Investment has gained traction from the Production years, notwithstanding a marginal rise in credit card
Linked Incentive (PLI) scheme and this is expected and personal loan delinquencies in recent quarters25.
to extend further in the coming months.

24 As per data provided by Investment Information and Credit Rating Agency (ICRA) Limited.
25 Based on information received from TransUnion CIBIL Limited.

146 RBI Bulletin October 2024

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Chart III.1: Economic Activity and GDP Growth Nowcast

-1

-2

-3

Note: The economic activity index (EAI) is constructed by extracting the common trend underlying twenty-seven high frequency indicators of economic activity using a
Dynamic Factor Model. EAI is scaled to 100 in February 2020 and 0 in April 2020, the worst affected month due to mobility restrictions.
Sources: National Statistical Office (NSO); Consumer Confidence Survey (CCS), RBI; and RBI staff estimates.

Supply chain pressures eased in September, September 2024 (Chart III.2a). Toll collections grew
falling below historical average levels, although they by 6.5 per cent (y-o-y) in September as against 6.8 per
remain vulnerable to geopolitical risks which have cent (y-o-y) in the previous month (Chart III.2b).
escalated in October (Chart III.1b). Our economic Automobile sales recorded a growth of 13.1 per
activity index (EAI)26, based on a range of high cent (y-o-y) in September 2024, supported by two-
frequency indicators, projects GDP growth at 6.8 per wheelers (Chart III.3a). Domestic tractor sales also
cent in Q2:2024-25 (Charts III.1c and III.1d). expanded by 3.7 per cent (y-o-y) in September (Chart
III.3b). Vehicle registrations contracted in September
Aggregate Demand
due to decline in both non-transport and transport
High-frequency indicators indicate that aggregate vehicles segments (Chart III.3c). Average daily
demand continued to grow, albeit with a slower petroleum consumption contracted for the second
momentum than in the preceding quarters. E-way consecutive month in September 2024, driven by a
bills continued to record double digit growth in decline in diesel consumption (Chart III.3d).
26 The index extracts the dynamic common factor underlying 27 monthly As per the latest periodic labour force survey
indicators representing industry, services, global and miscellaneous
activities. (PLFS) report for 2023-24 (July-June), the labour force

RBI Bulletin October 2024 147

ARTICLE State of the Economy

Chart III.2: E-way Bills and Toll Collections

Sources: GSTN; and RBI.

participation rates (LFPR) and worker population cent, respectively, marking their highest levels since
ratio (WPR) increased to 60.1 per cent and 58.2 per the inception of the survey. The unemployment rate

Chart III.3: Automobile Sector Indicators

Source: Ministry of Road Transport and Highways. Source: Petroleum Planning and Analysis Cell.

148 RBI Bulletin October 2024

State of the Economy ARTICLE

remained unchanged at 3.2 per cent in 2023-24 from employment recorded its seventh consecutive month
the previous year27 (Chart III.4a). The overall LFPR of expansion in September 2024, albeit with some
increased in both rural and urban areas in 2023-24, moderation. The rate of job creation in the services
driven by a rise in the female LFPR, which rose by 6.1 sector accelerated in September, recording one of the
percentage points in rural areas and 2.6 percentage strongest growth in two years (Chart III.6).
points in urban areas (Chart III.4b and III.4c). Similar
Households’ demand for work under the
patterns were witnessed in the case of WPR.
Mahatma Gandhi National Rural Employment
The share of regular salaried workers and helpers Guarantee Act (MGNREGA) contracted for the fourth
in household enterprises increased, while the share month in a row in September 2024, reflecting higher
of casual workers declined (Chart III.5a). The share of demand for agriculture labour during the kharif
employment in the tertiary sector increased (Chart sowing season. On a y-o-y basis, it recorded a decline
III.5b). for the seventh consecutive month, pointing to
As per the purchasing managers’ (PMI) increased availability of alternative employment
employment indices, organised manufacturing opportunities (Chart III.7).

Chart III.4: PLFS Annual 2023-24 (Age 15 and above)

Source: Ministry of Statistics and Programme Implementation (MoS&PI).

27 mospi.gov.in/sites/default/files/publication_reports/AnnualReport_PLFS2023-24L2.pdf.

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ARTICLE State of the Economy

Chart III.5: PLFS Annual 2023-24 (Employment by Category and Sector)

Note: Construction sector is included in the secondary sector in Chart III.5b.

Source: MoS&PI.

India’s merchandise exports at US$ 34.6 billion made garments (RMG) were the major drivers
grew by 0.5 per cent (y-o-y) in September 2024, of exports, while petroleum products, gems and
supported by a favourable base effect (Chart III.8). jewellery, iron ore, marine products, and ceramic
Exports of 23 out of 30 major commodities products and glassware operated as drags (Chart III.9).
(accounting for 63 per cent of the export basket) During April-September 2024, India’s merchandise
expanded on a y-o-y basis in September. Engineering exports expanded by 1.0 per cent (y-o-y) to US$
goods, organic and inorganic chemicals, plastic and 213.2 billion, primarily led by engineering goods,
linoleum, drugs and pharmaceuticals, and ready- electronic goods, drugs and pharmaceuticals, organic

Chart III.6: PMI Employment Indices Chart III.7: Households Demand for Work under
MGNREGA

Note: A PMI value above 50 indicates expansion.

Source: S&P Global. Source: Ministry of Rural Development.

150 RBI Bulletin October 2024

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Chart III.8: India’s Merchandise Exports

Sources: Press Information Bureau (PIB); DGCI&S; and RBI staff estimates.

and inorganic chemicals, and RMG, while petroleum Merchandise imports at US$ 55.4 billion
products, gems and jewellery, marine products, iron expanded by 1.6 per cent (y-o-y) in September, despite
ore, and other cereals restrained overall exports a sequential contraction which was more than offset
growth. by a positive base effect (Chart III.10). Out of 30
major commodities, 20 commodities (accounting for
Exports to 13 out of 20 major destinations 48.7 per cent of the import basket) registered growth
expanded in September 2024 and during April- on a y-o-y basis in September.
September 2024, with the US, the UAE and the Machinery, electronic goods, non-ferrous
Netherlands being the top 3 export destinations. metals, chemicals, and gold contributed positively to

Chart III.9: India’s Merchandise Exports – Relative Contribution (September 2024 over September 2023)

Sources: PIB; and RBI staff estimates.

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ARTICLE State of the Economy

Chart III.10: India’s Merchandise Imports

Sources: PIB; DGCI&S; and RBI staff estimates.

overall import growth, while POL, pearls, precious equipment, while pearls, precious and semi-precious
and semi-precious stones, vegetable oil, artificial stones, chemical material and products, coal, coke
resins, plastic materials, etc., and dyeing, tanning and briquettes, fertilisers, and dyeing, tanning and
and colouring materials contributed negatively colouring materials contributed negatively.
(Chart III.11). During April-September 2024, India’s Imports from 9 out of 20 major source countries
merchandise imports increased by 6.2 per cent expanded in September 2024 on a y-o-y basis. Imports
(y-o-y) to US$ 350.7 billion, mainly led by POL, gold, from 14 out of 20 major source countries increased
electronic goods, non-ferrous metals, and transport during April-September 2024.

Chart III.11: India’s Merchandise Imports – Relative Contribution

(September 2024 over September 2023)

Sources: PIB; and RBI staff estimates.

152 RBI Bulletin October 2024

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Chart III.12: Decomposition of India’s Chart III.13: Commodity-wise Merchandise

Merchandise Trade Deficit Trade Deficit

Note: Coal, coke and briquettes exports in September 2024 are assumed to be at
the same level as in August 2024.
Sources: PIB; and DGCI&S. Sources: PIB; DGCI&S; and RBI staff estimates.

The merchandise trade deficit narrowed to (Chart III.14a). In 2023-24, drugs and pharmaceuticals
a 5-month low at US$ 20.8 billion in September exports increased by 9.7 per cent (y-o-y) to US$ 27.9
2024. The share of POL in the total merchandise billion. In 2024-25 so far (up to August), they grew
trade deficit remained the same at 37.6 per cent in by 8.2 per cent (y-o-y) to US$ 11.9 billion. The drugs
September 2024 as a year ago (Chart III.12). and pharmaceuticals sector yielded a trade surplus,
During April-September 2024, India’s mainly driven by drug formulations and biologicals
merchandise trade deficit widened to US$ 137.4 (Chart III. 14b).
billion from US$ 119.2 billion a year ago. Petroleum On the renewable energy front, India is the world’s
products were the largest source of the deficit, second-largest producer of wind turbine components
followed by electronic goods (Chart III.13). following China, with a significant share of its
India’s pharmaceutical industry is the world’s manufacturing capacity focused on exports (Chart
third largest by volume of production28, being a III.15). Low import dependency is reflective of around
global leader in the supply of diphtheria, tetanus 70-80 per cent indigenisation that has been achieved
and pertussis (DPT), bacillus calmette–guérin (BCG), with robust domestic manufacturing (Table III.1).
and measles vaccines. It is also one of the largest Table III.1: Manufacturing Capacity of Key Wind
suppliers of low cost vaccines in the world. Drugs and Turbine Components
pharmaceuticals are the sixth largest commodities in
Component Global Capacity 2023 India’s Capacity
India’s export basket, with a share of 6.4 per cent in Gigawatt (GW) (Share in Global
Market in per cent)
in 2023-24. Drug formulations and biologicals have
Gearbox 166.5 15.5 (9)
been the largest drivers of drugs and pharmaceuticals
Generators 155.6 8.25 (5)
exports, with more than a three-fourths share,
Blades 156.8 12.92 (8)
followed by bulk drugs and drug intermediates Power Converters 222.7 10.6 (5)
28Annual Report 2023-24, Department of Pharmaceuticals, Ministry of Towers 38 2.8 (7)
Chemicals and Fertilisers, Government of India. Source: CEEW.

RBI Bulletin October 2024 153

ARTICLE State of the Economy

Chart III.14: India’s Exports of Drugs and Pharmaceuticals

Source: DGCI&S.

India is a major importer of lithium-ion batteries outlay of ₹18500 crores, which is expected to reduce
in the world (Chart III.16). India has a mature but its dependence on imports.

small lithium-ion battery assembly sector, with over Services exports at US$ 30.3 billion grew by 5.7
per cent (y-o-y) in August 2024 and services imports
6.5 gigawatt-hour (GWh) of manufacturing capacity.
rose by 8.8 per cent (y-o-y) to US$ 16.4 billion (Chart
The government has approved the Production
III.17). As a result, net services export earnings
Linked Incentive (PLI) scheme for manufacturing increased by 2.2 per cent (y-o-y) to US$ 13.9 billion
advance chemistry cell (ACC) batteries with a total during the month.

Chart III.15: Wind Generators Chart III.16: Lithium-Ion Batteries

Source: Ministry of Commerce and Industry. Source: Ministry of Commerce and Industry.

154 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart III.17: Services Exports and Imports: Growth Rates

Source: RBI.

All major key deficit indicators of the Union cent of BE in April-August 2024, down from 36 per cent
government, viz., the gross fiscal deficit (GFD), the in the corresponding period of the previous year (Chart
revenue deficit (RD), and the primary deficit (PD) III.18a and III.18b). Robust growth in revenue receipts
recorded an improvement during April-August 2024 during April-August 2024, coupled with a contraction
[both in absolute terms as well as in proportion to in the total expenditure of the Union government by
budget estimates (BE)] relative to the corresponding 1.2 per cent on a y-o-y basis, led to an improvement in
period of the previous year. The GFD stood at 27 per the financial position of the Union Government.

Chart III.18: Budgetary Deficits (April-August 2024)

₹ thousand crore

Sources: Controller General of Accounts (CGA); and Union Budget Documents.

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ARTICLE State of the Economy

Revenue expenditure moderated to 4.1 per cent Under direct taxes, income tax collections registered
during April-August 2024 from a growth of 14.1 per a robust growth rate of 25.5 per cent (y-o-y) [Chart
cent recorded in April-August 2023. The outgo on III.19a]. Corporate taxes, however, recorded a
major subsidies contracted marginally by 1.2 per decline during the period, although it recovered
cent, partly owing to a decline in the international substantially by mid-September.30 Under indirect
price of fertiliser. Similarly, capital expenditure taxes, GST collections recorded a growth of 10.2 per
growth recorded a contraction, partly attributable cent. With the surplus transfer of ₹2.1 lakh crore
to the model code of conduct imposed due to the by the Reserve Bank, non-tax revenues recorded a
general elections held in Q1:2024-25. During growth of 59.6 per cent during April-August 2024
July-August 2024, however, capital expenditure (Chart III.19b). Disinvestment receipts, however,
rebounded with a y-o-y growth of 25.8 per cent. lagged the budgeted target, leading to a contraction
Further, in September 2024, the government relaxed of 42.4 per cent in non-debt capital receipts during
its cash management guidelines with the objective of the concerned period. Overall, the total receipts of
boosting expenditure. 29
the Union government posted a growth of 18.3 per
cent in April-August 2024 over their level in the
On the receipts side, gross tax revenues
corresponding period of the previous year.
recorded a growth of 12.1 per cent during April-
August 2024 vis-à-vis a growth of 16.5 per cent in Gross GST collections (Centre plus States) for the
the corresponding period of the previous year. month of September amounted to ₹1.73 lakh crore,

Chart III.19: Revenue Receipts of the Union Government (April-August 2024)

Sources: CGA; and Union Budget Documents.

29 As per the office memorandum released by the Department of Economic Affairs (DEA) on September 4, 2024 the stipulations pertaining to the big
releases (₹500 crore or more) will be relaxed until further notice to provide operational flexibility to execute the budget. The newly provided relaxations
will remain subjected to the compliance guidelines of Single Nodal Agency (SNA)/Central Nodal agency (CNA) and of Monthly Expenditure Plan (MEP)/
Quarterly expenditure Plan (QEP).
30 As per the data on the advance tax collections up to September 17, 2024, the corporate tax collections recorded a y-o-y growth of 18.2 per cent indicating

that the decline in April-August 2024 is likely to be more than compensated (https://incometaxindia.gov.in/news/net-direct-tax-collection-provisional-as-
on-17.09.2024-for-the-financial-year-2024-25.pdf).

156 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart III.20: Monthly GST Revenue Chart III.21: States’ Fiscal Indicators as a
Share of BE (April-August)

Note: Data pertains to 21 States.

Sources: PIB; and GST Portal. Source: Comptroller and Auditor General (CAG) of India.

registering a growth of 6.5 per cent on a y-o-y basis from 27 per cent in the previous year (Chart III.21).
(Chart III.20). After accounting for refunds, net GST Revenue receipt growth decelerated due to a decline
collections stood at ₹1.52 lakh crore, growing at 3.9 in tax revenue growth and a contraction in non-tax
per cent on a y-o-y basis. Further, the cumulative revenue and grants from the Union government
(Table III.2). Growth in States’ goods and services tax
gross GST collections for April-September 2024 stood
(SGST), the largest driver of tax revenue, moderated.
at ₹10.9 lakh crore, recording a growth of 9.5 per cent
Stamp duties and registration fees witnessed robust
over April-September 2023.
growth, while sales tax collections showed signs of
Provisional data for April-August 2024 indicate recovery from a contraction during the same period
that States’ GFD increased to 31.7 per cent of BE in the previous year.

Table III.2: States’ Key Fiscal Indicators (April-August 2024-25)

(Per cent)
Per cent of BE Y-o-Y Growth Rate
2022-23 2023-24 2024-25 2022-23 2023-24 2024-25
1. Revenue Receipts 33.6 32.8 32.0 28.1 8.8 5.0
1.1. Tax Revenue 37.1 35.9 35.4 33.0 15.7 11.4
Stamp Duties and registration fees 40.3 36.6 38.0 43.6 15.8 16.2

GST 43.6 43.9 43.3 31.7 19.0 10.3

Sales Tax 40.1 34.4 35.2 20.1 -2.1 4.2
State Excise Duties 37.3 36.9 34.8 27.0 12.8 5.6
1.2. Non-Tax Revenue 29.1 31.9 26.2 53.6 16.1 -9.9
1.3. Grants-in-Aid 24.1 20.2 15.7 10.2 -27.0 -33.5
2. Revenue expenditure 33.9 33.2 33.8 15.6 7.7 10.4
2.1 Interest Payments 32.3 31.8 33.7 11.1 8.8 14.3
3. Capital expenditure 20.5 23.4 21.3 6.3 35.0 -4.9
3.1 Capital Outlay 19.6 23.8 20.3 4.4 42.3 -9.4
Note: Data pertains to 21 States.
Sources: CAG of India; and Budget documents of State governments.

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On the expenditure side, revenue expenditure The 2024 southwest monsoon (SWM) ended
growth increased, while capital expenditure with above-normal rainfall at 108 per cent of the long
declined during this period. Going forward, capital period average (LPA), the highest since 2020. It was
expenditure is expected to pick up owing to the in line with the India Meteorological Department’s
Union government’s provision of special assistance (IMD’s) long range forecast for 2024 SWM (June-
of ₹1.5 lakh crore long term interest free loans. September). The rainfall was 7 per cent, 19 per
Aggregate Supply cent, and 14 per cent above the LPA in northwest,
The final estimates of foodgrains production for central, and southern peninsula, respectively, but it
2023-24 stood at a record 332.3 million tonnes, which was 14 per cent below the LPA in east and northeast
was 0.8 per cent higher than the final estimates for India. Out of 36 subdivisions, 33 received normal or
2022-23, despite 2023 being an El Niño year with above normal rainfall this year, an increase from 29
below normal monsoon. Increases in the production subdivisions last year (Chart III.24).
of wheat and rice more than compensated for the
The production weighted rainfall index (PRN)
decline in pulses and coarse cereals production
stood at 107 per cent of the LPA and it remained
(Chart III.22).
above normal for other major crops except rice for
As per the 3rd advance estimates (AE) for 2023-24, which it was normal (Chart III.25). Notably, PRNs
horticultural crop production declined (for the first for all key crops during this season exceeded their
time since 2002-03) to 353.2 million tonnes, driven
respective five-year averages (Chart III.26).
down by declines in the production of onions and
potatoes by 19.7 per cent and 5.1 per cent, respectively The high spatial dispersion of rainfall observed
(Chart III.23). Deficient rainfall and heat waves in the early part of the monsoon season declined
associated with El Niño weather conditions adversely from mid-July onwards as rainfall activity became
affected horticulture crop production during 2023-24. broad based (Chart III.27).

Chart III.22: Agriculture Crops Production Chart III.23: Horticulture Crops Production
2023-24 (Final Estimates) 2023-24 (3rd AE)

Note: #: - Million bales of 170 kg each and *: - Sugarcane is in 10 million tonnes.

Source: Ministry of Agriculture and Farmers’ Welfare. Source: Ministry of Agriculture and Farmers’ Welfare.

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Chart III.24: SWM Season Rainfall – 36 Met Chart III.25: Weekly Progress of SWM
Subdivisions (June 01 - September 30)

Source: IMD. Sources: IMD; and RBI staff estimates.

Water levels in reservoirs at 87 per cent of the the normal area (Chart III.29). Except cotton, the area
total capacity as on October 17, 2024 was 19.9 per under all crops has increased over last year.
cent and 14.7 per cent higher than last year and the Minimum support prices (MSP) for the rabi
decadal average, respectively (Chart III.28). marketing season (April 2025 to March 2026) were
As on September 27, 2024, the total kharif sown increased in the range of 2.4 per cent (for Safflower)
area stood at 1108.6 lakh hectares (101.1 per cent of to 7.0 per cent (for Barley) [Chart III.30]. Significant
full season normal area), higher than last year and increases in MSP were announced for rapeseed and

Chart III.26: Crop-wise PRN Chart III.27: Spatial Standard Deviation of

SWM Rainfall

Sources: IMD; and RBI staff estimates. Sources: IMD; and RBI staff estimates.

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ARTICLE State of the Economy

Chart III.28: Reservoir Level (As on October 17) Chart III.29: Kharif Sowing Area 2024-25
(As on September 27, 2024)

Source: Central Water Commission. Source: Ministry of Agriculture and Farmers’ Welfare.

mustard at ₹300 per quintal, as well as for lentil peninsula31. So far, the cumulative rainfall has been 1
(Masur) at ₹275 per quintal. This is in line with the per cent below the LPA during the current Northeast
recent policies announced by the government to monsoon (NEM) season (October 01-18). Forecasts
boost oilseeds and pulses production and reduce the indicate an increased likelihood of La Niña conditions
import dependency. developing during the post-monsoon season, which
augurs well for the rabi sowing (Chart III.31).
As per the IMD’s recent forecast for post-monsoon
season (October-December), rainfall is most likely to The stock of rice with the Food Corporation of
India (FCI) stood at 387 lakh tonnes as on October
be above normal (>112 per cent of LPA) over the south
01, 2024 which was 23.0 per cent higher than on the
Chart III.30: Change in MSP of Rabi Crops corresponding date last year. The government procured
525.4 lakh tonnes of rice in the kharif marketing
season (KMS) 2023-24, which was 7.7 per cent lower
than in last year’s season. In view of the ample stock
of rice and moderating retail prices, the government
amended the export policy for non-basmati white rice
from prohibited to free on September 28, 2024, subject
to a minimum export price (MEP) of US$ 490 per
tonne. In the case of wheat, the government procured
266 lakh tonnes in the rabi marketing season (RMS)
2024-25, which was 1.6 per cent higher than in the last

31 South Peninsular India consists of five meteorological subdivisions

(Tamil Nadu, Puducherry and Karaikal, Coastal Andhra Pradesh,
Rayalaseema, Kerala and Mahe, and South Interior Karnataka). IMD has
been preparing forecasts for northeast monsoon (post-monsoon) season
rainfall over the south peninsula since 1998 because this region receives
Source: Ministry of Agriculture and Farmers’ Welfare.
major part of its annual rainfall during this season.

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Chart III.31: Northeast Monsoon Forecast Chart III.32: Central Public Distribution System
(October - December 2024)

Note: The chart denotes the probability forecast of tercile categories (below normal,
normal, and above normal) of rainfall over India during October to December 2024
period. The figure illustrates the most likely categories as well as their probabilities.
Tercile categories have equal climatological probabilities of 33.33 per cent each. Note: *:- As on September 30; #:- As on October 01, 2024.
Source: IMD. Source: Food Corporation of India.

season. The stock of wheat at 238 lakh tonnes (as on India’s manufacturing PMI eased in September
October 01, 2024) remained 0.9 per cent lower than due to deceleration in the pace of expansion in new
last year. The government revised downward the stock orders, employment and output (Chart III.33a). The
limit on wheat for traders, retailers, and processors services sector PMI also moderated to ten-month low
to increase its availability and curb prices. The buffer in September due to a slowdown in new business
norm for rice and wheat stock for October-December activity (Chart III.33b). Business expectations in the
quarter was 102.5 lakh tonnes and 205.2 lakh tonnes, manufacturing sector showed signs of moderation,
respectively (Chart III.32). while the services sector exhibited an improvement.

Chart III.33: Purchasing Managers’ Index (PMI)

Note: A level of 50 corresponds to no change in activity and a reading above 50 denotes expansion and vice versa.
Source: S&P Global.

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ARTICLE State of the Economy

Chart III.34: Domestic Manufacturing Capacity

Source: JMK Research.

On the renewable energy front, India has built scheme32 comes online (Chart III.34).
6.6 gigawatt (GW) of indigenous solar cell Port traffic increased by 5.9 per cent (y-o-y) in
manufacturing capacity in 2023. India is likely September 2024, driven by other miscellaneous
to develop a significant manufacturing presence cargo, petroleum, oil and lubricants (Chart III.35a).
in polysilicon, ingots wafers, cells and module Railway freight traffic, on the other hand, recorded
manufacturing once the manufacturing capacity a y-o-y decline in August, led by coal and cement
allotted under the Production Linked Incentive (PLI) (Chart III.35b).

Chart III.35: Port Cargo and Railway Freight Traffic

Sources: Indian Ports Association; Ministry of Railways; and CMIE.

32 The Government has allocated a total capacity of 48337 megawatt (MW) of domestic solar PV module manufacturing capacity, with a total outlay
of ₹18500 crores under the PLI Scheme for high efficiency solar PV modules. It consists of 15400 MW of manufacturing capacity under P+W+C+M
(Polysilicon, wafers, cells and modules) Basket, thereby ensuring that the entire manufacturing supply chain can be established in India.

162 RBI Bulletin October 2024

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Chart III.36: Steel Consumption and Cement Production

Sources: Joint Plant Committee; Office of the Economic Adviser; and Ministry of Commerce and Industry.

Within the construction sector, steel Available high frequency indicators for the services
consumption expanded by 10.5 per cent (y-o-y) in sector reflect the resilience of activity in September
September. Cement production, however, declined 2024, supported by rural demand, domestic air
by 3.0 per cent in August 2024 (Chart III.36). passenger traffic and steel consumption (Table III.3).
Table III.3: High Frequency Indicators- Services
(y-o-y, per cent)
Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep-
Sector Indicator
23 23 23 24 24 24 24 24 24 24 24 24
Urban demand Passenger Vehicles Sales 17.3 4.3 3.2 13.9 5.7 8.9 1.2 4.3 4.9 -2.0 -1.8 -0.4
Two-Wheeler Sales 20.1 31.3 16.0 26.2 34.6 15.3 30.8 10.1 21.3 12.5 9.3 15.8
Rural demand Three-Wheeler Sales 42.1 30.8 30.6 9.5 8.3 4.3 14.5 14.4 12.3 5.1 8.0 6.7
Tractor Sales -4.3 6.4 -19.8 -15.3 -30.6 -23.1 -3.0 0.0 3.6 1.6 -5.8 3.7
Commercial Vehicles Sales 3.2 -3.8 3.5 -11.0
Railway Freight Traffic 8.5 4.3 6.4 6.4 10.1 8.6 1.4 3.7 10.1 4.6 -5.0
Port Cargo Traffic 13.8 16.9 0.6 3.2 2.1 2.7 1.3 3.8 6.8 6.0 6.7 5.9
Domestic Air Cargo Traffic* 10.6 9.0 8.7 10.0 11.5 8.7 0.3 10.3 10.3 8.8 0.6 -12.5
International Air Cargo Traffic* 15.0 4.9 12.2 19.3 30.2 22.5 16.2 19.2 19.6 24.4 20.7 3.2
Trade, hotels, Domestic Air Passenger Traffic * 10.7 8.7 8.1 5.0 5.8 4.7 3.8 5.9 6.9 7.6 6.7 7.8
transport,
communication International Air Passenger Traffic * 17.5 19.8 18.1 17.0 19.3 15.0 16.8 19.6 11.3 8.8 11.1 9.7
GST E-way Bills (Total) 30.5 8.5 13.2 16.4 18.9 13.9 14.5 17.0 16.3 19.2 12.9 18.5
GST E-way Bills (Intra State) 30.0 22.7 14.2 17.9 21.1 15.8 17.3 18.9 16.4 19.0 13.1 19.0
GST E-way Bills (Inter State) 31.2 -16.2 11.4 13.8 15.0 10.7 9.6 13.6 16.3 19.6 12.5 17.7
Hotel occupancy rate@ 62.5 63.0 70.0 66.6 72.5 64.4 62.3 60.3 62.0 63.1 61.3
Average revenue per room 14.8 15.9 12.8 11.0 4.1 6.7 4.8 1.8 2.8 7.6 5.2
Tourist Arrivals 19.8 16.8 7.8 10.4 15.8 8.0 7.7 0.3 9.0
Steel Consumption 13.6 15.4 6.5 3.8 12.7 11.2 11.5 13.0 21.1 13.8 10.7 10.5
Construction
Cement Production 17.0 -4.8 3.8 4.0 7.8 10.6 0.2 -0.6 1.9 5.5 -3.0
PMI Index# Services 58.4 56.9 59.0 61.8 60.6 61.2 60.8 60.2 60.5 60.3 60.9 57.7

<<   Contraction ------------------------------------- Expansion   >>

Note: #: Data in levels. *: September 2024 data are based on the monthly average of daily figures. @: Data in rate, not in y-o-y rate of growth. The heat-
map is constructed for each indicator for the period July-2021 till date.
Sources: SIAM; Ministry of Railways; CMIE; Tractor and Mechanisation Association; Indian Ports Association; Office of Economic Adviser; GSTN; Airports
Authority of India; HVS Anarock; Ministry of Tourism; Joint Plant Committee; and IHS Markit.

RBI Bulletin October 2024 163

ARTICLE State of the Economy

Inflation Fuel and light deflation narrowed significantly

to (-)1.4 per cent in September from (-)5.3 per cent
Headline inflation, as measured by y-o-y changes
in August, driven by electricity, firewood, and
in the all-India CPI33, increased to a nine-month high
chips prices and a lower rate of deflation in LPG prices
of 5.5 per cent in September 2024 from 3.7 per cent
reflecting the dissipation of the impact of the 16 per
in August 2024 (Chart III.37). The sharp increase
cent reduction in these prices a year ago. Kerosene
in inflation of 1.75 percentage points came from a
prices, on the other hand, moved back into deflation.
positive momentum of 60 bps and an unfavourable
base effect of 115 bps. All CPI sub-groups – food; fuel Core inflation firmed up to 3.6 per cent in
and lights; and core (CPI excluding food and fuel) September from 3.3 per cent in August. Price growth
– showed positive momentum, registering m-o-m increased in respect of housing, household goods and
increases of 1.0 per cent, 0.1 per cent, and 0.3 per services, transport and communication, and personal
cent, respectively. care and effects while it remained steady for sub-
groups such as clothing and footwear, and health.
Food inflation increased y-o-y to 8.4 per cent in
Prices of recreation and amusement, education and
September from 5.3 per cent in August, driven up
pan, tobacco and intoxicants, however, recorded a
by a positive momentum and an unfavourable base
moderation in growth (Chart III.39).
effect. In terms of sub-groups, inflation in vegetables,
fruits, milk and products, non-alcoholic beverages In terms of regional distribution, inflation
and prepared meals picked up while that in cereals, hardened in both rural and urban areas in September,
meat and fish, eggs, pulses and sugar moderated with rural inflation at 5.9 per cent being higher
(Chart III.38). Price of edible oils and fats moved than urban inflation at 5.0 per cent. Majority of the
out of deflation after 19 consecutive months, while states registered inflation close to 6 per cent (Chart
deflation in spices prices deepened. III.40).

Chart III.37: Trends and Drivers of CPI Inflation

Sources: NSO; and RBI staff estimates.

33 As per the provisional data released by the NSO on October 14, 2024.

164 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart III.38: Annual Inflation (y-o-y) and Momentum (m-o-m) across Sub-groups

Sources: NSO; and RBI staff estimates.

High frequency food price data for October so far after the import duty was hiked by 20 percentage
(up to 17th) show a moderation in the prices of cereals points in September 2024. Among key vegetables,
(mainly for rice) and pulses (except for gram dal ). Edible potato prices softened, while those of onions and
oil prices continued to record a broad based hardening tomatoes recorded a steep increase (Chart III.41).

Chart III.39: Annual Inflation across Sub-groups(September 2024 versus August 2024)

Sources: NSO; and RBI staff estimates.

RBI Bulletin October 2024 165

ARTICLE State of the Economy

03, 2024) and the export duty was reduced from 40

Chart III.40: Spatial Distribution of Inflation:
September 2024 (CPI-Combined, y-o-y, per cent) per cent to 20 per cent in September. These changes
could have led to higher export demand, putting
upward pressure on domestic prices. The production
of both onion and tomato crops during the kharif
season is, however, expected to be robust on account
of favourable monsoon conditions, which may bring
about downward pressure on prices (Chart III.42).
Retail selling prices of petrol and diesel remained
unchanged in October so far (up to 17th). LPG prices
were also kept unchanged while kerosene prices
continued to decline (Table III.4).
The PMIs for September 2024 indicated that
<4 4-6 6-8
Note: Map is for illustrative purposes only.
the rate of expansion of input costs across both
Sources: NSO; and RBI Staff estimates. manufacturing and services firms increased,
The government scrapped the US$ 550 a tonne following a moderation in August. On the other
minimum export price on onions (introduced on May hand, selling price pressures across manufacturing

Chart III.41: DCA Essential Commodity Prices

Sources: Department of Consumer Affairs, GoI; and RBI staff estimates.

166 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart III.42: Average Mandi Prices Table III.4: Petroleum Products Prices
Item Unit Domestic Month-
Prices over-month
(per cent)

Oct- Sep- Oct- Sep- Oct-

23 24 24^ 24 24^

Petrol ₹/litre 102.92 100.97 100.97 0 0

Diesel ₹/litre 92.72 90.42 90.42 0 0

Kerosene ₹/litre 57.95 45.78 42.93 -1.9 -6.2

(subsidised)

LPG ₹/cylinder 913.25 813.25 813.25 0 0

(non-subsidised)
^: For the period October 1-17, 2024.
Note: Other than kerosene, prices represent the average Indian
Oil Corporation Limited (IOCL) prices in four major metros (Delhi,
Kolkata, Mumbai and Chennai). For kerosene, prices denote the
average of the subsidised prices in Kolkata, Mumbai and Chennai.
Sources: IOCL; Petroleum Planning and Analysis Cell (PPAC); and RBI staff
Sources: Food Corporation of India; and Centre for Monitoring Indian Economy. estimates.

firms eased to a four-month low, while the services 20 bps and 10 bps for the 3-months and one-year
sector recorded the slowest expansion in selling horizons, respectively. Respondents’ perception of
prices in the last 31 months (Chart III.43). current inflation has been generally on a declining
In the latest bi-monthly round of the RBI’s survey, trend since September 2022, barring two episodes of
households’ inflation expectations moderated by marginal increase (Chart III.44).

Chart III.43: PMI: Input and Output Prices

Note: A level of 50 corresponds to no change in activity and a reading above 50 denotes expansion and vice versa.
Source: S&P Global.

RBI Bulletin October 2024 167

ARTICLE State of the Economy

unambiguously focused on a durable alignment of

Chart III.44: Households’ Median Inflation
Expectations inflation with the target, while supporting growth.

System liquidity mostly remained in surplus

during September-October so far (up to October 17),
owing to a pickup in government spending and the
return of currency to the banking system. There was,
however, a brief period of liquidity deficit during
the latter half of September (September 21-25) on
account of advance tax payments and GST related
outflows. Overall, the average daily net absorption
under the liquidity adjustment facility (LAF) was
₹1.2 lakh crore during September 16 to October 17,
2024, as against ₹1.53 lakh crore during August 16
and September 15, 2024 (Chart IV.1).
Source: Inflation Expectations Survey of Households (IESH), RBI.
In view of the evolving liquidity conditions, the

IV. Financial Conditions Reserve Bank conducted one main and three fine-
tuning variable rate repo (VRR) operations during
In the bimonthly monetary policy meeting of September 17-24, cumulatively injecting ₹2.1 lakh
October 2024, the Monetary Policy Committee (MPC) crore into the banking system to provide adequate
decided to keep the policy repo rate unchanged at liquidity. As liquidity returned to the banking
6.50 per cent by a majority of 5:1. In a unanimous system, one main and six fine-tuning variable rate
decision, the MPC changed the stance to neutral reverse repo (VRRR) auctions were conducted to
from withdrawal of accommodation while remaining mop up surplus liquidity amounting to ₹4.1 lakh

Chart IV.1: Liquidity Operations

Source: RBI.

168 RBI Bulletin October 2024

State of the Economy ARTICLE

crore during September 30 to October 17, 2024. however, firmed up and traded above the policy repo
Banks continue to show reluctance in parting with rate for a brief period (September 21-25) on account
liquidity for longer tenors, as evidenced by lower of liquidity deficit in the banking system due to
offer-cover ratios in the main operation. Of the reasons discussed earlier. On September 30, the
average total absorption of ₹1.54 lakh crore during WACR spiked by 15 bps on account of the usual half
September 16 to October 17, 2024, placement of year end tightness brought about by (i) banks reducing
funds under the standing deposit facility (SDF) their exposure in the uncollateralised market, which
accounted for 68 per cent. Average daily borrowings lowers their requirements of provisioning for capital
under the marginal standing facility (MSF) increased adequacy; and (ii) mutual funds (MFs) reducing
to ₹0.08 lakh crore during September 16 to October their lending in the tri-party repo segment because
17, 2024 from ₹0.05 lakh crore during August 16 and of redemption pressures. These circumstances
September 15, 2024. notwithstanding, the WACR remained within the
The weighted average call rate (WACR) averaged policy corridor. In the collateralised segment, the tri-
6.50 per cent during September 16 to October 17 party repo rate moved in tandem with the WACR,
as compared with 6.52 per cent during August 16 averaging 11 bps below the policy repo rate during
to September 15, 2024 (Chart IV.2a). The WACR, the same period (Chart IV.2b).

Chart IV.2: Policy Corridor and Money Market Rates

Sources: RBI; CCIL; and Bloomberg.

RBI Bulletin October 2024 169

ARTICLE State of the Economy

In the short-term money market segment, The weighted average discount rate (WADR)
yields on 3-month treasury bills (T-bills) softened of CPs and weighted average effective interest
during September 16 and October 17 on account rate (WAEIR) of CDs generally evolved in line with
of lower short-term borrowing requirements of the monetary conditions (Chart IV.3). The WADR stood
Government, as reflected in cancellation of T-bill at 7.51 per cent in October 2024 (upto October 15),
auctions in the second half of September. Rates on higher than 7.45 per cent during the corresponding
3-month commercial paper (CPs) issued by NBFCs period of previous year. Also, WAEIR increased to
and 3-month CDs have eased during the same period 7.27 per cent (upto October 17, 2024) from 7.23 per
(Chart IV.2b). cent a year ago, reflecting the large volume of CD
issuances.
The average risk premium in the money market
(spread between 3-month CP and 91-day T-bill rates) In the primary market, CD issuances grew by 69
was at 113 bps during the period September 16 – per cent (y-o-y) to ₹5.58 lakh crore during 2024-25
October 17, 2024, 6 bps higher than during August (up to October 4) as banks turned to the CD market
16 to September 15, 2024. In the secondary market, for their funding requirements (Chart IV.4). Banks
the spread of 3-month CP (NBFC) and CD rates over prefer to bridge the funding gap through issuances of
the 91-day T-bill rate stood at 115 bps and 73 bps, short-term CDs rather than raising deposit rates. CP
respectively, during October 2024 (upto October 17), issuances stood at ₹8.0 lakh crore during 2024-25 (up
higher than 71 bps and 28 bps a year ago (Chart IV.2c). to October 15), higher than ₹7.34 lakh crore in the
Though the spreads in general tend to ease during corresponding period of the previous year. With the
periods of surplus liquidity, they have increased in Reserve Bank increasing risk weights on bank loans
recent months, mainly due to a fall in 91-Day T-Bill to NBFCs, CP issuances by NBFCs increased as they
rates. looked towards diversifying their funding sources.

Chart IV.3: WADR and WAEIR

Note: *:up to October 17, 2024.

Sources: RBI; and CCIL- FTRAC.

170 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.4: Certificates of Deposit (CDs) and Commercial Paper (CP) - Fortnightly Issuances

Source: RBI.

In the fixed income segment, domestic bond October 17, 2024 (Chart IV.5a). The average term spread
yields generally softened in September on account of (10-year minus 91-day T-bills) remained stable at 29
benign domestic inflation, improved global investor bps during September 16 – October 17, as compared
sentiment, falling US treasury yields and decline in with 23 bps during August 16 - September 15. G-sec
crude oil prices, but they exhibited some hardening yield broadly remained stable across the mid-segment
in early October. The yield on the 10-year Indian (except 10-year) of the term structure. (Chart IV.5b).
benchmark government security (G-sec) moved in a The spread of 10-year Indian G-sec yield over
range of 6.72 - 6.85 per cent during September 16 – that of 10-year US bonds has remained range-bound,

Chart IV.5: Developments in the G-sec Market

Sources: Bloomberg; CCIL; and RBI staff estimates.

RBI Bulletin October 2024 171

ARTICLE State of the Economy

Chart IV.6 : Volatility and Spread-Bond Market

Note: *: 12-months rolling standard deviation.

Sources: Bloomberg; and RBI staff calculations.

after falling to a 17-year low in October 2023. As on Growth in currency in circulation (CiC), the largest
October 18, 2024, the spread stood at 271 bps as component of RM, increased to 6.7 per cent (y-o-y) as
against 243 bps a year ago. The volatility of yields on October 11, 2024 from 3.0 per cent as on May 17,
in the Indian bond market has been low compared 2024, on account of the base effect of the withdrawal
to that of the US treasury market, though both have of ₹2000 banknotes34 – 98 per cent has returned to
risen since August 2024. The unwinding of yen carry the banking system, mostly in the form of deposits
trade and uncertainty regarding magnitude and (as on September 30, 2024).
timing of monetary policy easing provided upsides
Table IV.1: Financial Markets - Rates and Spread
(Chart IV.6).
Interest Rates Spread (bps)
Corporate bond yields moderated in tandem (per cent) (Over Corresponding
Risk-free Rate)
with softening G-sec yields. Risk premia generally Instrument Aug 16, Sept Variation Aug 16, Sept Variation
remained unchanged (except for 1-year AAA category) 2024 16, 2024 16,
– Sept 2024 – – Sept 2024 –
during September 16 - October 15, 2024 (Table IV.1). 15, Oct 15, 15, Oct 15,
2024 2024 2024 2024
Corporate bond issuances were ₹79,856 crore during
1 2 3 (4 = 3-2) 5 6 (7 = 6-5)
August 2024 as compared with ₹49,329 crore a
Corporate Bonds
year ago. During 2024-25 (up to August), however, (i) AAA (1-year) 7.94 7.83 -11 112 117 5
corporate bond issuances were marginally lower at (ii) AAA (3-year) 7.81 7.74 -7 95 95 0
₹3.3 lakh crore than ₹3.4 lakh crore during the same (iii) AAA (5-year) 7.75 7.65 -10 85 83 -2
period of the previous year. (iv) AA (3-year) 8.56 8.49 -7 170 170 0
(v) BBB- (3-year) 12.14 12.07 -7 528 528 0
Reserve money (RM) excluding the first- Note: Yields and spreads are computed as averages for the respective
round impact of change in the cash reserve ratio periods.
Sources: FIMMDA; and Bloomberg.
(CRR) recorded a growth of 7.0 per cent (y-o-y) as on
34 Announced on May 19, 2023.
October 11, 2024 (6.1 per cent a year ago) [Chart IV.7].

172 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.7: Growth in Reserve Money and Currency in Circulation

Note: Latest data for reserve money pertain to October 11, 2024.
Source: RBI.

On the sources side (assets), RM comprises net cent, the highest since August 2020, mainly due to
domestic assets (NDA) and net foreign assets (NFA) of revaluation gains from rising gold prices (Chart IV.8).
the Reserve Bank. Foreign currency assets (accounting Money supply (M3) rose by 11.0 per cent (y-o-y) as
for more than 90 per cent of NFA) increased by 19.8 on October 4, 2024 (same as a year ago).35 Aggregate
per cent (y-o-y) as on October 11, 2024. Gold – the deposits with banks, accounting for around 87 per
other major component of NFA – grew by 52.1 per cent of M3, increased by 11.7 per cent (12.2 per cent

Chart IV.8: RBI’s Net Foreign Exchange Assets (NFA) - Growth

Source: RBI.

35 Excluding the impact of the merger of a non-bank with a bank (with effect from July 1, 2023).

RBI Bulletin October 2024 173

ARTICLE State of the Economy

Chart IV.9: M3 Growth and Credit Growth of SCBs - Base Effect and Momentum

Source: RBI.

a year ago). Scheduled commercial banks’ (SCBs’) While SCBs’ incremental credit-deposit (CD) ratio
credit growth stood at 14.1 per cent as on October 4, declined from 95.8 as at end-March 2024 to 87.5 as
2024 (14.7 per cent a year ago) [Chart IV.9]. on October 4, 2024, there has been a narrowing of the
gap between credit and deposits (Chart IV.11a). For
SCBs’ deposit growth (excluding the impact of the
public and private sector banks, the incremental CD
merger), which witnessed an increase in the wake of
ratio stood at 102.5 per cent and 78.5 per cent (88.5
withdrawal of ₹2000 banknotes, continued to remain
per cent and 87.4 per cent a year ago), respectively, as
in double digits since April 2023 (Chart IV.10).
on October 4, 2024 (Chart IV.11b). With the statutory

Chart IV.10: SCBs’ Aggregate Deposits, Credit Growth and Outstanding Certificates of Deposit

Source: RBI.

174 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.11: Incremental Credit-Deposit Ratio

Source: Form A return under Section 42(2) of RBI Act, 1934.

requirements for CRR and statutory liquidity ratio and outstanding rupee loans have increased by 190
(SLR) at 4.5 per cent and 18 per cent, respectively, bps and 119 bps, respectively, during May 2022 to
around 77 per cent of deposits were available with August 2024. On the deposit side, the weighted
the banking system for extending credit as on average domestic term deposit rates (WADTDRs) on
October 4, 2024. fresh and outstanding rupee term deposits of SCBs
increased by 243 bps and 190 bps, respectively,
In response to the 250 bps hike in the policy repo
during the same period (Table IV.2).
rate since May 2022, banks have revised upwards
their repo-linked external benchmark-based lending Transmission across bank groups indicates that
rates (EBLRs) by a similar magnitude. The median the increase in the WALR on fresh rupee loans was
1-year marginal cost of funds-based lending rate higher in the case of public sector banks (PSBs) vis-
(MCLR) of SCBs has increased by 170 bps during à-vis private banks; however, in the case of deposits,
May 2022 to September 2024. Consequently, the it was higher for PSBs during the same period
weighted average lending rates (WALRs) on fresh (Chart IV.12).

Table IV.2: Transmission to Banks’ Deposit and Lending Rates

(Variation in bps)

Term Deposit Rates Lending Rates

WADTDR – WADTDR- WALR - WALR-
1-Yr. MCLR
Period Repo Rate Fresh Outstanding EBLR Fresh Rupee Outstanding
(Median)
Deposits Deposits Loans Rupee Loans
Easing Phase Feb 2019 to Mar 2022 -250 -259 -188 -250 -155 -232 -150
Tightening Period May 2022 to Aug* 2024 +250 243 190 250 170 190 119
Notes: Data on EBLR pertain to 32 domestic banks.
*: Data on EBLR and MCLR pertain to September 2024.
WALR: Weighted Average Lending Rate; WADTDR: Weighted Average Domestic Term Deposit Rate;
MCLR: Marginal Cost of Funds-based Lending Rate; EBLR: External Benchmark based Lending Rate.
Source: RBI staff estimates.

RBI Bulletin October 2024 175

ARTICLE State of the Economy

Chart IV.12: Transmission across Bank-groups (May 2022 to August 2024)

Note: Data on 1-year median MCLR pertain to May 2022 to September 2024.
Source: RBI.

The Government of India kept rates on During September-October 2024 so far, Indian
small savings schemes unchanged for Q3:2024-25. 36
equity markets registered losses, with the BSE
Rates on most of the small savings instruments are Sensex decreasing by 1.4 per cent to close at 81,225
now above the formula based rates, except rates on on October 18, 2024 (Chart IV.13). After remaining
public provident funds and post office recurring rangebound in the first half of September, the BSE
deposits.37 Sensex experienced a bullish run to breach the

Chart IV.13: BSE Sensex and Institutional Flows

Note: FPI and MF flows are represented on 15-days rolling sum basis.
Source: Bloomberg.

36 https://dea.gov.in/sites/default/files/Q3_2425.pdf
37 Chapter IV: Monetary Policy Report - October 2024, RBI.

176 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.14: Foreign Direct Investment Flows

Sources: RBI; and IMF.

historical 85,000 mark, mostly supported by cues from were sourced from Singapore, Mauritius, the UAE,
global markets. Thereafter, the markets exhibited the Netherlands, and the US.
a declining bias as domestic sentiments remained
Net foreign portfolio investment (FPI) inflows
subdued amidst escalation of geopolitical conflicts
to the tune of US$ 9.6 billion in September 2024
in the Middle East, rise in crude oil prices and
rose to their highest level since December 2020
media reports of portfolio outflows from other Asian
(Chart IV.15a). Net FPI inflows in the equity segment
EMEs to China. Weaker-than-expected corporate
accelerated in September 2024 to a nine-month
earnings releases for Q2:2024-25 also weighed on
high level to US$ 5.9 billion, boosted by the rate
the sentiment in domestic equity markets. During
September, FPIs remained net buyers in the domestic cut in the US, unwinding of Yen carry trade, and
equity markets but turned net sellers in October (up optimistic domestic growth prospects. Among peer
to October 16, 2024) amid risk-off sentiment. EMEs, Indian equities received the highest inflows
after China in September (Chart IV.15b). The debt
Net FDI inflows has moderated across the top FDI
segment continues to receive steady FPI inflows
recipient economies (Chart IV.14a). During 2024-25,
to the tune of US$ 23.5 billion since October 2023,
FDI flows to India recorded signs of revival as gross
following the announcement of the inclusion of
inward FDI during April-August 2024 increased to US$
36.1 billion from US$ 27.4 billion a year ago, while net Indian sovereign bonds in JP Morgan’s Government
FDI at US$ 6.6 billion during April-August 2024 more Bond Index – Emerging Markets (GBI-EM). Among
than doubled from a year ago (Chart IV.14b). Around sectors, financial services and telecommunications
two-thirds of the gross FDI inflows were directed received the highest FPI inflows during September.
towards manufacturing, financial services, Net FPI outflows amounted to US$ 7.9 billion during
communication services, and electricity and other October 2024 (up to October 16), triggered by rising
energy sectors. About three-fourths of the flows risk-off sentiment globally.

RBI Bulletin October 2024 177

ARTICLE State of the Economy

Chart IV.15: Net Portfolio Investments

Notes: 1. Debt includes investments under the voluntary retention route and hybrid instruments.
2. *: Data up to October 16, 2024.
Sources: National Securities Depository Limited (NSDL); and Institute of International Finance.

Net accretions to non-resident deposits rose to Two-fifths of the total ECB loans raised during April-
US$ 7.8 billion during April-August 2024 from US$ August 2024 were for capital expenditure purposes
3.7 billion a year ago, led by accretions to all three (including on-lending and sub-lending for capex)
accounts, namely, Non-Resident (External) Rupee [Chart IV.16c].
Accounts [NR(E)RA], Non-Resident Ordinary (NRO) India’s foreign exchange reserves reached a
and Foreign Currency Non-Resident [FCNR(B)] historical high of US$ 704.9 billion on September 27,
accounts. 2024. As on October 11, it stood at US$ 690.4 billion,
During April-August 2024, both registrations covering for 11.8 months of imports and more than

(US$ 20.6 billion) and gross disbursements (US$ 101 per cent of total external debt outstanding at

16.1 billion) of external commercial borrowings end-June 2024 (Chart IV.17a). During 2024 so far (as
on October 11), India’s foreign exchange reserves
(ECBs) were lower than in the corresponding period
increased by US$ 68.0 billion, second only to China
last year (Chart IV.16a). Adjusting for principal
among major foreign exchange reserves holding
repayments, net ECB inflows (US$ 5.4 billion) in
countries (Chart IV.17b).
2024-25 so far were lower than in the corresponding
period previous year. The overall cost of ECBs The Indian rupee (INR) remained the least
rose by 37 bps during April-August 2024 over the volatile major currency during September 2024,
corresponding period last year. The weighted average depreciating by 0.1 per cent (m-o-m) vis-à-vis the US

interest margin (WAIM) over the benchmark rates dollar (Chart IV.18).

increased by 14 bps during April-August 2024 vis-à- In terms of the 40-currency real effective
vis the corresponding period last year (Chart IV.16b). exchange rate (REER), the INR depreciated by

178 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.16: External Commercial Borrowings

Sources: Form ECB, RBI; and RBI staff estimates.

0.3 per cent (m-o-m) in September 2024 as more than offset positive relative price differentials
depreciation of the INR in nominal effective terms (Chart IV.19).
Chart IV.17: Foreign Exchange Reserves

Notes: 1. *: Data for October 11. The import cover for September and October 2024 is based on annualised merchandise imports for the quarter ending June 2024 on
balance of payments statistics.
2. ^: Countries are arranged in the decreasing order of change in reserves in 2024. Latest data for India are for October 11, 2024, October 4 for Russia, end-August
for Switzerland and Hong Kong, and end-September for other countries.
Sources: RBI; respective central bank websites; and RBI staff estimates.

RBI Bulletin October 2024 179

ARTICLE State of the Economy

Chart IV.18: Movements of the Indian Rupee and Major Currencies against the US Dollar
(September 2024 over August 2024)

Note: US dollar (DXY) measures the movements of the US dollar against a basket of major currencies (Euro, Japanese yen, British pound, Canadian dollar, Swedish krona,
Swiss franc).
Sources: FBIL; Thomson Reuters; and RBI staff estimates.

India’s current account balance (CAB) recorded a services exports and remittance receipts improved
deficit of 1.1 per cent of GDP in Q1:2024-25 as against over the period. There was an accretion of US$ 5.2
a surplus of 0.5 per cent in the preceding quarter billion to the foreign exchange reserves (excluding
(Q4:2023-24) and a deficit of 1.0 per cent a year ago valuation effects) in Q1:2024-25 as compared to US$
(Q1:2023-24). The widening of the current account 24.4 billion in Q1:2023-24 (Chart IV.20).
deficit in Q1:2024-25 from a year ago was mainly At end-June 2024, India’s external debt at
due to a rise in the merchandise trade deficit, while US$ 682.3 billion stood at 18.8 per cent of GDP,

Chart IV.19: Movements in the 40-Currency Real Effective Exchange Rate

Source: RBI.

180 RBI Bulletin October 2024

State of the Economy ARTICLE

Chart IV.20: India’s Balance of Payments

Source: RBI.

slightly lower than 18.9 per cent at end-March resilient as indicated by sustainable levels of key
2024 (Chart IV.21a). India’s external sector remains external indicators at end-June 2024 (Chart IV.21b).
Chart IV.21: External Vulnerability- India

Note: RM: Residual Maturity.

Sources: RBI; and Government of India.

RBI Bulletin October 2024 181

ARTICLE State of the Economy

India’s net international investment position (IIP) than ₹500’ transaction band. Credit card issuances
increased by US$ 6.7 billion during Q1:2024-25 rose by 15 per cent in August 2024, bringing the
due to a rise in foreign-owned financial assets in total to 10.5 crore cards. Overall, in H1:2024-25, total
India vis-à-vis residents’ overseas financial assets. digital payments increased (y-o-y) by 38 per cent (43
However, the ratio of India’s international assets to per cent in 2023-24) in volume and 19 per cent (15
international liabilities improved to 74.1 per cent in per cent 2023-24) in value.38
June 2024 compared to 71.3 per cent in June 2023,
Various initiatives aimed at leveraging digital
indicating a stronger external position than a year
ago (Chart IV.21c). platforms for efficient disbursement of funds were
introduced in September. The National Payments
Payment Systems
Corporation of India (NPCI) has enabled e-RUPI
Digital transactions continued advancing across vouchers through the Bharat Interface for Money
various payment modes in September 2024 (Table (BHIM) app for artisans under the PM Vishwakarma
IV.3). The Real Time Gross Settlement (RTGS) reached Scheme to disburse the scheme amount, promoting
₹177.8 lakh crore during the month–the highest in the adoption of digital payment modes.39 Similarly,
2024-25 so far. Among the retail modes, transactions the Central Bank Digital Currency (CBDC) pilot
under the Unified Payments Interface (UPI), the project has been integrated with a state government
National Electronic Funds Transfer (NEFT) and the scheme for efficient fund transfer.40
National Automated Clearing House (NACH) posted
double digit growth (y-o-y) in September. UPI scaled As part of ongoing efforts to internationalise
a new high of 15 billion transactions in the month, UPI, NPCI International Payments Limited
while its average ticket size declined to ₹1,372, (NIPL) has partnered with the Ministry of Digital
indicating growing adoption of digital modes for Transformation of Trinidad and Tobago to develop
small-value transactions. This is further corroborated a real-time payments platform, making it the first
by the bulk of the peer-to-merchant (P2M) and peer- Caribbean nation to adopt India’s home-grown
to-peer (P2P) UPI volumes falling under the ‘less payment mode.41

Table IV.3: Growth in Select Payment Systems

(y-o-y in per cent)

Payment Modes Transaction Volume Transaction Value

Aug-23 Aug-24 Sep-23 Sep-24 Aug-23 Aug-24 Sep-23 Sep-24
RTGS 16.0 8.9 7.9 9.1 17.8 15.8 5.5 22.3
NEFT 35.6 41.2 29.2 41.3 19.1 14.5 7.0 15.1
UPI 60.8 41.3 55.7 42.5 46.9 30.7 41.4 30.7
IMPS 4.8 -7.3 2.3 -9.1 15.3 12.4 11.7 11.4
NACH 14.1 23.9 20.2 20.2 17.9 25.6 14.1 27.1
NETC 13.3 6.8 15.4 6.5 21.9 8.4 19.9 10.4
BBPS 23.9 86.1 20.2 106.6 46.5 258.6 43.8 268.5
Note: RTGS: Real Time Gross Settlement, NEFT: National Electronic Funds Transfer, UPI: Unified Payments Interface, IMPS: Immediate Payment Service,
NACH: National Automated Clearing House, NETC: National Electronic Toll Collection, BBPS: Bharat Bill Payment System.
Source: RBI.
38 Data for September 2024 are provisional.
39 NPCI. (2024). BHIM to Empower Artisans under PM Vishwakarma Scheme through e-RUPI Vouchers.
40 Subhadra Yojana of Odisha State Government (PIB, 2024).
41 NPCI. (2024). NPCI International to Develop UPI-like Real-Time Payments Platform in Trinidad and Tobago.

182 RBI Bulletin October 2024

State of the Economy ARTICLE

In the Statement on Developmental and to external demand for India’s exports although
Regulatory Policies announced on October 09, 2024, escalation of geopolitical tensions remains a potential
the Reserve Bank increased the per-transaction limit threat.
for UPI123 Pay to ₹10,000 (from ₹5,000) and for the
In terms of aggregate supply, above normal rainfall
UPI Lite wallet to ₹1,000 (from ₹500). Additionally,
in the monsoon season augurs well for overall kharif
the overall limit for UPI Lite was raised to ₹5,000
production in the country as well as for reservoir
(from ₹2,000). It has also been proposed to introduce
storage, which brightens the rabi season outlook. The
a ‘beneficiary account name look-up facility’ for RTGS
increased likelihood of La Niña conditions developing
and NEFT transactions to boost customer confidence
during the post-monsoon season of 2024 is beneficial
and reduce the risk of wrong credits and frauds.42
for overall precipitation, although the possibility of
V. Conclusion excessive rainfall damaging the standing kharif crops
Going forward, uncertainty surrounding global remains a risk.
economic prospects could persist in the near term Liquidity conditions remain in surplus mode. The
with heightened geopolitical tensions in the Middle Reserve Bank will continue to be nimble and flexible
East. Increase in commodity prices, especially of in its liquidity management operations and will
crude oil and metals, raise pass-through risks for net
deploy an appropriate mix of instruments to modulate
importer countries. The future course of monetary
both frictional and durable liquidity so as to ensure
policy the world over would, therefore have to take
that interest rates evolve in an orderly manner.44
into account the risks to both growth and inflation
Indian equity markets have scaled fresh peaks in the
from recent commodity price shocks. The response
current year on strong macroeconomic fundamentals
of the Chinese economy to the stimulus measures
and long-term growth potential. Concerns, however,
announced also remains unclear, complicating the
remain around stretched valuations and uncertainty
outlook for the global economy.
surrounding geopolitical conflicts in the Middle East
In India, aggregate demand is poised to shrug off which got reflected in the pullback witnessed in
the temporary slowdown in momentum in the second October. Markets are likely to tread cautiously with
quarter of 2024-25 as festival demand picks up pace an eye on corporate earnings reports for Q2:2024-25
and consumer confidence improves. Rural demand is and trends in global markets. Despite these concerns,
expected to get a boost from the improved agricultural the pipeline for primary market issuances remains
outlook. Private investment should pick up steam in strong.
response to signs of pick-up in consumption demand
and rising business optimism. With the financial India’s external sector is showing resilience
sector ready to intermediate resources for productive despite rising geopolitical tensions. On October 08,
investment, buffered by healthy balance sheets, and 2024, the Financial Times Stock Exchange (FTSE)
the government’s continued thrust on capex, the – Russell announced that it would include India’s
investment outlook appears bright. The ongoing sovereign bonds in its Emerging Markets Government
strengthening of global trade43 could provide fillip Bond Index (EMGBI) over a six-month period from
42
September 2025 with a share of 9.35 per cent on
RBI Press Release. Statement on Developmental and Regulatory Policies.
October 09, 2024. a market value weighted basis. This is expected to
43 Global goods trade has continued to recover in the third quarter of 2024

despite headwinds, as per the WTO goods trade barometer (September 44Governor’s Statement: October 9, 2024, Monetary Policy Statement
2024). 2024-25.

RBI Bulletin October 2024 183

ARTICLE State of the Economy

boost flows to the debt segments significantly, apart festive season, marked by mega e-commerce sales
from positioning India as a favourable investment and rising demand from smaller towns and cities.
destination. The innate strength of India’s external Increasingly, consumers in Tier 3 to 6 cities are using
sector lies in its strong macroeconomic fundamentals, digital payment services daily.45 These developments
supported by high foreign exchange reserves. highlight the vast potential for driving adoption and
Digital payment transactions are expected to ensuring sustained usage of digital payments at the
gain from strong tailwinds with the onset of the grassroots level.

45 Chase India Report (August 2024). The State of Digital Payments in

India.

184 RBI Bulletin October 2024

State of the Economy ARTICLE

Annex 1: Major Takeaways from the RBI’s Enterprise Surveys

• CU in the manufacturing sector recorded a seasonal decline in Q1:2024-25 (Chart A1). Seasonally adjusted CU,
however, increased by 120 basis points during the quarter. Manufacturers maintained a positive outlook on
CU in the ensuing quarters (Chart A2).

Chart A1: Capacity Utilisation in Manufacturing Sector

Source: Order Books, Inventories and Capacity Utilisation Survey, RBI.

Chart A2: Manufacturers’ Assessment and Expectations on Capacity Utilisation

Source: Industrial Outlook Survey, RBI.

RBI Bulletin October 2024 185

ARTICLE State of the Economy

• Manufacturing firms expect similar levels of optimism on production in Q3:2024-25 and it is likely to improve
from Q4 onwards (Chart A3).

Chart A3: Expectations on Production/Turnover

Source: Industrial Outlook Survey; and Services and Infrastructure Outlook Survey, RBI.

• Services and infrastructure firms continue to poll a highly optimistic outlook on demand conditions (Chart
A4). Firms remain optimistic on the overall business situation till Q1:2025-26.

Chart A4: Expectations on Overall Business Situation

Sources: Industrial Outlook Survey; and Services and Infrastructure Outlook Survey, RBI.

186 RBI Bulletin October 2024

State of the Economy ARTICLE

• Employment is expected to move in tandem with demand conditions (Chart A5).

Chart A5: Expectations on Overall Employment Situation

Sources: Industrial Outlook Survey; and Services and Infrastructure Outlook Survey, RBI.

• Input cost pressures are likely to ease for the manufacturing sector while the same is expected to persist for
the services and the infrastructure sectors in Q3:2024-25 (Chart A6).

Chart A6: Expectations on Input Cost

Sources: Industrial Outlook Survey: and Services and Infrastructure Outlook Survey, RBI.

RBI Bulletin October 2024 187

ARTICLE State of the Economy

• The manufacturing sector anticipates stable growth in selling prices in Q3:2024-25. Growth in selling prices is
expected to moderate for the services and infrastructure sectors in Q3:2024-25 (Chart A7).

Chart A7: Expectations on Selling Price

Sources: Industrial Outlook Survey; and Services and Infrastructure Outlook Survey, RBI.

• Bankers expect higher loan demand and easy terms and conditions for loans across major sectors (Chart A8).

Chart A8: Senior Loan Officers’ Assessment and Expectations on Credit Demand

Source: Bank Lending Survey, RBI.

Note: The ‘net response’ is calculated as the difference between the percentage of respondents reporting
optimism and that reporting pessimism. The increase option (I) is an optimistic response for all parameters,
except the cost related parameters, such as cost of raw materials, etc., where the decrease option (D) signifies
optimism from the viewpoint of a respondent company.

188 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

Monetary Policy Transmission of businesses and households, to get manifested in

output and prices and hence in societal welfare.
in India: The Recent Experience
The efficacy of monetary transmission is based
by Michael Debabrata Patra, on (i) active liquidity management by the central
Indranil Bhattacharyya, Joice John and bank; (ii) an efficient payment and settlement system;
Avnish Kumar^ (iii) well-integrated financial markets that arbitrage
interest rates across constituent segments; (iv) a
Evaluating the impact of monetary policy changes to sound and vibrant system of financial intermediaries,
inflation, aggregate demand and inflation expectations with asset-liability profiles that are responsive to
in India through the transmission channels of the spectrum policy rate changes; and (v) the absence of market
of financial markets, during the phase of monetary policy pricing distortions like subventions and administered
tightening since May 2022 indicates relatively strong settings of interest rates. Even with the fulfilment
effects on the shorter end of the term structure. Monetary of these pre-conditions, transmission losses often
policy shocks, however, significantly impact all market occur due to idiosyncrasies in market microstructure,
segments and across tenors. Pass-through to the exchange frictions within and across market segments and the
rate and equity prices has been relatively low. Overall, inexorable reality of macroeconomic and financial
policy rate increases have anchored inflation expectations cycles.
and modulated aggregate demand, generating Since early 2022, central banks across the
disinflationary responses. world engaged in one of the most aggressive and
Introduction synchronised episodes of monetary policy tightening
in recent history in response to an inflation surge
The efficient conduct of monetary policy is
that found parallel in the great inflation of the 1970s.
contingent upon the propagation of monetary policy
In India too, front-loaded and even pre-emptive
impulses across the spectrum of financial markets
monetary policy tightening was undertaken since
on to the real economy. For central banks, as the
May 2022. In the event, inflation has largely been
monopoly supplier of reserves, the responsibility
restrained to its last lap of alignment with targets
for transmission is to ensure that the monetary
across geographies. In fact, early movers of monetary
policy impulse is fully and seamlessly reflected at
policy tightening in this episode have been successful
the short-end of the term structure – the money
enough to pivot to commencing easing cycles. In
market (Patra, 2022). Accordingly, a money market
India, the process of disinflation has been stubborn,
interest rate – usually the rate determined in the
slow, and uneven, stalled by the incidence of repetitive
uncollateralised segment of the money market to
and often overlapping supply shocks. The trajectory
represent the infra-marginal demand for reserves –
of disinflation has, however, been downwards and
is designated as the operational target of monetary
a durable alignment with the target is in sight. This
policy. If markets are efficient and complete, changes
article delves into this somewhat unique experience
in short term rates synaptically travel across the term
by revisiting the various channels of transmission
structure and impact long-term rates which, in turn,
with some stylised facts on developments over the
influence spending decisions, saving and investment
past decade during tightening episodes (Section II),
^ The authors are from the Reserve Bank of India. The views expressed in followed by an empirical assessment of transmission
this article are those of the authors and do not represent the views of the
Reserve Bank of India. in financial markets and the impact of the current

RBI Bulletin October 2024 189

ARTICLE Monetary Policy Transmission in India: The Recent Experience

tightening cycle on macroeconomic variables (Section influence changes in output and inflation. It is in this
III), before concluding with some policy observations context that central bank communication is seen as
(Section IV). vital for the anchoring of inflation expectations and
actual inflation outcomes (Jung and Kühl, 2021).
II. Transmission Channels and Stylised Facts
Clearly, the credibility of the monetary authority
In the literature, five key channels of monetary drives the expectations channel (Park, 2023).
policy transmission have been identified, viz, From this perspective, monetary policy has been
interest rates; credit; asset prices; the exchange rate; characterised as the art of managing expectations
and expectations. The interest rate channel is the (Woodford, 2003). In the final analysis, however,
dominant one – expansionary monetary policy, for these channels work simultaneously, reinforcing and
instance, leads to a lowering of the cost of loanable interacting with each other. Country circumstances
funds, which, in turn, raises investment and matter, depending on the structure of the economy
consumption demand and eventually both output and the state of the financial system.
and prices. Similar effects can accrue through changes
In India, monetary policy transmission to money
in the availability of loanable funds, i.e., the credit
markets is usually instantaneous and complete,
channel, although it is not a standalone alternative
especially across collateralised segments. In the
mechanism; it is best regarded as amplifying
uncollateralised call money market – the focus of
conventional interest rate effects and running
transmission – sporadic and episodic deviations
alongside in impacting real activity (Bernanke and
are observed in times of reserve requirement and
Gertler, 1995). Policy rate changes also induce shifts
balance sheet dates as well as in recurring events
in asset prices that generate wealth effects through
such as advance tax outflows and government salary
market valuations of financial assets and liabilities.
payments. The government securities (G-sec) market
This asset price channel of monetary transmission
assumes a central position in the intermediate
interacts with the bank lending or credit channel,
to longer end of the interest rate continuum in
enhancing or diminishing the capacity to borrow at
view of it providing the risk-free term structure for
prevailing interest rates, and reinforcing impulses to
pricing instruments issued by all other sectors of
aggregate demand. Changes in domestic interest rates
the economy. Liquidity in the G-sec market is not
can also induce the external value of the domestic
uniform across the curve but concentrated in few
currency which, in turn, can bring about changes in
maturity segments because of “preferred habitat”
exports and imports and thereby in aggregate demand
and “market segmentation” behaviour of market
and output. The exchange rate channel of monetary
participants. Corporate bond yields essentially track
policy transmission is found to be dominant in small
the movements in G-sec yields, with changing risk
open economies (Chamon et al., 2019). Over the last
spreads over time caused by both variations in the
three decades, the expectations channel has assumed
risk-free rate and credit worthiness of corporates.
prominence in the conduct of forward-looking
Fixed income segments of the interest rate spectrum
monetary policy. Economic agents form futuristic
are also vulnerable to global spillovers.
assessments about the economy, the central bank’s
reactions thereto and modulate their current In the credit segment, the extent and speed of
behaviour accordingly. It is observed that these policy rate pass-through to lending and deposit rates
expectations-driven behaviourial changes powerfully have varied sizeably in tightening episodes, depending

190 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

upon factors such as the duration of the cycle, the September 20, 2013, policy normalisation commenced
speed of the rate hikes and the prevailing liquidity in a calibrated manner even while persisting with the
conditions. There are also several idiosyncratic anti-inflationary monetary policy stance. Following
factors that influence monetary policy transmission, the ebbing of volatility in the foreign exchange
viz., interest rate subventions; mismatches in the market, the Reserve Bank restored the width of the
maturity profile of banks’ assets and liabilities; LAF corridor to 100 bps along with relaxations in
loans being mostly contracted at floating rates with regulatory prescriptions1.
deposits contracted at fixed rates; rigidity in banks’ During July 2013 to December 2014, the Reserve
savings deposit rates; competition from administered Bank cumulatively increased the repo rate by 75 bps.
rates on small saving instruments; and the asset Transmission to various segments of the financial
quality of financial intermediaries. The introduction market spectrum evolved in a differentiated manner
of the external benchmark-based lending rate (EBLR) in response to these policy actions.
system of loan pricing, effective October 2019 has
The tightening of monetary and liquidity
improved transmission in the credit market (Kumar
conditions and imposition of regulatory prescriptions
et al., 2022). Against this backdrop, the rest of this
led to a significant increase in money market
section compares transmission across three monetary
rates in the range of 5 - 406 bps during July 15 to
tightening episodes over the last decade.
September 19, 2013. Normalisation of monetary
II.1 Taper Tantrum (July 2013 - Dec 2014) policy, liquidity augmenting measures along with
In May 2013, apprehensions of the likely tapering the relaxation in regulatory prescription beginning
of US bond purchases under quantitative easing September 20 eased financial conditions thereafter.
(QE) triggered outflows of portfolio investment The rates in the money market (except CD rate)
from emerging market economies (EMEs), including moderated significantly in the range of 148 – 217
India, particularly from the debt segment. Faced bps during September 20, 2013 - January 14, 2015,
with this haemorrhage, the Reserve Bank resorted even when the policy repo rate was increased by 75
to exceptional measures from mid-July to September bps (Chart 1a). Sovereign yields largely reflected the
2013 to address exchange market pressures – a domestic monetary policy stance, which adjusted to
rare instance of monetary policy steered to address insulate domestic macroeconomic conditions during
exchange rate concerns. The marginal standing the taper tantrum. Yields in G-Sec and corporate bond
facility (MSF) rate was raised by 200 basis points markets hardened during July to September 2013,
(bps) on July 15, 2013, which became the de facto and moderated as financial conditions eased after
policy rate, supported by liquidity limits on banks’ September. The yields in the corporate bond market

access to the liquidity adjustment facility (LAF); broadly tracked the movements in G-sec yields

open market sales of government securities of ₹25 (Chart 1b).

1 The minimum daily maintenance requirement of the CRR was reduced
billion on July 18, 2013; and increase in daily cash
from 99 per cent to 95 per cent effective from the fortnight beginning
reserve ratio (CRR) maintenance requirement; September 21, 2013. Additional liquidity was provided through term repos
of 7-day and 14-day tenor for a notified amount equivalent to 0.25 per cent
even as the repo rate was left unchanged. This was of net demand and time liabilities (NDTL) of the banking system through
variable rate auctions on every Friday beginning October 11, 2013 and further
eventually followed by an increase in the policy repo
increased to 0.5 per cent of NDTL of the banking system on October 29,
rate to contain the inflationary pressures. Beginning 2013.

RBI Bulletin October 2024 191

ARTICLE Monetary Policy Transmission in India: The Recent Experience

Chart 1: Monetary Transmission during July 2013 to December 2014 Episode

Note: The tightening phase represents the period July 15, 2013 to January 14, 2015.
Sources: Bloomberg; and Reserve Bank of India (RBI).

Transmission to the credit segment remained II.2 Policy Tightening (June 2018 - January 2019)
muted during July 2013 to December 2014. While Taking into consideration the risks to inflation
the weighted average lending rate (WALR) on fresh from global financial market developments, sharp
rupee loans of scheduled commercial banks (SCBs) increase in crude oil prices, rise in global commodity
increased marginally, the WALR on outstanding rupee prices and input cost pressures, the Monetary Policy
loans and weighted average domestic term deposit Committee (MPC) increased the policy repo rate
rate (WADTDR) on outstanding deposits witnessed a cumulatively by 50 bps during June 6 to August 8,
decline. During the initial months when the MSF rate 2018 and maintained a pause thereafter before a cut
was raised and liquidity tightening measures were in the February 2019 policy.
undertaken, the lending and deposit rates increased The pass-through to overnight money market
only marginally. Once normalcy was restored in rates was instantaneous and full during this
financial markets, banks started reducing their tightening episode. Transmission to short term
lending rates even as the repo rate was unchanged, money market rates, however, remained muted;
thus impacting the efficacy of transmission in this in fact, the rates on 3-month certificates of deposit
cycle (Chart 1c). (CDs) and commercial papers (CPs) declined. Durable

192 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

liquidity of ₹1.4 trillion was injected through open Monetary transmission to the deposit and
market purchases during October – December lending rates was partial and delayed. During June
2018 (RBI, 2018-19). Infusion of durable liquidity 2018 to January 2019, SCBs increased their lending
through open market operations (OMOs) and rate on fresh loans by 55 bps in response to the 50 bps
expectations of rate cuts had a softening impact change in the repo rate. Transmission to the WALR
on T-bill rates during October 2018 to January on outstanding rupee loans remained muted as the
2019. Accordingly, the CP and CD rates, which are increase in interest rates on fresh loans was more
typically priced off the risk-free rate (T-bill rate), than offset by the fall in interest rates on marginal
moderated during the same period. Barring cost of funds-based lending rate (MCLR)-linked loans
intermittent hardening, G-sec yields softened in this contracted in the past and reset at lower rates. The
episode due to continuing fall in crude oil prices internal benchmark-based lending rate regimes
and buoyed sentiments after the announcement suffered from a multitude of issues, such as opacity
of multiple open market purchases by the RBI. The and arbitrariness in calculation of the base rate/MCLR
yields in corporate bond market also moderated and spreads; and long reset clauses that inhibited
(Chart 2a and 2b). efficient monetary transmission (Chart 2c).

Chart 2: Monetary Transmission during June 2018 to January 2019 Episode

Note: The tightening phase represents the period June 6, 2018 to Feb 6, 2019.
Sources: Bloomberg; and RBI.

RBI Bulletin October 2024 193

ARTICLE Monetary Policy Transmission in India: The Recent Experience

II.3 Current Tightening Cycle (May 2022 onwards) the LAF corridor. The width of the corridor was thus
restored to its pre-pandemic configuration of 50 bps. In
Amidst inflationary pressures emanating from
consonance with the monetary policy stance, liquidity
heightened geopolitical tensions due to the war in
management operations were aimed at balancing out
Ukraine, a generalised hardening of global commodity
the level of liquidity in the banking system.
prices, supply chain disruptions, and volatility in
global financial market, the Reserve Bank moved into Money market interest rates rose broadly in
tightening mode beginning May 2022. Responding to tandem with the policy repo rate hikes, the increase
the ensuing inflation surge, the MPC increased the in CRR and the decline in surplus liquidity. These rates
policy repo rate cumulatively by 250 bps between May increased in the range of 236 – 325 bps during May
4, 2022 to February 8, 2023 and adopted a calibrated 4, 2022 to September 30, 2024. The yields on G-sec
and cautious approach thereafter to contain rising hardened in the initial phase of tightening, taking cues
inflation. The stance of monetary policy was also from global developments and the domestic monetary
altered to withdrawal of accommodation in June policy stance. Sovereign yields softened, however,
2022. In its liquidity management operations, the RBI reflecting positive sentiment on the inclusion of Indian
introduced a standing deposit facility (SDF) in April G-sec in global bond indices, moderation in headline
2022 at 25 bps below the repo rate as the new floor of inflation and fiscal consolidation (Chart 3a and 3b).

Chart 3: Monetary Transmission during May 2022 to September 2024 Episode

Note: The tightening phase represents the period May 4, 2022 to Sept 30, 2024. Data on lending and deposit rates are up to August 2024.
Sources: Bloomberg; and RBI.

194 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

The pace of monetary transmission to lending they involve only an exchange of interest and not
and deposit rates of SCBs has strengthened in notional principal amounts (Finlay and Olivan, 2012).
recent years, reflecting the RBI’s sustained efforts to Second, OIS contracts do not involve any initial
impart transparency and flexibility to SCBs’ interest cash flow; only net payments are exchanged, thus
rate structure, including the introduction of EBLR minimising liquidity risk. Taking cognizance of these
for floating rate loans in October 2019. The WALR features, OIS rates have been used to decipher market
on fresh rupee loans rose by 190 bps while that on
expectations on future monetary policy (Christensen
outstanding loans rose by 119 bps during May 2022
and Rudebusch, 2012; Woodford, 2012; Güneş and
to August 2024. In the case of deposits, the WADTDRs
Mohanty, 2018; Altavilla et al., 2019; Lloyd, 2021).
on fresh and outstanding deposits rose by 243 bps
and 190 bps, respectively, during the same period Using the 2-month3 OIS rates, in particular, the
(Chart 3c). monetary policy “surprises” can be estimated (John
et al., 2023a; Lloyd 2018, 2021).
III. Quantitative Assessment of Monetary Policy
Transmission It is observed that majority of monetary
policy announcements are well anticipated by the
Monetary policy impulses transmit through
changes in financial market variables (the first leg of market (Table 1). 9 out of 49 monetary policy
transmission), which subsequently gets propagated announcements since the implementation of the
to the real sector in terms of growth and inflation flexible inflation targeting (FIT) framework in India4
(last leg of transmission). From this perspective, this had a surprise component of 10 bps (in absolute
section provides an empirical assessment of the first terms) or above in the announced policy rate
and last leg of transmission. changes. The most noteworthy “surprise” was the
III.1 Transmission to Financial Markets off-cycle announcement made on May 4, 2022, which
completely surprised markets.
Assessing the strength of monetary policy
transmission in the first leg is complicated by Two alternate empirical approaches are used
monetary policy’s simultaneous and endogenous to estimate the impact of policy “surprises” on the
response to economic developments. In this context, financial market variables. In the first approach,
markets anticipate the central banks’ policy actions a 5-day window-based event study (ES) regression
in advance and adjust their behaviour even before analysis around the policy announcement days since
actual policy announcements. Sometimes, however,
October 2016 is carried out (Table 2).
central bank actions can result in monetary policy
“surprises”, which can be utilised to evaluate the The regression results suggest that monetary
impact of monetary policy transmission to financial policy changes affect shorter-term rates more
market variables. aggressively than long-term rates. Overnight
Overnight indexed swap (OIS) rates2 are useful call money rates are affected by the policy rate,
in identifying the “surprise” component of policy irrespective of whether they are anticipated or not.
announcement, with several advantages. First, Anticipated changes do not affect the long-term
counterparty risk is minimal in OIS contracts since 3 Since India has a bi- monthly monetary policy cycle, 2-month OIS rate
ensures that each window contains one and only one monetary policy
2 An OIS is an interest rate derivative contract in which two entities agree announcement.
to swap/exchange a fixed vis-à-vis a floating interest rate payment based on 4 The first meeting after the constitution of the first MPC and the formal
a notional principal amount. introduction of FIT was on October 4, 2016.

RBI Bulletin October 2024 195

ARTICLE Monetary Policy Transmission in India: The Recent Experience

Table 1: Monetary Policy Surprises (bps) Table 2: Event Study Regression Estimates: Impact
Policy Date Δ Policy Surprise Policy Date Δ Policy Surprise of Policy Surprises on Financial Market Variables
2016-17 2021-22 Independent
August 09 0 9 April 07 0 -3 Variables
Δ Policy Anticipated Surprise
October 04 -25 -10 June 04 0 -5
Dependent
December 07 0 7 August 06 0 -6 Variables
February 08 0 -1 October 08 0 -4 Δ WACR 0.784*** 0.776*** 0.822***
2017-18 December 08 0 -7
Δ G-Sec3Yr 0.292*** 0.152* 0.931***
April 06 0 -7 February 10 0 -17
Δ G-Sec5Yr 0.246*** 0.107 0.879***
June 07 0 2 2022-23
Δ G-Sec10Yr 0.151** 0.0493 0.616***
August 02 -25 -6 April 08** 0 0
Δ CB 3Yr 0.262*** 0.112 0.951***
October 04 0 -2 May 04 40 40
December 06 0 -2 June 08 50 -2 Δ CB 5Yr 0.245*** 0.107 0.876***

February 07 0 -5 August 05 50 1 Δ CB 10Yr 0.202*** 0.110 0.625***

2018-19 September 30 50 15 Δ INR-USD -0.0878 0.275 -1.741**
April 05 0 -4 December 07 35 -12 Δ NIFTY -1.082 -0.497 -3.749*
June 06 25 3 February 08 25 0 Note: *, **, ***: Significant at 10, 5 and 1 per cent respectively
August 01 25 5 2023-24 WACR: Weighted average overnight call money rate
G-sec: Government Securities rates
October 05 0 -15 April 06 0 -1
CB: Corporate bond rates
December 05 0 -5 Jun 08 0 6 Sources: John et al. (2023a); and Authors’ estimate.
February 07 -25 -8 August 10 0 8
2019-20 October 06 0 8 direction. G-sec and corporate bond yields positively
April 04 -25 1 December 08 0 7 react to the monetary policy “surprise”, while the
June 06 -25 0 February 08 0 5
exchange rate appreciates, and stock market returns
August 07 -35 -1 2024-25
diminish. In case of G-sec and corporate bond yields,
October 04 -25 6 April 05 0 4
December 05 0 10 June 07 0 -1 the impact is found to be higher for shorter tenure
February 06 0 -5 August 08 0 -2 interest rates.
2020-21
March 27* -75 -24
In the second approach, we use the local
May 22 -40 0 projection model (Jorda, 2005) to estimate the impact
August 06 0 7 of monetary policy “surprises” in a time series
October 09 0 -12 framework using daily data from October 2016.5 This
December 04 0 -8
approach also corroborates the findings from the
February 05 0 -4
Note: *: There was an additional 15 bps reduction in the reverse repo rate event study (Chart 4). Monetary policy “surprises”
making the LAF corridor asymmetric. affect the financial market variables significantly
**: Corridor width was restored by introducing Standing Deposit Facility
(SDF) at 25 bps below the policy repo rate. and in the expected direction. The effect on yields is
Policy dates where surprises were more than or equal to absolute 10 bps
found to wane beyond the three-year tenure in case
are shaded
Sources: John et al. (2023a); and Authors’ estimate. of G-sec and corporate bond yields. Policy surprises
have a relatively lower but significant pass-through to
rates instantaneously, perhaps because they have
the exchange rate and equity prices.
already been factored in by the market even before
the policy announcement. Policy surprises, however, 5 The advantages of local projections are several: (1) they can be estimated
by simple regression with standard packages; (2) they are more robust to
significantly impact all the financial market rates misspecification; (3) joint or point-wise analytic inference is simple; and
(G-sec yields; corporate bond yields; the exchange (4) they easily accommodate experimentation with highly nonlinear and
flexible specifications that may be impractical in a multivariate context
rate; and stock market returns) in the expected (Jorda, 2005).

196 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

Chart 4: Impact of Policy Rate “Surprises” on Financial Market Variables from Local Projection Model
Impact of 1 unit shock of “Surprise” on cumulative change in financial market variables

Note: IRF- Impulse response function; CI: Confidence interval; CB: Corporate bond yields; G-Sec: Government securities yields.
x-axes represent days and y-axes represent percentage points.
Source: Authors’ estimate.

III.2 Impact on Macroeconomic Variables The impact on inflation expectations can be

The impact of the policy rate on the real economy estimated by using the dynamic multiplier of the
is assessed through inflation expectations (IE) and policy rate on inflation expectations (IE) generated
aggregate demand. Monetary policy affects the real from an IE formation regression equation (Patra et al.,
sector with long and variable lags; hence, the impact 2024). The one-year ahead IE from household inflation
of easing and tightening cycles is usually intertwined. expectations survey is regressed on food inflation
Therefore, we use macro level analysis to identify the (representing adaptive expectations), the monetary
average impact of a policy rate change. policy framework (represented by inflation target or

RBI Bulletin October 2024 197

ARTICLE Monetary Policy Transmission in India: The Recent Experience

Table 3: Regression Coefficients Chart 5: Dynamic Multiplier (Shock: Policy Rate,

Variables Coefficient p-value Response: IE)
IE (-1) 0.44 0.000
Food Inflation 0.12 0.047
Target 0.65 0.006
Repo -0.31 0.097
Constant 4.00 0.000
Diagnostics: Adjusted R2: 0.740; Breusch-Godfrey LM test for
autocorrelation in errors p-value: 0.793.
Sources: NSO; RBI; and Patra et al. (2024).

commitment to the framework) and the policy repo

rate, by using quarterly data from Q1:2012-13 to
Q1:2024-25. Monetary policy has a significant negative
impact on inflation expectations, while adaptive
expectations (represented by food inflation) have a
statistically significant positive impact (Table 3).
Source: Authors’ estimate

The long-run elasticity of the policy rate on IE is

cycle from May 2022. QPM belongs to a genre of
0.70. This shows that an increase in the policy rate
New-Keynesian open economy, calibrated, gap model
leads to anchoring of IE. The dynamic multiplier
featuring several India specific features (John et al.,
suggests that policy rate tightening impacts inflation
2023b). The impulse response generated from QPM
expectations up to 2 quarters (Chart 5).
suggest that the 250 basis points increase since May
The macroeconomic impact of monetary policy 2022 has negatively contributed to aggregate demand
on aggregate demand and inflation is estimated by and headline inflation by 160 bps each till Q2:2024-
using the RBI’s Quarterly Projection Model (QPM), 25, working through various channels of monetary
focussing on the recent monetary policy tightening policy transmission (Chart 6).

Chart 6: Impulse Response Functions (250 bps Shock to Policy Rate)

Source: Authors’ estimate

198 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

IV. Conclusion Finlay, R., and Olivan, D. (2012). Extracting

Our findings on monetary policy transmission Information from Financial Market Instruments. RBA
in India suggest that monetary policy changes affect Bulletin, March.
short term interest rates more than long-term rates. Güneş, K., and Mohanty, M. (2018). Do Interest Rates
While anticipated policy changes do not have any Play a Major Role in Monetary Policy Transmission in
instantaneous impact on long-term rates, policy China?, BIS Working Papers 714, Bank for International
“surprises” significantly impact all market segments
Settlements.
and across tenors. Policy signals tend to wane, however,
beyond the three-year tenure. Policy “surprises” John, J., Talwar, B. A., Sachdeva, P. and Bhattacharyya,
are found to have a relatively lower but significant I. (2023a). Reading the Market’s Mind: Decoding
pass-through to the exchange rate and equity prices. Monetary Policy Expectations from Financial Data,
In terms of the impact of the policy rate tightening RBI Bulletin, November.
on the real economy, a significant negative impact John, J., Kumar, D. George, A. T., Mitra, P., Kapur, M.,
on inflation expectations is observed. The long-run
and Patra, M. D. (2023b). A Recalibrated Quarterly
elasticity of the policy rate with respect to inflation
Projection Model (QPM 2.0) for India, RBI Bulletin,
expectation reveals that an increase in policy rate
February.
anchors expectations effectively. The macroeconomic
impact of monetary policy on aggregate demand and Jordà, Ò. (2005). Estimation and Inference of Impulse
inflation indicate that the 250 basis points increase Responses by Local Projections, American Economic
since May 2022 has negatively contributed to aggregate Review, 95(1), 161-182.
demand and headline inflation by 160 bps each till
Jung, A. and Kühl, P (2021). Can Central Bank
Q2:2024-25, working through various channels of
Communication Help to Stabilise Inflation
policy transmission.
Expectations? ECB Working Paper Series. No 2547,
References: May.
Altavilla, C., Brugnolini, L., Gürkaynak, R. S., Motto, R., Kumar, A., Prakash, A., and Latey, S. (2022). Monetary
and Ragusa, G. (2019). Measuring Euro Area Monetary
Transmission to Banks’ Interest Rates: Implications
Policy, Journal of Monetary Economics, 108, 162-179.
of External Benchmark Regime, RBI Bulletin,
Bernanke, B. S., and M. Gertler (1995). Inside the April. https://rbi.org.in/Scripts/BS_ViewBulletin.
Black Box: The Credit Channel of Monetary Policy aspx?Id=20939
Transmission, Journal of Economic Perspectives, vol.
Lloyd, S.P. (2018). Overnight Index Swap Market-based
9, pp. 27-48.
Measures of Monetary Policy Expectations, Bank of
Chamon, M. M., Hofman, M. D. J., Magud, M. N. E., and
England Working Paper 709.
Werner, A. M. (2019). Foreign Exchange Intervention
in Inflation Targeters in Latin America, International Lloyd, S. P. (2021). Overnight Indexed Swap-implied
Monetary Fund. Interest Rate Expectations, Finance Research
Letters, 38, 101430.
Christensen, J. H., and Rudebusch, G. D. (2012). The
Response of Interest Rates to US & UK Quantitative Park, K. (2023). Central Bank Credibility and Monetary
Easing. The Economic Journal, 122(564), F385-F414. Policy, International Journal of Central Banking, June.

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ARTICLE Monetary Policy Transmission in India: The Recent Experience

Patra, M. D. (2022). Lost in Transmission? Financial Woodford M. D (2003). Interest and Prices: Foundations
Markets and Monetary Policy, RBI Bulletin, of a Theory of Monetary Policy, Princeton University
November. https://rbi.org.in/Scripts/BS_ViewBulletin. Press.
aspx?Id=21395 Woodford, M. D. (2012). Methods of Policy
Accommodation at the Interest-rate Lower
Patra, M. D., John, J. and George. A. T. (2024). Are Food
Bound, Proceedings - Economic Policy Symposium
Prices Spilling Over?, RBI Bulletin, August.
- Jackson Hole, Federal Reserve Bank of Kansas City,
Reserve Bank of India (2018-19). Annual Report. pages 185-288.

200 RBI Bulletin October 2024

Monetary Policy Transmission in India: The Recent Experience ARTICLE

Annex
Table A1: Monetary Transmission across Tightening Episodes (in bps)
15 Jul-2013 to 14 Jan-2015 Current Tightening Episode
6 Jun-2018 to
15 Jul-2013 to 15 Jul-2013 to 20 Sep-2013 to 6 Feb-2019 8 Apr-2022 to 4 May-2022 to
14 Jan-2015 19 Sep-2013 14 Jan-2015 30 Sep-2024 30 Sep-2024

Repo Rate 75 0 75 50 250 250

Reserve Repo/SDF 75 0 75 50 290 250

MSF 75 200 -125 50 250 250

Money Market Rates

WACR 95 312 -217 53 341 304

Triparty Repo 216 406 -190 64 328 288

Market Repo 127 321 -194 51 337 293

3M T Bill 85 244 -159 7 256 236

3M CD Rate 51 5 46 -74 347 319

3M CP (NBFCs) 47 195 -148 -38 342 325

Bond Market Yields

5-Yr G-sec 9 76 -66 -63 27 -16

5-Yr AAA Corp -27 63 -90 -7 104 66

10-Yr G-sec 24 66 -42 -48 -16 -37

10-Yr AAA Corp -27 55 -82 1 16 3

Interest Rates of Banks

July 2013 to Dec 2014 Current Tightening Episode

Jun 2018 to
July 2013 to July 2013 to Sep 2013 to Jan 2019 April 2022 to May 2022 to
Dec 2014 Sep 2013 Dec 2014 August 2024 August 2024

WALR-Fresh rupee loans 5 22 -17 55 178 190

WALR- Outstanding
-28 5 -33 -1 117 119
rupee loans
WADTDR- Outstanding
-9 8 -17 20 190 190
deposits

WADTDR- Fresh deposits - - - - 234 243

Sources: Bloomberg; and RBI.

RBI Bulletin October 2024 201

Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

Nowcasting Food Inflation in of FIT and for aligning inflation to the target on a
durable basis. In India, the food and beverages group
India: Leveraging Price and has a high share (45.86 per cent) in the Consumer
Non-Price Signals through Price Index-Combined (CPI-C) basket and its prices
exhibit large volatility driven by supply-side shocks.
Machine Learning At the same time, food prices carry important
by Nishant Singh and Abhiruchi Rathi^ macroeconomic implications as their movements
strongly impact the welfare of the poor (Sekhar, et al.,
The significance of food items in India’s Consumer 2018) and help in monitoring developments around
Price Index (CPI) in terms of their weight and price food security (Cachia, 2014). After moderating since
volatility makes accurate forecasting of food inflation 2014 on improvement in supply chain dynamics (Bhoi
crucial for headline inflation projections. Nowcast, which et al., 2019), CPI food inflation2 witnessed an uptick in
is the current-period inflation projection, guides short- and both mean and volatility starting 2019-20 due to the
medium-horizon forecasts. Given the technology-driven resurgence of supply disruptions driven by weather-
surge in data availability, this study investigates predictive related disturbances, the COVID-19 pandemic and
power of high frequency price and non-price indicators geopolitical conflicts.
for nowcasting food inflation in India. Furthermore, Given the significant impact of the food and
employing machine learning (ML) techniques, this beverages group (hereafter referred to as ‘food’) on
study explores their utility over traditional benchmark headline inflation due to its high weight in the CPI
models. Empirical findings indicate that expanding basket and the associated large volatility, it is of utmost
the information set improves nowcast accuracy, which is significance to have systems in place to generate
further enhanced by employing regularisation and ML reliable forecasts of food inflation. Comparision of
methods. cross-country headline inflation forecast performance
Introduction suggests that countries with a larger share of food in
their CPI baskets tend to experience higher forecast
The Reserve Bank of India Act provided a statutory
errors (RBI, 2020), highlighting the challenging nature
basis for flexible inflation targeting (FIT)1 in 2016
and entrusted the central bank to conduct monetary of inflation forecasting in India and reiterating the
policy with the primary objective of maintaining significance of accurate food inflation forecasts.
price stability while keeping in mind the objective An important component of the forecasting
of growth. Given the typical monetary transmission exercise is nowcasting, which is to predict inflation
lags, inflation forecasts act as an intermediate target in the current period (month or quarter), before the
for the central bank in a FIT framework, which guide official data are published (Clark, et al., 2022). These
monetary policy actions and stance. Thus, accurate nowcasts are not only of interest on their own but
forecasts of inflation (as well as that of economic also act as important inputs to forecasts at short-
activity) play a key role in the successful pursuit and medium-horizons (Krüger et al., 2017; Faust and
^ Nishant Singh and Abhiruchi Rathi are Managers in the Department
Wright, 2013). However, studies focusing on improving
of Economic and Policy Research (DEPR), Reserve Bank of India (RBI), food inflation nowcasts are relatively scarce (Macias,
Mumbai. The authors are thankful to Binod Bihari Bhoi for his valuable
suggestions. The views expressed in the article are those of the authors et al., 2023), which necessitates increased attention in
and do not represent the views of the RBI.
1 The inflation target under the FIT framework has been set at 4 per cent
this area.
with a tolerance band of +/-2 per cent in terms of headline inflation, 2 Food inflation is measured by year-on-year (y-o-y) per cent change in the
measured by the year-on-year (y-o-y) per cent change in the all-India all-India Consumer Price Index-Combined (CPI-C) series (base year
Consumer Price Index-Combined (CPI-C) series with base year 2012=100. 2012=100) of the Food and Beverages group.

RBI Bulletin October 2024 203

ARTICLE Nowcasting Food Inflation in India: Leveraging Price and
Non-Price Signals through Machine Learning

Due to the sensitivity of food prices to a multitude (Andreas Joseph et al., 2024). In such circumstances,
of domestic and international factors and its the widely used traditional linear econometric
changing statistical properties, the task of capturing models including autoregressive integrated moving
large and unanticipated movements in food prices average (ARIMA), seasonal ARIMA (SARIMA), and
using traditional univariate modelling methods has linear regression, which assume linear and time-
become challenging. This makes a case for exploring invariant relationships, could miss out potential
alternative, yet relevant, information which may be non-linearities and changing relationships (Binner
available at higher frequencies than traditionally et al., 2005). Hence, not only leveraging alternative
used sources, and evaluating non-traditional methods information across sectors might be useful to detect
of leveraging such information to extract real-time price movements and turning points early on, but
indication of the direction and magnitude of price employing alternative techniques for capturing the
movements. relationships in the data may further help in better
The recent technological advancements, rise of nowcasting. Therefore, leveraging ML models may
digitalisation, and more particularly, the emergence add value to the nowcasting exercise, given their
of high frequency information from various sectors suitability in dealing with large heterogenous data and
of the economy have facilitated better understanding capturing changing relationships (Chakraborty and
of food price dynamics in the Indian context. While Joseph, 2017). On high-dimensional data, employing
some recent studies have employed models using regularisation or shrinkage methods may also help
high-frequency price information to predict short- in enhancing the modelling performance (Joseph et
term food inflation (Yadav and Das, 2023; Pratap et al., 2024; Richardson et al., 2021). Therefore, besides
al., 2022), there is plenty of other price and non-price traditional linear techniques, this study also explores
information available which, when aggregated and regularisation (shrinkage) techniques such as ridge
utilised along with price information, could better regression (Hoerl and Kennard, 1970), Machine
reflect the supply-side dynamics impacting food prices Learning (ML) techniques including Deep Learning
and CPI food inflation. A potential set of such price (DL) which capture potential non-linearities (Singh
and non-price information includes high-frequency and Bhoi, 2022; Chakraborty and Joseph, 2017; LeCun
retail and wholesale/mandi food prices, domestic et al., 2015) and Support Vector Regression (SVR)
and international commodity prices, weather-related which reduces overfitting and is known to perform
information, reservoir levels, information on crop well on high-dimensional data (Noble, 2006; Drucker
sowing, production and market/mandi arrivals, wage et al., 1996).
rates, exchange rate movements (INR/USD), internet-
The studies on nowcasting food inflation in
search trends among public with regard to food
India are scarce and those leveraging information
prices3, and government policies and interventions.
other than retail and wholesale prices are even rare.
Hence, nowcasting food inflation calls for keeping a
Therefore, this study attempts to contribute to the
track of such evolving information on a regular basis.
existing literature by investigating the predictive
Forecast errors can be large around turning points power of large alternative information (big data)
or high inflation episodes since during such phases the using alternative nowcasting techniques and methods
time series properties of inflation and its relationship (data science) including ML and regularisation to
with key macroeconomic variables may turn unstable potentially enhance the accuracy of food inflation
3 To capture this, the study considers information from Google Trends nowcasts. For the empirical exercise, the study
data as an input in the empirical exercise. Information from Google Trends
segregates the set of all the techniques into three
can reflect consumer sentiment and has usefulness in predicting price
movements (Seabold and Coppala, 2015). broad categories i.e., Univariate Linear, Multivariate

204 RBI Bulletin October 2024

Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

Linear, and Multivariate ML-based to examine if

Table 1: CPI Inflation in India
an increasing level of sophistication of both data Period: January 2014 – December 2023
coverage and model complexity enhances the nowcast CPI Group CPI Mean Standard Skewness Kurtosis
performance. Different nowcast combinations have Weight Deviation
Food 45.86 5.1 3.0 -0.1 -0.6
also been derived to investigate if they improve upon
Fuel 6.84 5.4 3.6 0.3 -0.1
the individual models, drawing from the literature,
Core 47.30 5.2 0.8 0.1 -0.8
suggesting potential improvements in accuracy
Headline 100 5.1 1.5 -0.1 -0.7
over individual models (John et al., 2020; Stock and
Note: Core group refers to CPI headline excluding food and fuel groups.
Watson, 2004). Sources: National Statistics Office (NSO), Ministry of Statistics and
Programme Implementation (MoSPI), Government of India (GoI), and RBI
The rest of the study is organised into five staff estimates.
sections. Section II provides stylised facts on food food inflation and its contribution (around 13 per cent
inflation in India. Section III reviews the relevant during 2017-19 and 53 per cent during 2019-21) to
literature. Section IV describes the methodology and headline inflation increased sharply (Chart 1a and 1b)
empirical strategy, followed by results in Section V. on account of rain-induced food price pressures and
Section VI concludes the paper. pandemic-driven supply disruptions. With the easing
II. Stylised Facts on Food Inflation in India of global supply chain disturbances, food inflation
moderated in 2021-22. However, the moderation was
The food group has a substantial weight in India’s
short-lived as the conflict in Europe led to a renewed
CPI (Table 1). Food inflation in India recorded a
spike in global food and energy prices (IMF, 2022),
declining trend from 2014 through the first half of 2019.
which coupled with weather-related disturbances,
While improved supply conditions relative to demand
kept food inflation largely elevated since 2022.
have been underscored as the primary driving force
behind this moderation, the enhancements in supply CPI food momentum4 has also witnessed some
chain dynamics were also a contributing factor to this statistical changes such as decline in the correlation
trend (Bhoi et al., 2019). However, during 2019-21, with its same season lag (12th lag) over time (Chart 2a),

Chart 1: Summary Statistics of Food Inflation in India

Note: Figures in parentheses indicate weights in CPI. Core group refers to CPI headline excluding food and fuel groups.
Sources: NSO, MoSPI; and RBI staff estimates.

4 Monthly momentum refers to month-on-month (m-o-m) change (in per cent).

RBI Bulletin October 2024 205

ARTICLE Nowcasting Food Inflation in India: Leveraging Price and
Non-Price Signals through Machine Learning

Chart 2: Rolling Correlations of CPI Food with Some Alternative Variables

Notes: 1. Variables in the chart are in the momentum form except for reservoir level (per cent deviation from Long Period Average (LPA)).
2. Y-axis represents correlation coefficient. Rolling correlations are based on 36-month window.
3. To construct the retail price index (RPI), retail prices of 22 essential commodities from Department of Consumer Affairs (DCA) and 11
commodities from National Horticulture Board (NHB) were converted to indices using average prices in 2012 (CPI base year) as the base, and
then aggregated using corresponding CPI weights. For information on other variables, please refer to Table A2.
4. The exchange rate is expressed in terms of INR per USD. Google Trends index corresponds to the term “Food Prices” for the Indian region.
Source: RBI staff estimates.

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Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

attenuating the univariate modelling methods for scanner data on product-level prices and quantities
nowcasting, which calls to explore additional to nowcast German inflation, demonstrating that
high frequency information to better capture food this granular information yields timely insights into
inflation dynamics. Information other than retail and inflation dynamics early in each month. According
wholesale prices may potentially provide additional to Yadav and Das (2023), an approach using dynamic
real-time information about the supply-side dynamics factors and mixed frequency models on daily crowd-
translating into retail price changes, acting as early/ sourced food prices outperforms the conventional
leading indicators, more particularly, for food items approaches in nowcasting inflation. Macias et al.
on which price-related information is not available. (2023) find that employing an extensive dataset of
The relationships between food inflation and some food and non-alcoholic beverages prices scraped
associated variables have also undergone changes over from webpages of major online retailers enhances
time, as reflected in correlation with the variables and the accuracy of food inflation nowcasts. Leveraging
their lags (Chart 2), suggesting the presence of non- the Google Trends database, Seabold and Coppola
linearities. While linear models may fail in capturing (2015) find that integrating an internet search index
these changing relationships, non-traditional methods improves the nowcasting of prices in Central America.
and techniques such as ML can be employed to capture Modugno (2013) shows that the inclusion of high
non-linearities, as discussed earlier. frequency data on energy and raw material prices
enhances the performance of inflation nowcasts.
III. Literature Review
Knotek and Zaman (2017) also explored nowcasting
Nowcasting exercises are particularly pertinent inflation using real-time data in the US.
for macroeconomic variables which are available at
Recent literature has also highlighted the use
low frequencies, often at a quarterly basis, as in the
of alternative nowcasting techniques within ML for
case of Gross Domestic Product (GDP). Data for these
their ability to process unstructured data and capture
variables are typically released with significant lags,
strong non-linearities (Desai, 2023; Goulet Coulombe
prompting the need for nowcasts - early estimates
et al., 2022), as well as shrinkage and regularisation
derived by leveraging more readily available and
techniques which perform well on high-dimensional
frequently updated data sources (Banbura et al., 2010).
data by reducing overfitting and improving
With inflation data commonly available on a monthly
generalisation. Joseph et al. (2024) explore the
basis, nowcasting, particularly for food inflation, has
effectiveness of dimensionality reduction techniques
been relatively less explored globally, especially given
such as principal component analysis (PCA),
its relatively low weight in the CPI baskets in major
shrinkage methods such as ridge regression, and ML
advanced economies. In emerging and developing
models such as support vector machines (SVM) and
economies with large share of food in the CPI basket,
neural networks in forecasting UK inflation and find
nowcasting of food inflation can substantially
that ridge regression and other shrinkage methods
strengthen the conduct and formulation of monetary
perform best when using high-dimensional data, and
policy.
that combining large and relevant information set
Several studies suggest the importance of high along with effective penalisation enhances model
frequency information for the inflation nowcasting performance. Using Euro area inflation data, Aliaj et
exercise. According to Silva et al. (2024), daily food al. (2023) find that lasso regression, another popular
prices carry significance in nowcasting food price regularisation technique, outperforms standard
inflation. Beck et al. (2022) leverage household methods in nowcasting Euro area inflation.

RBI Bulletin October 2024 207

ARTICLE Nowcasting Food Inflation in India: Leveraging Price and
Non-Price Signals through Machine Learning

IV. Methodology, Data and Empirical Strategy ML-based (Table 3) to assess if the increasing level of
sophistication in terms of data coverage and model
Food inflation (y-o-y) in India is non-stationary
complexity improves the nowcast performance.
in nature. However, CPI food momentum is found to
be stationary (Table A1), and therefore is used as the While Deep Learning (DL) has been employed to
target variable for the empirical work in this study capture the possible non-linearities in the data, ridge
(Table 2). All the empirical work in this paper is based regression7 and SVR8 have been used to investigate if
on monthly data. Nowcasts have been generated on their suitability to high-dimensional data enhances
an expanding sample basis to control for sample the nowcast accuracy.
period bias. Model specification for each technique is The study considers both price and non-price
fixed using data till December 2022, after which the indicators to capture variation in food inflation (Table
selected models are trained on an expanding sample A2). Retail prices, wholesale/mandi prices, domestic
basis by adding one successive month of realised and international commodity prices, Wholesale Price
data at a time to generate 12 monthly nowcasts. ML Index (WPI)-based input prices, rural wages, rainfall
models generally require a testing data set5 to assess deviation, reservoir levels, market arrivals, exchange
the accuracy of trained models and choose the optimal rate, and Google Trends data are considered. The
model based on minimum error6 obtained on the empirical work considers all the explanatory variables
testing data set, which is kept as 12 months for each in both contemporaneous and lagged forms to capture
sample. their immediate and lagged impact for nowcast
In this paper, alternative nowcasting techniques generation, except WPI and rural wages considering
have been employed for a broad comparison of their the lag in their data release, as detailed in Table A3 of
nowcast performance. The set of all techniques is the Appendix.
divided into three broad categories i.e., Univariate After finalising the set of variables and their
Linear, Multivariate Linear and Multivariate appropriate lag structure (based on AIC), the principal

Table 2: Details of the Methodology Used in the Study

Item Traditional Techniques ML Techniques
Study Period Jan 2014 – Dec 2023 Jan 2014 – Dec 2023
Model Identification Period Jan 2014 – Dec 2022 Jan 2014 – Dec 2022
Target Variable CPI Food momentum CPI Food momentum
Test Data Size - 12 months
Model Building Period Training Period Training + Testing Period
First Sample Training Period Jan 2014 – Dec 2022 Jan 2014 – Dec 2021
First Sample Testing Period - Jan 2022 – Dec 2022
Nowcast Period Jan 2023 – Dec 2023 Jan 2023 – Dec 2023

5 Testing data is a dataset, different from training dataset, on which trained models are tested to assess their prediction accuracy.
6 Root Mean Squared Error (RMSE) and Mean Absolute Error (MAE) have been used as measures of error for nowcast performance comparison in the
study.
7 The ridge regression - a popular regularisation technique, reduces model complexity in presence of large number of variables by shrinking the coefficients

of each by imposing a penalty on their size in the form of a regularisation (L2), where the penalty is applied on the squared magnitude of the coefficients
(Richardson et al., 2021). This approach not only helps in stabilising the model by reducing its sensitivity to outliers, but also improves its generalisation
performance, making it useful when dealing with high-dimensional data and multicollinearity.
8 Support Vector Regression (SVR) – a popular ML technique, is less susceptible to outliers, compared to linear regression, as it introduces an epsilon-

insensitive region, a tube around the regression line where residuals are disregarded, which allows it to fit a more robust line by ignoring small deviations,
reducing overfitting as its loss function penalises only residuals outside this insensitive region (Drucker et al., 1996).

208 RBI Bulletin October 2024

Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

Table 3: Alternative Techniques Used in the Study for performance comparison across models. Relative
Technique Type RMSE, calculated considering Random Walk as the
Random Walk Univariate Linear base model, is also compared (Chart 3). As 2023Q3
ARIMA and SARIMA Univariate Linear witnessed substantial food price shocks, nowcasts
Linear Regression Multivariate Linear excluding Q3 are also calculated for a more robust
ARIMAX and SARIMAX Multivariate Linear comparison.
Ridge Regression Multivariate Linear
Artificial Neural Network (ANN) Multivariate ML-based
The results indicate that expanding the
Support Vector Regression (SVR) Multivariate ML-based
information set as well as increasing model
Note: For description on models other than ridge regression and SVR, complexity improves the accuracy of nowcasts based
please refer to Singh and Bhoi, 2022. on data for 2023 (Table 4, Chart 3). The precision
notably increases when retail and wholesale food
component analysis (PCA) technique has been
price information are incorporated as compared to
employed on all explanatory variables except retail
scenarios where only univariate models (no alternative
prices9, for dimensionality reduction to generate
information) are employed, producing temporally
maximum principal components (PCs) (Table A3).
lagged (seemingly right-shifted) nowcasts due to the
Thereafter, forward selection10 (FS) technique has
presence of significant immediate sequential lags in
been employed to shortlist the most relevant PCs
the autoregressive models (Chart A1). However, within
based on the training data using a significance level of
multivariate linear models (linear regression and
10 per cent as the threshold. The list of input variables
SARIMAX), inclusion of information other than retail
before and after conducting PCA is given in the Annex
and wholesale prices does not provide performance
(Table A4). While the ridge regression is allowed to
gains as traditional linear models may not perform
leverage raw data of all the 35 predictors due to its
well on higher dimensions and capture potential non-
regularisation (shrinkage) capability, the other models
linearities in the data. This deficiency is addressed by
consider the shortlisted principal components as
employing regularisation and ML techniques which
explanatory variables (Table A5).
provide significant improvement in the prediction
Seasonal adjustment has not been performed on accuracy.
the data as (1) the paper concentrates only on nowcast
Within ML models, while SVR enhances the
accuracy and not impact evaluation and (2) seasonal
accuracy by generating robust estimates for high-
adjustment results in loss of some information, even
dimensional data (characterised by noise and
when conducted properly (IMF, 2017).
heterogeneity among predictor variables), ANN further
V. Results enhances the nowcast performance due to its ability
As the inflation nowcasts are in month-on- to capture non-linearities. However, ridge regression,
month (m-o-m) momentum form, they are converted a linear model, provides maximum performance
into year-on-year (y-o-y) numbers for like-for-like gains as its regularisation (shrinkage) feature
comparison with the actual CPI food inflation rates stabilises the coefficients by reducing overfitting
(y-o-y). Both root mean squared error (RMSE) and mean and multicollinearity commonly associated with
absolute error (MAE) of nowcasts have been calculated high-dimensional data. These results indicate that
9 Given the strong association of retail price information with CPI food in contemporaneous form, it has been independently used and not included
under PCA.
10 Forward selection (FS) is a variable selection technique which starts with no variables in the model and adds variables one by one till a threshold (say,
significance level of 10 per cent) beyond which no further improvement occurs. The order of selection is based on statistical significance and sequential
addition to explanation power.

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ARTICLE Nowcasting Food Inflation in India: Leveraging Price and
Non-Price Signals through Machine Learning

Table 4: Performance Comparison of Alternative Models

Comparison vis-à-vis Actual Food Inflation (y-o-y) Nowcast Period: Jan 2023 – Dec 2023
RMSE MAE
Model Type Model Excluding Excluding Complexity
Full Sample Full Sample
2023Q3 2023Q3
Random Walk 2.15 1.09 1.54 0.93
No Alternative
Univariate Linear ARIMA 1.61 0.67 1.07 0.52
Information
SARIMA 1.57 0.76 1.07 0.64
LR 0.73 0.51 0.54 0.39
Retail and
SARIMAX 0.68 0.53 0.55 0.43 Wholesale Price
Information
Ridge 0.63 0.41 0.49 0.35
Multivariate Linear
LR 0.77 0.65 0.62 0.54
SARIMAX 0.73 0.63 0.60 0.51 Full Information
Ridge 0.55 0.40 0.45 0.33
ANN 0.60 0.47 0.51 0.38 Full Information
Multivariate ML-based
SVR 0.68 0.51 0.52 0.41 + ML

Ridge(PI)+ANN 0.59^ 0.41 0.47^ 0.33^

Combinations
Ridge(FI)+ANN 0.55 0.40 0.44^ 0.31^
Notes: 1. MAE: Mean Absolute Error; LR: Linear Regression; PI: Price Information (retail and wholesale); FI: Full Information.
2. All models include a seasonal lag (12th lag) of target variable as an explanatory variable.
3. Combinations are based on RMSE-weighted average of nowcasts. ^ indicates improvement with nowcast combination if RMSE (Combination)
< Minimum (RMSEs of individual models).
Source: RBI staff estimates.

inclusion of additional information help in explaining combination nowcasts are also calculated which
variations in food inflation, enhancing the nowcasting provide additional performance gains over those
performance over traditional linear benchmarks. obtained from the individual models, suggesting
Using the best performing models, RMSE-weighted maximum performance using the combination

Chart 3: Performance Comparison of Alternative Models (Relative to Random Walk)

Random
Walk

ARIMA

SARIMA

LR

SARIMAX

Ridge

LR

SARIMAX

Ridge

ANN

SVR

Univariate Retail and Wholesale Price Information Full Information Full Information + ML

Source: RBI staff estimates.

210 RBI Bulletin October 2024

Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

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Binner, J. M., Bissoondeeal, R. K, Elger, T., Gazely,
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Faust, J., and Wright, J. H. (2013). Forecasting Inflation. Modugno, M. (2013). Now-casting Inflation Using High
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212 RBI Bulletin October 2024

Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
Non-Price Signals through Machine Learning

Annex

Table A1: Stationarity Tests

Variable ADF Test Statistic P-value Result

Food Inflation (y-o-y) -2.19 0.21 Non-stationary
CPI Food momentum (m-o-m) -6.20*** 0.00 Stationary

Notes: 1. Estimates are based on data for January 2014-December 2022.

2. *: P < 0.10; **: P < 0.05; ***: P < 0.01
Source: RBI staff estimates.

Table A2: Description of Input Information

Information Sources
Retail Prices DCA, MCE, GoI; NHB, MAFW, GoI
Wholesale and Mandi Prices WPI; Agmarknet, MAFW, GoI
International Prices IMF
WPI Input Prices WPI, MCI, GoI
Rural Wages Labour Bureau, MLE, GoI
Rainfall IMD, GoI
Reservoir Level CMIE
Market/mandi Arrivals Agmarknet, MAFW, GoI
Oil/Energy Prices MoPNG, GoI; IMF
Exchange Rate FBIL
Google Trends Google
Note: GoI: Government of India; DCA: Department of Consumer Affairs; MCE: Ministry of Consumer Affairs; NHB: National Horticulture Board; MAFW:
Ministry of Agriculture and Farmers Welfare; WPI: Wholesale Price Index; MCI: Ministry of Commerce and Industry; IMF: International Monetary Fund;
MLE: Ministry of Labour and Employment; IMD: Indian Meteorological Department; CMIE: Centre for Monitoring Indian Economy; MoPNG: Ministry of
Petroleum and Natural Gas; FBIL: Financial Benchmarks India Pvt. Ltd.

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Table A3: Selected Principal Components and Variable Importance

Wholesale/Mandi Price Variables PC 1 PC 2
Mandi Price momt 0.28 0.01
Mandi Price momt–1 0.15 0.22
Mandi Price momt–2 0.25 0.28
WPI Food momt–1 0.10 0.31
WPI Food momt–2 0.22 0.18

Other Variables PC 1 PC 2 PC 3 PC 4 PC 5 PC 6
Exchange Rate momt 0.02 0.00 0.00 0.13 0.01 0.02
Exchange Rate momt–1 0.00 0.03 0.07 0.01 0.00 0.00
Exchange Rate momt–2 0.06 0.02 0.08 0.03 0.00 0.11
Google Trends momt 0.03 0.16 0.01 0.09 0.19 0.08
Google Trends momt–1 0.04 0.24 0.00 0.02 0.00 0.04
Google Trends momt–2 0.08 0.04 0.04 0.02 0.08 0.01
IMF Agricultural Raw Materials momt 0.02 0.01 0.00 0.01 0.01 0.04
IMF Agricultural Raw Materials momt–1 0.00 0.02 0.01 0.03 0.00 0.00
IMF Agricultural Raw Materials momt–2 0.00 0.00 0.01 0.00 0.06 0.01
IMF Food and Beverages momt 0.04 0.05 0.01 0.03 0.01 0.07
IMF Food and Beverages momt–1 0.00 0.02 0.00 0.00 0.02 0.08
IMF Food and Beverages momt–2 0.01 0.00 0.01 0.00 0.07 0.01
Mandi Arrivals momt 0.12 0.09 0.00 0.10 0.01 0.01
Mandi Arrivals momt–1 0.01 0.12 0.12 0.00 0.01 0.00
Mandi Arrivals momt–2 0.17 0.00 0.12 0.07 0.01 0.06
Oil Price momt 0.01 0.04 0.02 0.05 0.15 0.09
Oil Price momt–1 0.03 0.00 0.08 0.00 0.02 0.15
Oil Price momt–2 0.02 0.00 0.01 0.00 0.01 0.00
Rainfall Deviationt 0.00 0.00 0.25 0.00 0.01 0.00
Rainfall Deviationt–1 0.03 0.03 0.01 0.25 0.08 0.10
Rainfall Deviationt–2 0.01 0.03 0.05 0.02 0.05 0.05
Reservoir Deviationt 0.01 0.00 0.00 0.00 0.01 0.01
Reservoir Deviationt–1 0.03 0.00 0.00 0.00 0.00 0.00
Reservoir Deviationt–2 0.04 0.00 0.01 0.01 0.01 0.02
Rural Wage momt–2 0.07 0.00 0.09 0.02 0.05 0.00
WPI Farm Inputs momt–1 0.00 0.03 0.00 0.03 0.07 0.00
WPI Farm Inputs momt–2 0.09 0.03 0.00 0.03 0.04 0.04
WPI Industrial Inputs momt–1 0.01 0.01 0.00 0.01 0.01 0.00
WPI Industrial Inputs momt–2 0.05 0.03 0.00 0.05 0.03 0.00
Note: Each cell quantifies the importance of the variable in each PC. Higher importance within each PC is shown with darker shade of green.
Source: RBI staff estimates.

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Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
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Table A4: List of Final Input Variables

Before PCA After PCA and FS
Input Variables Contemporaneous
S.No. Final Variables
(m-o-m, per cent) + Lags
Retail Price (DCA and NHB) Index
1 Retail Price Index (RPI) 1
Momentum
2 WPI Food 2
2 Principal Components
3 Mandi Price Index 3
4 WPI Farm Inputs Index
2
5 WPI Industrial Inputs Index
6 Rural Wages 1
7 Absolute Rainfall Deviation from LPA (per cent)
8 Reservoir Level Deviation from LPA (per cent)
9 Market Arrivals Index 6 Principal Components
10 IMF Food and Beverages Index
3
11 IMF Agricultural Raw Materials Index
12 Oil Price
13 Exchange Rate
14 Google Trends Index
Total 35 9

Notes: 1. All variables are in month-on-month (m-o-m) per cent change form, except for absolute rainfall deviation from LPA (per cent) and reservoir
level deviation from LPA (per cent).
2. FS: Forward Selection; LPA: Long Period Average.
3. Google Trends Index corresponds to the term “Food Prices” for the Indian region.

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Table A5: Detail on Alternative Nowcasting Models

Dependent Variable: Y = CPI Food momentum
Model Type Complexity Model Explanatory Variables and Model Structure R2 AIC

No Alternative ARIMA C, (p,d,q) = (4,0,2) 0.43 2.79

Univariate Linear
Information SARIMA C, (p,d,q)(P,D,Q) = (1,0,2)(1,0,1) 0.50 2.77
C, CPI Food Momentumt-12, RPI Momentumt, PCs
LR 0.79 1.63
capturing WPI and mandi food prices
C, (p,d,q)(P,D,Q) = (1,0,1)(0,0,0), RPI Momentumt,
Retail and Wholesale SARIMAX 0.81 1.65
PCs capturing WPI and mandi food prices
Price Information
C, RPI Momentumt, WPI and mandi food price
Ridge variables 0.81 -
Method = K-Fold

Multivariate Linear C, CPI Food Momentumt-12, RPI Momentumt, PCs

LR capturing WPI and mandi food prices and rest of 0.85 1.45
information
C, (p,d,q)(P,D,Q) = (1,0,1)(0,0,0), RPI Momentumt,
Full Information SARIMAX PCs capturing WPI and mandi food prices and rest 0.88 1.47
of information
C, all variables capturing food prices and rest of
Ridge information 0.88 -
Method = K-Fold
C, CPI Food Momentumt-12, RPI Momentumt, PCs
capturing WPI and mandi food prices and rest of
information
Hyperparamters:
ANN - -
1 hidden layer with 3 nodes,
Activation function = Sigmoid,
Learning Rate = 0.005,
Multivariate Full Information Runs = 1000
ML-based + ML
C, CPI Food Momentumt-12, RPI Momentumt, PCs
capturing WPI and mandi food prices and rest of
information
SVR Hyperparamters: - -
Kernel = Linear
C (regularisation parameter) = 0.1
Epsilon = 0.01
Notes: 1. ‘p’,’d’ and ‘q’ refer to the autoregressive, differencing and moving average orders, while ‘P’, ‘D’ and ‘Q’ are seasonal autoregressive, seasonal
differencing and moving average orders; ‘X’ refers to the set of exogenous variables.
2. C: Constant; AIC: Akaike Information Criterion; ‘Xt-n’ refers to nth lag of variable X.
Source: RBI staff estimates.

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Nowcasting Food Inflation in India: Leveraging Price and ARTICLE
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Chart A1: Nowcasts of Alternative Models

Actual Random Walk ARIMA SARIMA

LR (PI) SARIMAX (PI) Ridge (PI) LR (FI)
SARIMAX (FI) ANN SVR Ridge(PI) + ANN
Ridge (FI) Ridge(FI) + ANN
Source: RBI staff estimates.

RBI Bulletin October 2024 217

How Indian Banks are Adopting Artificial Intelligence? ARTICLE

How Indian Banks are Adopting like machine learning, deep learning, unsupervised
learning, and neural networks are often used in
Artificial Intelligence? conjunction with artificial intelligence, they can be
by Shobhit Goel, Dirghau K. Raut, viewed as subsets of the broad field of AI (Chart 1)1. The
rapid rise in computing power combined with the rise
Madhuresh Kumar and Manu Sharma^
of unstructured data has supported the development
Artificial Intelligence (AI) is being increasingly of machine learning and other AI systems. Further, the
rise of smart devices powered by AI and the Internet
adopted in the banking and financial services industry,
of Things (IoT) has in turn created new swathes of
with multiple use cases including fraud detection,
data which can be used to create the next generation
customer segmentation, and chat automation. This
of AI solutions.
article attempts to construct a quantitative measure of
AI adoption in the Indian banking system using a text- Artificial intelligence (AI) and machine learning
mining approach. It also attempts to identify the impact of (ML) have gained prominence, especially with
bank-specific characteristics in driving AI adoption using advancements in generative AI models based on large
a panel fixed effects model. The results indicate that AI language models (LLMs). The adoption of AI and
adoption is gaining momentum led by private banks, with related technologies in the banking, financial services,
asset size and CRAR influencing the rate of adoption. and insurance (BFSI) sector is rapidly transforming
the landscape of financial services both globally and
Introduction in India (RBI, 2023). The banking sector is integrating
The banking and financial sector has a long AI into banking operations to enhance efficiency,
and storied history of adapting to and adopting accuracy, and customer experience, paving the way
technological innovations, starting from the invention for a more innovative and customer-centric financial
of paper currency in the 7th century AD to the ecosystem (BIS, 2024).
introduction of the internet and mobile banking in the Chart 1: Subsets of Artificial Intelligence
21st century. In each case, the industry initially faced Emerging AI technologies

scepticism and challenges in embracing these new AI TECHNOLOGIES ILLUSTRATIVE SOLUTIONS

Computer Vision
technologies, but eventually, they became integral to Virtual
Audio Processing Agents
its functioning and productive efficiencies. Sense
Identity
Analytics
Artificial Intelligence (AI) today can be broadly
defined as the branch of computer science that aims Cognitive
Robotics
Natural Language Processing
to create machines and systems that can perform tasks
Knowledge Representation
which normally require human intelligence, such as Comprehend
Speech
Analytics

reasoning, learning, decision-making, and natural

Recommendation
language processing (Holden, 1991; McCarthy, 1960, Systems

1989, 2007; Russell and Norvig, 2010). While terms Machine Learning
Data
Expert Systems Visualisation
^ The authors are from the Department of Economic and Policy Research, Act
Reserve Bank of India. The authors would like to thank Dr. Snehal
Harwadkar and Sonali Goel for providing data and inputs for the article. Source: Accenture.
The authors are also thankful to Shri Rajib Das and Dr. Sarat Dhal for
their useful comments on the paper. The views expressed are those of the
1 A glossary of terms commonly associated with AI is provided in Annex 1.
authors and do not represent the views of the Reserve Bank of India.

RBI Bulletin October 2024 219

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

The potential adoption and usage of the AI banking sector and the broader financial industry’s
models has necessitated policy discussion and relentless pursuit of efficiency, innovation, and
research around multiple macro financial and enhanced decision-making capabilities, others have
other issues including, quantitatively measuring argued that the adoption of these technologies
the adoption of these technologies, identifying has become a necessity as the wider economy has
the factors driving their adoption, and evaluating embraced them. The banking industry is realising the
the impact of these technologies. While there potential of not only the traditional data analytics and
exists literature on the adoption of AI it is mostly machine learning but it is increasingly recognising the
qualitative in nature. This paper attempts to provide role of new and emerging advanced AI technologies
a quantitative measure of the pace of adoption of AI like deep neural networks and large language models
in Indian banks. It employs text-mining techniques to to derive value in traditional areas like marketing and
analyse 32 Indian commercial banks’ annual reports 2
sales, risk management, finance, and IT. According
for eight years from FY 2015-16 to FY 2022-23 to to McKinskey (2021), the potential for value creation
identify their adoption and usage of AI and related through AI and related technologies in global banking
technologies and their growth in recent years. It is more than US$1 trillion annually mainly in the
then explores the role of bank’s financial health in domain of marketing and sales, and risk management
influencing AI adoption by utilising a fixed effects (Chart 2).
panel data model.
From the broader business drivers’ standpoint,
The rest of the paper is divided into four within the Indian financial sector, the improvement
sections. Section II provides stylised facts such of customer experience, revenue augmentation, and
as applications and business drivers of AI and its the creation of new products – all of which can be
potential value creation in the banking sector. Data broadly seen as endeavours in the realm of marketing
sources and methodology are explained in Section III and sales – stand out as significant motivation for
while outcomes of text mining and empirical results
on drivers of AI adoption are provided in Section IV. Chart 2: Potential Value of AI and Analytics for
Section V concludes the article. Global Banking

II. Artificial Intelligence and the Financial Sector

The digital age has witnessed a monumental

shift in the pace and scale of innovation, with
convergence of big data, advanced algorithms, and
computational power. This rapid evolution of deep
learning, machine learning, and other AI technologies
has been accompanied by its increasing adoption and
integration in the financial sector. While some view
it as a natural evolution in this era marked by the
2 All 12 public sector banks and 20 out of 21 private sector banks have
been considered for analysis. The banks under consideration account for
100 per cent of total assets in the case of public sector banks and 99.3 per
Source: McKinsey (2021).
cent of total assets in the case of private sector banks

220 RBI Bulletin October 2024

How Indian Banks are Adopting Artificial Intelligence? ARTICLE

Chart 3: AI in Indian Financial Services Sector

Sources: PwC India; and FICCI.

the utilisation of AI (Chart 3a). Indian banks are of their trading operations. These strategies are
increasingly focusing on deployment of AI-driven increasingly driven by predictive analytics, sentiment
chatbots and virtual assistants to enhance customer analysis, and other AI-powered tools, with the
experience and provide personalised service (Chart potential to outperform traditional investment
3b) (PwC India and FICCI, 2022). These technologies approaches (Boukherouaa et al., 2021; Goudarzi et al.,
provide customers with instant responses to 2018). Some of the areas for which banks are using
queries, streamline account management, and AI to save cost are: conversational banking, anti-fraud
offer personalised financial advice (Alt et al., 2021; and under-writing3.
Boukherouaa et al., 2021; Goudarzi et al., 2018; Orçun
Financial sector in India is also trying to leverage
Kaya, 2019). AI technologies are reshaping traditional
the AI tools for regulatory compliance. AI solutions
banking and expanding financial services to the
could facilitate compliance by automating reporting,
underserved populations. Mobile banking apps, AI-
monitoring transactions for suspicious activities, better
driven credit scoring, and blockchain-based solutions
understanding of the regulatory requirements and
are examples of some of the powerful and enabling
ensuring adherence to evolving regulatory standards,
vehicles of greater financial inclusion by extending
reducing the risk of regulatory misconducts, penalties
access to banking services to previously unbanked or
and fines (Boukherouaa et al., 2021).
underbanked individuals (Bazarbash, 2019; Gensler
and Bailey, 2021). As seen earlier, AI solutions have huge potential to
enhance risk management capabilities, by undertaking
Banks and FIs are using Machine Learning (ML)
analysis of massive datasets, finding solutions not
algorithms as part of their proprietary trading desks,
available earlier and getting better perspectives on
forex trading desks and even fixed income trading to
3 https://www.businessinsider.in/finance/news/the-impact-of-artificial-
deploy sophisticated trading strategies on a real-time
intelligence-in-the-banking-sector-how-ai-is-being-used-in-2020/
basis, with the goal of increasing the profitability articleshow/72860899.cms

RBI Bulletin October 2024 221

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

Chart 4: Applications of AI by Banks

Source: The Economist Intelligence Unit Survey, 2022.

the real-time market conditions; thereby allowing for to identify potential threats and vulnerabilities (Aziz
more accurate and timely business risk predictions, and Dowling, 2018; Donepudi, 2017; Goudarzi et al.,
contributing to improved portfolio management, 2018; Milojević and Redzepagic, 2021; Orçun Kaya,
loan underwriting, and fraud detection. According 2019).
to a survey of the IT executives in the banking sector III. Data Sources and Methodology
globally, banks are deploying AI based applications
Most of the existing literature on the impact of
for risk management, the most prominent of which
AI/ML on financial sector has limited quantitative
are for fraud detection, optimising IT operations, risk
information on the actual usage and adoption of
assessment and personalising credit scoring (Chart 4).
artificial intelligence, machine learning and other
AI-powered fraud detection systems can identify automation technologies in the Indian banking sector.
suspicious activities and transactions in real-time, The existing literature has mainly adopted three broad
thus offering a robust defense against financial crimes. approaches. The first approach has been a completely
Some experts argue that future of fraud detection qualitative one, where analysis of academic journals,
has to be AI powered as financial transactions are industry reports and leading business publications is
increasingly occurring in the digital realm, making the undertaken to identify use cases of AI in the industry.
battle against fraud more complex (Boukherouaa et al., However, the main shortcomings of this approach are:
2021; Goudarzi et al., 2018; Milojević and Redzepagic, (1) Possibility of researchers’ bias which can lead to
2021; Orçun Kaya, 2019). With the growing volume an overemphasis on certain themes or findings, and
of sensitive financial data, cybersecurity has become underrepresentation of others; (2) Concerns over
a paramount concern. Banks and FIs are increasingly rigour and reliability of reports; (3) Limited ability
adopting AI-powered cybersecurity tools for automated to generalise findings and allow spatial and inter-
anomaly detection and predictive behavioural analysis temporal comparisons (Carter et al., 2021; Rahman,

222 RBI Bulletin October 2024

How Indian Banks are Adopting Artificial Intelligence? ARTICLE

2016). The second approach has been to conduct to successfully develop or operationalise a technology
surveys/questionnaires and provide qualitative solution or may be utilising cost-effective open source
overview of AI adoption or convert the responses into technologies to develop solutions.
a quantitative metric. However, this approach too
In view of this, we propose a text mining-based
suffers from issues like (1) difficulty in capturing the
approach to measure the adoption of AI/ML and
complexity with adoption of a frontier technology like
related technologies in the Indian banking sector.
AI; (2) unreliability and bias as the respondent may
We perform text mining on the annual reports of
not be aware of all aspects or use cases of technology
the Indian banks as they are highly likely to reflect
within the firm and may also overstate and over
the usage and adoption of new-age technology like
emphasise their usage of AI to appear more innovative
AI/ML. Further, the annual reports are a trustworthy
or may understate the response due to privacy
and publicly available source of information and are
concerns; (3) Comparison issues especially across
also available across years thereby allowing for inter-
time which is a very important aspect as technology
temporal analysis.
adoption is a dynamic process and a firm’s use of
AI and other technologies can evolve rapidly (Carter We have adopted a dictionary-based approach
et al., 2021; Survey Research and Questionnaires, after parsing the annual reports to extract individual
n.d.).The third approach has been to use a proxy words/phrases and evaluate the instances of usage of
variable as a measure of AI adoption including using these words. While the earliest work utilised existing
some proportion of IT investment expenditure/capital dictionaries like Harvard word dictionary, subsequent
expenditure/M&A expenditure of technology related work created their own unique dictionaries according
firms. The main shortcomings of this approach are (1) to the specific need. These text mining-based
these metrics measure not just AI based technologies approaches have been used to measure otherwise
but also other types of IT expenditure (2) expenditure hard to evaluate attributes like corporate governance,
may not directly lead to adoption as firms may fail ESG activity and FinTech adoption (Table 1).

Table 1: Literature Utilising Text Analytics

Loughran et al. (2009) Undertook text mining to examine the occurrence of ethics-related terms in firms’ 10-K reports. Found that firms using ethics-
related terms are more likely to be (i) “sin” stocks, (ii) the object of class action lawsuits and (iii) to score poorly on measures
of corporate governance.
Shirata et al. (2011) Adopted a text mining approach to analyse Japanese firms’ financial reports and extracted key phrases/descriptions which
could be able to predict bankruptcy.
Feng et al. (2013) Undertook textual analysis of firms 10-K reports to create a word count based measure of industry competition. This measure
is related to existing industry-level measures of disclosure (e.g., Herfindahl index), but provide additional insight into both
across-industry variation and within-industry variation.
Baier et al. (2020) Undertook textual analysis of firms’ 10-K reports for measuring environmental, social and governance (ESG) activity of the
firms. Undertook a word count based measure using a uniquely created dictionary for ESG related words.
Hong et al. (2023) Constructed a new measure of FinTech adoption by firms, using a word count approach with a uniquely created dictionary for
FinTech on firms’ 10-K reports. Further, examined how product market competition affects FinTech adoption at the firm level
and found that firms operating in more competitive environments have a higher incentive to adopt FinTech.
Sharma et al. (2024) Undertook natural language processing (NLP) based text mining approach to analyse news articles, speeches, interviews and
other publicly available documents for central banks and multi-lateral institutions. They further attempt to decipher the policy
focus and priority of the central banks and multilateral institutions in the areas of FinTech and the shift in these trends over
time.

RBI Bulletin October 2024 223

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

The key step in performing a keyword and which need to be acknowledged9. The quantitative
named entity matching is using a suitable dictionary mentions of AI-related terms in the dictionary-
which contains a list of words or phrases related to based frequency measures may not account for
specific categories or concepts of interest. In line with the contextual meaning (Loughran and Mcdonald,
existing literature, we started by using the popular 2016). The presence of AI related keywords may be
dictionaries/glossary related to AI and ML including indicating discussion about AI related opportunities
those by Google Vertex AI4, Google Developers5, IBM6, and risks rather than its deployment (Chen et al.,
NHS AI Lab7 and Council of Europe8 (RBI, 2023). We 2023). On the other hand, it may fail to account for
utilise the popular LLM models of ChatGPT and Bard
banks that have implemented AI extensively but
to create a dictionary of AI related terms pertaining to
have not emphasised it as frequently in their reports,
financial sector. The advantage of using LLM models
leading to underestimation of AI adoption. Thus, the
to create a dictionary comes from the fact that LLM
methodology captures banks discussion and focus on
models have been trained on an extensive dataset
AI and related technologies (which could be the part of
and therefore better equipped to identify keywords
their preparedness/evaluation of these technologies
related to AI in the context of financial sector. A
before its deployment) and not just the deployment
comprehensive dictionary has been formulated by
combining all these dictionaries. We have employed of these technologies.
a combination approach for creating the dictionary Annual reports for 32 commercial banks10  11 for 8
where both keyword matching and named entity years, starting from FY 2015-16 to FY 2022-23, were
recognition are used. This approach is based on analysed. In the first step, the annual reports of the
searching for presence of AI related keywords such said banks were downloaded in portable document
as “artificial intelligence,” “machine learning,” format (pdf). In the text pre-processing stage, these
“neural networks,” “deep learning,” “data science,” pdf files were checked for machine readability and
and other relevant terms. We also match for named
made machine readable, wherever possible, using
entities related to AI, like AI applications (e.g., natural
techniques like optical character recognition (OCR).
language processing, computer vision), or AI-related
organisations (e.g., ChatGPT). A higher frequency of 9 Alternative topic modelling algorithms, such as Latent Dirichlet
AI-related keywords indicates a higher likelihood of Allocation (LDA) or Non-Negative Matrix Factorization (NMF) were
attempted. However, in our case with banks annual reports which are geared
deployment or focus on AI. Words which may be used toward topics related to financial sector with extremely limited space
devoted to discussion around AI/ML and related technologies, these
in an alternate usage sense in financial sector have techniques did not provide useful results. Other approaches include Support
been removed along with terms which were found to Vector Machines (SVM) and Convolutional Neural Networks (CNN) can
identify context and semantic patters. However, as they require high amount
have negligible mention in the test case to improve of labelled data and were therefore not used. Recent studies have explored
usage of transformers like BERT (Bidirectional Encoder Representations
accuracy and parsimony gains, respectively.
from Transformers), GPTs and other LLMs which excel in contextual
understanding, but they not only require large datasets but also are
As is the case with any empirical methodology, extremely computationally extensive mechanisms. This combined with
this methodology also has certain limitations their black box kind of nature limited their suitability for this study.
10 Public Sector Banks witnessed mergers during the period under

4 consideration. The acquiring entities annual reports which were available

https://cloud.google.com/vertex-ai/docs/glossary
for the whole study period were considered. Thus, 12 public sector banks
5 https://developers.google.com/machine-learning/glossary which existed post mergers have been included in the study.
6 https://www.ibm.com/cloud/architecture/architecture/practices/ 11 A total of 21 private sectors scheduled commercial banks were considered,
cognitive-glossary/ including IDBI Bank which was categorised as a private sector bank in 2019.
7 https://nhsx.github.io/ai-dictionary
One private sector bank had to be excluded as its annual reports were not
8 https://www.coe.int/en/web/artificial-intelligence/glossary machine readable.

224 RBI Bulletin October 2024

How Indian Banks are Adopting Artificial Intelligence? ARTICLE

The machine-readable pdfs were then processed IV. Results

individually, by extracting the text content from each IV.1 Artificial Intelligence Adoption
page and storing it in a data-frame. In the next step,
The results show that initially (FY 2015-16), public
tasks such as lowercasing, removing special characters,
sector banks were proactively considering AI/ML and
tokenisation stop-word removal, and lemmatisation
related technologies, showing a similar mention of AI
were performed to make the text suitable for dictionary
related keywords (AI score) compared to their private
matching. In the last step, keyword matching was done
sector counterparts. However, during the period from
by checking each keyword for its presence in the text
2016 to 2021, the AI-related word count in the annual
data, and the frequency of occurrence was recorded. reports of private sector banks has picked up. This may
The key banking characteristics including total be due to a combination of recognition of additional
assets, CRAR (capital to risk weighted assets ratio), use cases of existing AI based technologies along with
return to total assets, efficiency ratio, GNPA (gross more agility in adopting the newer and advanced AI
NPAs to gross advances) ratio, NNPA (net NPAs to net techniques and models.
advances) ratio and retail lending ratio (gross retail The usage of AI related keywords in the
loans to gross advances) for both public and private annual reports of private sector banks increased by
sector banks have been outlined in Table 2. We find approximately six-fold in 2022-23 reports as compared
that there are considerable differences at aggregate to 2015-16 level. Even in case of public sector banks
level between private and public sectors in terms of (PSBs), the emphasis on new age technologies like
these banking characteristics. AI in their annual reports has increased more than 3

Table 2: Key Banking Characteristics of Public and Private Sector Banks in India
Year Total Assets Capital Ratio Return on Efficiency Gross NPAs to Net NPAs to Net Retail Lending
(in ₹ lakh crore) (CRAR) Total Assets (Cost to Income Gross Advances Advances Ratio
(annualised) Ratio) (Per cent) (Per cent) (Per cent)
Public Sector Banks
2015-16 81.01 11.82 -0.27 53.02 9.83 6.13 17.4
2016-17 88.15 12.14 -0.16 50.26 12.47 7.39 19.6
2017-18 91.79 11.66 -0.94 52.32 15.52 8.58 22.4
2018-19 93.73 12.20 -0.77 55.18 12.25 5.12 23.4
2019-20 99.88 12.85 -0.29 53.33 10.79 4.00 25.0
2020-21 109.13 14.04 0.29 51.46 9.36 3.23 26.8
2021-22 119.87 14.62 0.55 53.09 7.57 2.33 27.8
2022-23 130.39 15.53 0.75 51.77 5.22 1.34 29.2
Private Sector Bank
2015-16 28.91 15.68 1.64 44.11 2.70 1.27 24.8
2016-17 34.39 15.53 1.45 43.19 3.51 1.84 25.5
2017-18 41.17 16.43 1.27 43.83 4.01 1.97 25.4
2018-19 51.17 16.07 0.82 46.60 4.81 1.89 26.8
2019-20 56.77 16.55 0.51 43.66 5.11 1.43 30.2
2020-21 63.45 18.42 1.22 41.50 4.74 1.41 31.7
2021-22 72.40 18.78 1.44 44.83 3.73 0.96 30.5
2022-23 83.01 18.61 1.60 48.38 2.17 0.55 35.2
Source: Database on India Economy, RBI.

RBI Bulletin October 2024 225

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

reduce human interventions (Chart 6). Data analytics

Chart 5: AI Word Count for Public and
Private Sector Banks is another major thrust area with possible usage in
fraud detection and predictive analytics. While cloud
computing and big data continue to be the major
technologies which banks are employing, there is
an increasing recognition of potential usage of the
newer AI and ML technologies like Robotic Process
Automation (RPA), Internet of Things (IoT) and Natural
Language Processing (NLP).

IV.2 Drivers of AI Adoption

A panel fixed effect model was used to evaluate

how the AI score, as measured by text analytics
(explained above in section IV.1), may be influenced
Source: Authors’ calculations. by bank-level characteristics like assets, capital to
risk weighted assets ratio (CRAR), return on assets
times between 2015-16 and 2022-23 (Chart 5). In a few (RoA) and gross non-performing assets (GNPA).
public-sector banks, the enthusiasm towards AI based The data on bank specific variables has been taken
technologies is broadly at par with their private sector from RBI’s Database on Indian Economy. The choice
peers, especially in recent years. of a fixed effects model was made as the time-
invariant unobserved characteristics of each bank
Further, the word cloud reveals interesting
could influence both the AI adoption score and the
insights with most banks focussing on automation
bank-level characteristics. For instance, a bank’s
which may be due to a push for efficiency gains and
management quality or corporate culture could
influence its AI adoption score. By using a fixed
Chart 6: Word Cloud of AI Related Keywords
Mentioned in Annual Reports effects model, we can control for these unobserved
characteristics and isolate the relationship between AI
adoption and the observed bank-level characteristics.
Before estimating the model, we performed two
diagnostic tests: the Hausman test and the Redundant
Fixed Effects test. The Hausman test is used to decide
between a fixed effects model and a random effects
model. The null hypothesis under this test is that
the preferred model is random effects. However, in
our case, we rejected the null hypothesis, suggesting
that the fixed effects model is more appropriate. The
Redundant Fixed Effects test checks whether the fixed
effects (or individual-specific effects) in the model are
Source: Authors’ calculations.
significant. The null hypothesis of this test is that

226 RBI Bulletin October 2024

How Indian Banks are Adopting Artificial Intelligence? ARTICLE

these effects are redundant. Again, we rejected the RoAit–1 is return on assets expressed in percentage
null hypothesis, indicating that these fixed effects are which is a measure of how productively the bank has
significant and should be included in our model. been able to utilise its assets and thus a measure of
its capital efficiency in general (Adhitya and Sembel,
Estimation results of panel fixed models are
2020; Chhaidar et al., 2023; Doran et al., 2022).
provided in Table 3. In the baseline model (Model 1),
AI score is regressed upon assets, capital position and GNPAit–1 stands for gross non-performing assets.
dummies representing merger year and private-sector Banks with higher GNPA may derive greater benefits
banks. In the subsequent estimation, we augment from utilising AI related technologies in credit
our model to include other banking indicators such underwriting and recovery process (Bazarbash, 2019;
as GNPA (Model 2), RoA (Model 3), and efficiency Chhaidar et al., 2023; Doran et al., 2022; Goudarzi
ratio (Model 4) and retail lending ratio (Model 5). The et al., 2018; Seth and Bhavika Gandhi, 2023). However,
specification for the fully augmented model (Model 5) banks with higher GNPAs could be more focussed on
is as follows: cleaning books and also have had to allocate more
resources toward provisioning needs, thus reducing
AISCOREit =β0+β1*Ln(Assets)it–1 + β2*CRARit–1 + β3
the resources available for investing in AI and related
*RoAit–1 + β4*GNPAit–1 + β5*EffRatioit–1 +
technologies. In model 2a, net non-performing assets
β6*RetailLendingit–1 + β7 MergerDummyit +
(NNPA) has been taken instead of GNPA as an alternate
β8*PrivateDummyit + αi + εit
specification.
In this equation AISCOREit is the dependent
EffRatioit–1 is efficiency ratio which represents
variable. Ln(Assets)it–1 is the natural log of assets of
the cost to income ratio for a bank. Efficiency ratio can
a bank (in crores of rupees)12 and has been mean-
be indirect proxy for measuring the potential benefits
centered to account for the scale issue. Asset size
of using AI related technologies to reduce costs (Alt
can be viewed as proxy of size of banks and it can
et al., 2021; Boukherouaa et al., 2021; Orçun Kaya,
potentially influence adoption of technologies like
2019).
AI as it affects the amount of resources available, risk
taking capacity, exploitation of economies of scale, RetailLendingit–1 is the retail lending ratio which
potential benefits and even executional challenges represents how retail centric is a bank. With a lot
(Bordonaba-Juste et al., 2012; Burke, 2005; Hall and of AI technologies focussed towards improving the
Khan, 2003; Lee and Xia, 2006; Na et al., 2023). retail customer experience like creation of chatbots,
wealth management solutions, recommendation
CRARit–1 is capital to risk-weighted assets ratio
models among others. It is possible that banks which
and measures the capital adequacy, thus a proxy
have higher proportion of retail loans are more retail
for the financial health of the banks which in turn
banking focussed and thus have higher adoption of AI
indicates availability of capital to afford upfront costs
and related technologies.
of acquiring new technologies which can be significant
in case of complex and capital intensive technologies All the bank specific variables have been taken in
like AI (Chhaidar et al., 2023; Hall and Khan, 2003; lag form to account for the possibility that the impact
Nugroho et al., 2017). of these variables on the AI adoption score may not be
immediate, but rather delayed. Moreover, using lagged
12 Due to merger of some PSBs during the study period, the assets of the independent variables can also help mitigate potential
merged banks have been spliced to remove the impact of merger on asset
size. endogeneity problems. MergerDummyit takes value

RBI Bulletin October 2024 227

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

1 for the bank in the year it has been merged and 0 banks. This finding aligns with resource-based theory,
otherwise, thus allows us to estimate the short-term which posits that organisations with greater resources
impact of the merger13. PrivateDummyit is the dummy are more inclined to invest in innovation and modern
variable taking value 1 for private sector banks and technologies like AI (Barney, 1991) and survey results
0 otherwise, which allows to control for potential showing higher AI adoption rate among banks having
differences between these two categories. αi represents larger asset size14. Further, larger banks owing to their
the individual-specific (bank-specific) effects and εit is difficulties in coordination across verticals are likely
the error term. The subscript i represents the cross- to achieve higher net gains from adoption of such
technologies and data integration, thereby increasing
section (i.e. bank) and t represents the time period.
the motivation for adoption of AI. It may also be
We find consistent results across all the models indicating that the adoption of technologies such as
considered (Table 3). AI is relatively difficult for smaller banks due to larger
Across all models, we find that AI score is fixed cost and absence of economies of scale.
positively related to the asset size of the banks as Capital-to-risk weighted asset ratio (CRAR) which
evident from positive and statistically significant is a proxy for the capital adequacy of the bank and
coefficient, suggesting higher adoption by larger thus a reflection of the financial health of the bank,

Table 3: Factors Impacting Adoption of AI in Indian Banks

Model 1 Model 2 Model 2a Model 3 Model 4 Model 5
Ln_assets 49.34*** 48.62*** 49.09*** 48.40*** 48.72*** 50.13***
CRAR 1.68*** 1.78*** 1.90*** 1.88*** 1.98*** 1.98***
GNPA ratio 0.31 0.19 0.25 0.26
RoA -0.79 -0.04 0.01
Efficiency ratio 0.17 0.20
Retail Lending ratio -0.10
Merger dummy -6.58 -6.70 -6.40 -6.70 -6.19 -6.50
Private dummy 20.51* 17.05 21.56* 17.23 17.06 18.14
NNPA ratio 0.62
Cross-Sections Included 32 32 32 32 32 32
Total Observations 256 256 256 256 256 256
Constant Included Included Included Included Included Included
R2 0.76 0.76 0.76 0.76 0.76 0.76
Adjusted R 2
0.72 0.72 0.72 0.72 0.72 0.72
F-statistic 19.49*** 18.98*** 19.03*** 18.41*** 18.05*** 17.54***
Akaike info 8.39 8.39 8.39 8.40 8.40 8.40
Schwarz 8.88 8.90 8.90 8.92 8.94 8.96
Hannan-Quinn 8.58 8.60 8.60 8.61 8.61 8.62
Durbin-Watson 1.24 1.23 1.24 1.24 1.28 1.29
***, ** and * denotes statistical significance at 1 per cent, 5 per cent and 10 per cent probability level, respectively.

13 As only the acquiree banks were considered in the study for which AI score has been calculated for all years under consideration, a balanced panel was
utilised.
14 https://www.businessinsider.in/finance/news/the-impact-of-artificial-intelligence-in-the-banking-sector-how-ai-is-being-used-in-2020/

articleshow/72860899.cms

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How Indian Banks are Adopting Artificial Intelligence? ARTICLE

is positively related to AI score. This result resonates offline channels, especially in rural and semi-urban
with the viewpoint that well-capitalized banks are areas. However, with the rapid advancements in AI,
better positioned to take the investment risks in new especially generative AI and LLM based models in last
technology in terms of adequate capital buffers and 2 years, which have been accompanied with public at
confidence to pursue AI solutions. large being able to access and thus subsequently draw
comfort with AI based solutions, public sector banks
Other bank specific indicators such as RoA,
also appear to be increasing their usage of AI based
GNPA/NNPA, efficiency ratio and retail lending are not
solutions.
statistically significant for explaining AI score15. The
merger dummy is also not found to be a statistically V. Conclusion
significant determinant of AI score of banks. While AI is being increasingly explored in every
The coefficient for the dummy variable industry, its usage is expected to have a profound
representing private sector banks though positive is impact on various operations of banking and finance,
only significant at 10 per cent level in Model 1 and including risk assessment, fraud detection, customer
2a. This result needs to be seen in light of analytical service, investment strategies, regulatory compliance,
findings where both private and public-sector banks and more. As the capabilities of these technologies
broadly started at similar level of AI score in 2015-16 continue to grow, so does their influence on the
but then saw private sector banks AI score increase decision-making processes. AI is expected to have
rapidly in the next 5 years. However, in the last 2 years, the potential to reduce the inefficiencies, through
public sector banks also appear to have enhanced their automation by minimising errors in the human
AI adoption, as observed in their AI score, possibly decision making and by providing cost effective
reflecting the broad-based ongoing expansion of solutions. It is also expected to make banking services
digital technologies in the Indian banking sector. accessible to the population at the bottom of the
pyramid. While the integration of AI into banking
The greater adoption of AI in private sector banks
and finance offers immense opportunities, it also
could be due to a larger proportion of their clientele
presents challenges such as possibility of bias, lack
being better equipped to access digital services and
of transparency, and issues surrounding the ethical
more comfortable with usage of modern technology-
use of data which requires an in-depth evaluation
based solution (ET BFSI, 2021; Malladi et al., 2021).
in view of its implications for financial sector and
Also, private banks often cater to more financially
the overall economy. The recent policy initiatives by
aware and affluent customers and therefore could
India including the National Strategy for Artificial
see higher potential for leveraging AI based solutions
Intelligence, IndiaAI Mission, AI for India 2.0 and Skill
like customer segmentation, robo-advisory, robo-
India AI Portal aim to reap the potential offered by AI
wealth management tools to cross-sell or provide
and related technologies while being cognisance of the
other financial services. Further, private sector banks
risks and challenges presented by it. The Reserve Bank
especially those with a smaller branch network, are
of India has also recognised the potential of AI/ML
much more likely to adopt AI based solutions to
and related technologies and encouraged the banks to
gain new customers or cross-sell different products,
appropriately adopt these technologies for conducting
as it represents a more cost-effective solution. On
ongoing due diligence and effective monitoring for
the other hand, PSBs already have well established
KYC/AML norms16.
15 Results of model incorporating staff expenses and Return on Equity (RoE)
are not shown in the Table 2 but they can be made available on request/ 16 RBI Master Direction - Know Your Customer (KYC) Direction, 2016
demand. (Updated as on January 04, 2024).

RBI Bulletin October 2024 229

ARTICLE How Indian Banks are Adopting Artificial Intelligence?

Text mining of annual reports of Indian banks Bordonaba-Juste, V., Lucia-Palacios, L., and Polo-
during 2015-16 to 2022-23 reveals that both private Redondo, Y. (2012). The influence of organizational
and public-sector banks are increasingly emphasising factors on e-business use: Analysis of firm size.
on AI and related technologies; however, the pace of Marketing Intelligence and Planning, 30(2), 212–229.
increase is higher for private banks. Automation, data https://doi.org/10.1108/02634501211211984/FULL/
analytics, cloud computing and big data are the major XML
thrust areas, with increasing consideration for RPA,
Boukherouaa, E. B., Shabsigh, G., Deodoro, J., Farias,
IoT and NLP like technologies by banks especially in
A., Iskender, E. S., Mirestean, A. T., and Ravikumar, R.
recent years. Among different banking indicators, size
(2021). Powering the Digital Economy: Opportunities
and financial health of a bank is found to positively
and Risks of Artificial Intelligence in Finance. https://
influence the bank’s focus on AI, reflecting the
www.imf.org/en/Publications/Departmental-Papers-
impact of economies of scale and the availability of
Policy-Papers/Issues/2021/10/21/Powering-the-Digital-
investment on the technological advancement.
Economy-Opportunities-and-Risks-of-Artificial-
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Annexure
Annex 1: Glossary of Major AI Related Terms
Term Definition
Algorithm A set of rules that a machine can follow to learn how to do a task.
Artificial AI refers to the simulation of human intelligence processes by machines, especially
Intelligence (AI) computer systems to perform cognitive tasks like thinking, perceiving, learning, problem
solving and decision making. AI can have ‘communication’ or ‘decisions making’ similar
to human.
Big data Datasets that are too large or complex which may be structured, semi-structured and
unstructured data that can be mined for information and used in machine learning
projects, predictive modelling and other advanced analytics applications.
Chatbot Chatbot is a program designed for communicating like humans with users/people through
text or voice command.
ChatGPT ChatGPT stands for ‘Chat Generative Pre-Trained Transformer’, which is a large-language-
model based AI chatbot that uses natural language processing to create humanlike
conversational dialogue. The language model can respond to questions and compose
various written content, including articles, social media posts, essays, code and emails.
Computer Vision An interdisciplinary scientific field that deals with how computers can gain high-level
understanding from digital images or videos.
Data Mining The process of discovering patterns in large data sets involving methods at the intersection
of machine learning, statistics, and database systems.
Data Analytics Data analytics is the science of analyzing raw data through tools, technologies, and
processes. It is used to summarise data and to find trends pattern or to identify anomaly
to improve decision-making, and foster business growth. Some types of data analytics
such as prescriptive analytics and cognitive analytics are associated with AI/ML models
such as predictive modelling, deep learning and natural language processing.
Data Science An interdisciplinary field that uses scientific methods, processes, algorithms and systems
to extract knowledge and insights from structured and unstructured data.
Deep Learning A subset of machine learning which is based on artificial neural networks that has networks
capable of learning complex patterns and relationships within data. Deep learning is a
branch of machine learning. It is capable of learning.
Internet of It is a network of devices facilitating communication such as exchanging data with other
Things (IoT) devices/clouds and systems over the internet.
Machine Machine Learning is a type of artificial intelligence (AI) that allows software applications
Learning (ML) to become more accurate at predicting outcomes without being explicitly programmed
to do so. It involves the use of algorithms to parse data and learn from it and making a
determination or prediction. The machine gets “trained” using large amounts of data and
algorithms, and in turn gains the capability to perform specific tasks.

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ARTICLE How Indian Banks are Adopting Artificial Intelligence?

Term Definition
Natural Language A subfield of linguistics, computer science, and artificial intelligence concerned with the
Processing (NLP) interactions between computers and human language. It is the ability of computers to
understand text and spoken words like human being.
Neural Network A neural network is an adaptive system that learns by using interconnected nodes or
neurons in a layered structure that resembles a human brain. A neural network can learn
from data, so it can be trained to recognize patterns, classify data, and forecast future
events.
Predictive The use of data, statistical algorithms and machine learning techniques to identify the
Analysis likelihood of future outcomes based on historical data.
Robotic Process The use of software with artificial intelligence (AI) and machine learning capabilities to
Automation handle high-volume, repeatable tasks that previously required humans to perform.
(RPA)
Sentiment The use of natural language processing, text analysis, computational linguistics, and
Analysis biometrics to systematically identify, extract, quantify, and study affective states and
subjective information.
Supervised A type of machine learning where the model is provided with labeled training data.
Learning
Text Mining Text mining is the process of extracting valuable information from unstructured text
data to analyze, understand, and derive insights. It uses techniques of natural language
processing and machine learning.
Unsupervised A type of machine learning where the model is not provided with labeled training data.
Learning

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COVID-19 and Performance of MSME Clusters in India ARTICLE

COVID-19 and Performance of in the MSME sector, apart from general monetary and
fiscal support measures. With the pandemic receding,
MSME Clusters in India the Indian economy began its recovery in subsequent
by Rajib Das, Dhanya V, Amarendra periods.

Acharya, Ramesh Golait, Silu Muduli and Various policy measures have been
Arjit Shivhare^ implemented by the government over the decades
for the development of this sector in India, the
The COVID-19 pandemic adversely affected all prominent one being the cluster approach to MSME
sectors of the Indian economy, including the MSME development. A large segment of MSMEs in India
sector. Drawing on survey conducted on select MSME falls under the micro category, which face more acute
clusters, this article investigates the performance and challenges in their operations. A cluster approach to
state of formalisation of MSME sector. Expenses related MSME development was conceptualised as a policy
to electricity, rent, and debt service emerge as the key instrument to address the limitations arising from
factors influencing the net profit margin of MSMEs the ‘smallness’ of the firm. Clusters provide micro
in the post-pandemic period. Liquidity and regulatory and small firms a competitive advantage through
measures by the Reserve Bank and Government schemes many avenues, primarily through proximity to raw
such as the Emergency Credit Line Guarantee Scheme materials, suitable business development services,
(ECLGS) supported these enterprises in the aftermath marketing facilities, and skilled labour (Krugman,
of the pandemic. The paper’s observations and results 1991). The initial move towards a cluster approach
may not necessarily hold for the entire MSME sector, as in India began in 1998 with efforts to promote
the current study is limited to MSME firms within the technology adoption in small industries. By 2003, a
sampled clusters and the characteristics and behaviour of more comprehensive approach to cluster development
the firms outside the clusters could be different. was envisioned encompassing marketing, exports,
and skill development, establishing common facility
Introduction
centres, and implementing technology upgrades for
Micro, small, and medium enterprises (MSMEs) enterprises.
are well-known forms of business enterprises across
Against this backdrop, this study, based on
the globe, having features like small size, independent
a primary survey conducted among select MSME
entities and limited market exposure. MSMEs
clusters, examines the performance of MSME firms
contribute significantly to inclusive development
and the effectiveness of policy measures initiated
by fostering entrepreneurship and generating
during the pandemic. It also analyses the major factors
employment at comparatively lower capital costs. The
influencing the profitability of MSME firms and their
COVID pandemic disrupted the business landscape
variability pre- and post-COVID pandemic.
for MSMEs across geographies, including India. In
response, the Government of India (GoI) and the The paper is structured into four sections, starting
Reserve Bank introduced specific policies to alleviate with the introduction. Section II presents the status
working capital issues and ensure business continuity of the MSME sector, including definition, historical
background and policy measures taken by GoI and RBI.
^ The authors are from the Department of Economic and Policy Research
(DEPR), Reserve Bank of India (RBI), Mumbai. The authors are thankful to Section III delves into the empirical analysis, outlining
Soumya Bhadury and D Suganthi for their valuable suggestions. The views the survey methodology and presenting stylised facts.
expressed in the article are those of the authors and do not represent the
views of the Reserve Bank of India. Section IV presents concluding remarks.

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ARTICLE COVID-19 and Performance of MSME Clusters in India

II. Status of MSMEs in India However, only 5.2 crore MSME units were registered in
the Udyam Portal, an online portal for the registration
II.1 Definition and Historical Background
of MSMEs, as of September 2024. As per NSSO, the
The MSME sector is markedly heterogeneous, MSME sector employed around 11 crore individuals
characterised by variations in enterprise size, the during October 2022- September 2023, nearly one-
range of products and services offered, and the level fifth of total employment in the economy and 35
of technology utilised. As per the MSME Act 2006, per cent of non-agricultural employment. MSMEs
MSMEs were initially defined in terms of plant and contribute to nearly 63-66 per cent of employment in
machinery/equipment investment limits. However, high-income and upper-middle-income economies, 91
due to their informal and small scale of operations, per cent of total employment in lower-middle-income
classifying MSMEs based on investment criteria economies and 81 per cent of employment in low-
was viewed as difficult (RBI, 2019). In 2020, the income economies (Haider et al, 2019).
Government of India included turnover as a criterion
along with the earlier criterion based on investment in MSMEs in India broadly fall under the ‘micro
machinery and equipment. The introduction of Goods category’ and face challenges in technology adoption,
and Services Tax (GST) in 2017 provided an avenue to credit availability, infrastructure, and formalisation
verify the categorisation of MSMEs based on turnover (RBI, 2019). While conclusive evidence is lacking on
from the Goods and Services Tax Network (GSTN) the impact of firm size on productivity, the ‘small
data, imparting transparency in the system. Further, nature’ of firms can prevent MSMEs from taking
the distinction between manufacturing and services the benefit of economies of scale (Williamson, 1967;
was removed. Exports were also excluded from the Utterback, 1994; Dhawan, 2001). Medium and large
turnover classification to widen the scope of MSMEs. firms are more innovative than the smaller ones (GoI,
Accordingly, at present: 2014). Insufficient skilled labour, limited financing,
lack of technological and market information, and
i. an enterprise is a micro-enterprise where
inadequate infrastructure are barriers to innovations
the investment in plant and machinery
by MSME firms (GoI, 2014; Pachouri and Sharma,
or equipment is at most ₹1 crore, and the
2016).
turnover is at most ₹5 crore.
The cluster approach to economic development,
ii. a small enterprise, where the investment in
pioneered by Michael Porter (Porter, 1990; Porter,
plant and machinery or equipment does not
1998), gained traction across countries in the late
exceed ₹10 crore, and the turnover does not
1990s and early 2000s to overcome the limitations
exceed ₹50 crore; and
faced by small independent units. The cluster
iii. a medium enterprise, where the investment approach gained broader importance when United
in plant and machinery or equipment is at Nations Industrial Development Organization
most ₹50 crore, and the turnover does not (UNIDO) emphasised it in 2003 as a critical component
exceed ₹250 crore. of industrial development strategies and pointed
As per the National Sample Survey Organisation’s out that the cluster has the potential to promote
(NSSO) Annual Survey of Unincorporated Sector broad-based and inclusive growth (UNIDO, 2020).
Enterprises, October 2022- September 2023, there MSME clusters are proximate groupings of affiliated
were around 6.5 crore unincorporated non-agricultural institutions and interconnected companies bound by
MSMEs engaged in various economic activities in India. shared technologies and expertise within a specific

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COVID-19 and Performance of MSME Clusters in India ARTICLE

field. Typically, clusters are geographically situated focused allocation of resources and funding to specific
to facilitate seamless communication, logistics, and areas with considerable potential for growth and
interpersonal interaction, creating an environment development. This targeted approach is advantageous
conducive to productivity gains, a crucial factor for due to the potential spillover and multiplier effects
growth (Porter, 2003). that can extend beyond the initially identified
locations. As per the India Cluster Observatory, there
The effectiveness of clusters hinges on the
were 4361 clusters in India in September 2024, with
collaborative sharing of resources among small
57.2 per cent of clusters belonging to the handicraft
individual firms across various business processes
sector, followed by 30 per cent of industrial clusters
such as manufacturing, technology, quality control,
and 13 per cent of handloom clusters.
testing, marketing, and procurement. Clusters and
associated networks enable small firms to combine the II.2 Policy Measures
advantages of running a small unit with economies
The Ministry of MSME introduced selective
of scale and specialisation equivalent to large units
interventions in industrial clusters in 1998,
(Magar, 2017).
and subsequently broad-based its MSE Cluster
The initial official endorsement of clusters Development Programme through interventions
as the focal point for Small Scale Industry (SSI) such as capacity building, marketing development,
development in India came from the Abid Hussain export promotion, skill development, and setting up
Committee Report (GOI, 1997). India has actively common facilities centres. The Ministry of MSME has
adopted a cluster development approach since 2003 also launched the Scheme of Fund for Regeneration
to enhance economic development by bolstering of Traditional Industries (SFURTI) specifically
the competitiveness and growth of MSMEs. The for traditional khadi and village industries. The
Ministry of MSME has defined clusters as a “group of Department for Promotion of Industry and Internal
enterprises located within an identifiable and as far Trade initiated the Industrial Infrastructure
as practicable, contiguous area or a value chain that Upgradation Scheme (IIUS) in 2003 as a central
goes beyond a geographical area and producing same/ sector scheme to boost industries’ competitiveness
similar/complementary products/services, which can by enabling high-quality infrastructure development
be linked together by common physical infrastructure through collaborations between the public and
facilities that help address their common challenges. private sectors in specific operational clusters.
The essential characteristics of enterprises in a cluster
The government also revised the Micro and Small
are (a) Similarity or complementarity in the methods
Enterprises – Cluster Development Programme (MSE-
of production, quality control and testing, energy
CDP) in 2007. It operates as a demand-driven central
consumption, pollution control, etc., (b) Similar level
sector scheme wherein state governments send
of technology and marketing strategies/practices,
proposals for establishing common facility centres
(c) Similar channels for communication among the
and the initiation/up-gradation of infrastructure
members of the cluster, (d) Common market and skill
development projects. The MSE-CDP scheme has
needs and (e) Common challenges and opportunities
effectively enhanced and bolstered the value chain
that the cluster faces”1. Cluster initiatives were
of member and non-member units within the
recognised as efficient policy tools, enabling the
cluster, which is estimated to have led to an overall
1 https://my.msme.gov.in/MyMsme/Reg/COM_ClusterForm.aspx productivity increase of approximately 10-15 per

RBI Bulletin October 2024 237

ARTICLE COVID-19 and Performance of MSME Clusters in India

cent, a similar order of reduction in manufacturing a host of sectors, including MSMEs. Moreover, the
costs, and an increase in operational efficiency by Reserve Bank permitted loan moratorium subject to
approximately 15 per cent2. guidelines and exempted banks from keeping the
To enhance credit flows to MSMEs, a Credit cash reserve ratio (CRR) requirement against loans
Guarantee Fund Trust for Micro and Small Enterprises disbursed to first-time borrowers of micro, small and
(CGTMSE) was established in 2000, which offered medium enterprises (MSMEs). In 2022, in sync with
credit guarantee support to financial institutions co-lending policies of RBI, the CGTMSE introduced
for enabling collateral free loans to Micro and Small Credit Guarantee Scheme for Co-Lending (CGSCL) for
Enterprises (MSEs). In 2017, the scheme was widened extending the guarantee coverage to credit facilities
to include non-banking financial companies (NBFCs) under co-lending model jointly by banks and NBFCs.
into the scheme acknowledging the vital role they
III. Stylised Facts and Empirical Analysis
play in credit disbursement to MSEs (Credit Guarantee
Scheme for NBFCs - CGS-II). III.1 Survey Methodology and Coverage
To address the issue of delayed payments to The study is based on a primary survey among
MSMEs, the Reserve Bank of India (RBI) introduced 110 clusters across 15 states and one union territory
the Trade Receivables Discounting System (TReDS) conducted during April-September 2023. The MSME
in 2014. The TReDS is an electronic platform where firms were selected from pre-identified clusters in
MSMEs can secure financing of their receivables the UNIDO list of clusters and the state governments’
from buyers, including large corporates, public sector
lists of MSME clusters. From each cluster, firms
undertakings (PSUs), government departments, etc. at
were selected randomly. In total, 3,246 MSMEs were
a discount.
interviewed for the study (Table 1).
To mitigate the adverse impact of COVID pandemic
on MSMEs, GoI and the Reserve Bank undertook Table 1: Distribution of Sample over States
a slew of measures to provide continuous access to States Number of Share
credit and liquidity to the MSMEs to ensure business MSMEs Surveyed (Per cent)

continuity of the sector. The Credit Guarantee Scheme West Bengal 625 19.3

for Subordinate Debt (CGSSD) was launched in 2020 Delhi 557 17.2
Maharashtra 376 11.6
to infuse credit into the stressed MSME units as
Punjab 353 10.9
equity, quasi equity or sub-debt. Further, under PM Gujarat 240 7.4
Street Vendor’s Atma Nirbhar Nidhi (PM SVANidhi), Tamil Nadu 203 6.3
street vendors in urban areas were provided working Karnataka 194 6
Uttar Pradesh 159 4.9
capital credit to resume their business. The Emergency
Rajasthan 104 3.2
Credit Line Guarantee Scheme (ECLGS) was also
Odisha 93 2.9
introduced in 2020, providing additional funding to Andhra Pradesh 81 2.5
MSMEs through a fully guaranteed emergency credit Telangana 81 2.5
line. The RBI launched the on-tap targeted long- Jharkhand 61 1.9
Madhya Pradesh 53 1.6
term repo operations (TLTRO) scheme on October 9,
Haryana 46 1.4
2020 to enable banks to provide liquidity support to Assam 20 0.6
2 Total 3246 100
Evaluation study of Micro and Small Enterprises - Cluster Development
Programme (MSE-CDP), National Productivity Council. Source: Authors’ estimates based on the survey.

238 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

Corporation (ESIC), registration with the Udyam

Table 2: Distribution of Sample Firms Across
Industry Groups portal and being part of the GST Network.
NIC Industry Count of Share Almost three-fourths of the sampled clusters
2008 Response (Per cent)
belonged to the private sector, followed by
27 Electrical equipment 460 14.2
14 Wearing apparel 280 8.6 cooperative and state government clusters. One-
15 Leather 278 8.6 fifth of the surveyed firms were listed and 95 per
29 Motor vehicles 258 7.9 cent had bank accounts. More than three-fourths
24 Basic metals 247 7.6
of enterprises belonged to the micro-enterprise
13 Textiles 210 6.5
category, while small and medium firms accounted
28 Machinery n.e.s 192 5.9
17 Paper and paper products 158 4.9 for 14 per cent and 2 per cent of total firms,
10 Food products 149 4.6 respectively. The sales averaged ₹4.4 crore in 2022-
22 Rubber and rubber products 149 4.6 23 ranging between ₹70,000 and ₹250 crore. Nearly
20 Chemical and chemical products 139 4.3 70 per cent of firms have internet connectivity and
25 Fabricated metal products 118 3.6
use it for their business operations.
26 Computer and electronic 113 3.5
21 Pharmaceuticals 110 3.4 Around 71 per cent of the surveyed respondents
23 Other metallic non-minerals 104 3.2
have enrolled with the Udyam portal, an online
16 Wood and wood products 99 3.0
platform for registering MSME units. Size-wise, 98,
32 Other manufacturing 85 2.6
31 Furniture 80 2.5
84 and 69 per cent of the surveyed medium, small
1 Crops and animals 17 0.5 and micro enterprises, respectively, are registered
Total 3246 100 with the Udyam portal. Over 80 per cent of the
Source: Authors’ estimates based on the survey. respondent MSME units with more than 10
employees have completed the registration process
The surveyed firms are classified based on the
on the Udyam portal. More than half of the
National Industrial Classification (NIC) 2008 into
respondent MSME units are registered with EPFO
18 manufacturing sub-sectors and one agricultural
and ESIC (Chart 1).
sector for ease of comparison. Firms manufacturing
electrical equipment had the largest share in the III.2.2 Banking and Access to Finance
sample, followed by apparel, leather industries, Based on the survey, the majority of MSME
motor vehicles, base metals and textiles (Table 2). As firms are found to be bank-linked with nearly 70 per
the survey in this study covered only MSME firms cent of MSME units disbursing employee salaries
within sampled clusters, the survey responses and through their bank accounts. About 98 per cent of
the observation and analysis in this paper need not medium enterprises made direct salary deposits
hold for the broader MSME sector. into employees’ bank accounts. The proportion is
lower at around 67 per cent for micro enterprises
III.2 Stylised Facts
(Chart 2a and 2b).
III.2.1 Formalisation
According to the survey, MSME firms mostly
India has followed a multipronged approach to used personal savings, trade credit and retained
increase the degree of formalisation of the MSMEs. earnings to manage their enterprises’ expenses.
These include initiatives like the Employee Provident Looking at sources which always remained most
Fund Organisation (EPFO), Employee State Insurance important, personal savings is found to be the top-

RBI Bulletin October 2024 239

ARTICLE COVID-19 and Performance of MSME Clusters in India

Chart 1: Registration with Udyam and EPFO

Source: Authors’ estimates based on the survey3 .

most source of financing as per survey, followed by personal savings remained the most preferred source,
trade credit, retained earnings, friends and relatives, the importance of trade credit, retained earnings
bank loans and money lenders. About 42.8 per cent and bank loan increased post-pandemic as 12.7 per
of respondents viewed personal savings as the most cent, 11.5 per cent and 11.4 per cent of respondents
important source of financing post-pandemic, while respectively shifted their top preference to these
this proportion was 32 per cent pre-pandemic. While categories (Chart 3).

Chart 2: Paying Salary Through Bank Accounts

Source: Authors’ estimates based on the survey.

3 The survey question was: “Is the company registered in Udyam Portal? Whether employees are registered with EPFO?” The detailed questions are set
out in the questionnaire (Annexure).

240 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

Chart 3: Most Important Sources of Financing Chart 5: Source-wise Quantum of Loans

Note: The numbers need not add up to 100 as same firm has given multiple
sources as most important source of financing.
Source: Authors’ estimates based on the survey. Source: Authors’ estimates based on the survey.

Nearly 80 per cent of loans are taken from assets/businesses. Of the 90 per cent of firms who
institutional sources, with 96 per cent of the responded to the question, 73 per cent had insured
quantum coming from institutional sources their assets.
(Charts 4 and 5). Loans from commercial banks III.2.3 Business and Economic Issues Faced by MSMEs
accounted for a significant share of outstanding loans, On the relative importance of various constraints,
which holds true across micro, small, and medium competition from other firms turned out to be the
segments. A large segment of firms have insured their major business issue faced by firms in both pre and

Chart 4: Source-wise Number of Loans

Note: Shares do not add up to 100 as the same borrower could have borrowed from multiple sources.
Source: Authors’ estimates based on the survey.

4 Pre-COVID period considered in the analysis is 2019-20 and post-COVID refers to 2022-23.

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ARTICLE COVID-19 and Performance of MSME Clusters in India

per cent of firms saw a decline of the same. For most

Chart 6: Transition of Business Problems-
Pre-Covid to Post-Covid firms, the relative importance of issues remained
the same for pre- and post-COVID periods, pointing
towards the structural nature of these issues (Chart 6).

The pressure to reduce output prices amidst rising

input prices was the major economic issue faced by
the firms during both pre- and post-COVID periods.
Nearly one-fourth of firms witnessed increased
input prices, labour costs, and pressure to reduce
output prices. Foreign competition and the exchange
rate were the least important issues, as most of the
respondent firms were domestic-oriented. For most
firms, the relative importance of issues remained
the same during the pre- and post-pandemic periods
Source: Authors’ estimates based on the survey.
(Chart 7).
post-COVID periods4, followed by GST-related issues III.2.4 Infrastructure Facilities
and power supply disruptions. Government clearance
Infrastructure and marketing facilities available
and regulatory compliance were seen as manageable in a cluster play an essential role in firms’ operations
business issues by most firms, reflecting the ease of and profitability. In terms of physical infrastructure,
adhering to regulations and compliance functions in all clusters are well-connected. All the respondent
the cluster. Among the various business issues faced firms have access to roads within 2 kilometers. About
by firms, 23.5 per cent saw an increase in competition 62 per cent have a warehouse within a vicinity of 5
from other firms in the post-COVID period, while 18 km, with only 1.3 per cent having no warehousing

Chart 7: Most Important Economic Issues faced by Respondents

Source: Authors’ estimates based on the survey.

242 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

Chart 8: Share of Firms Receiving Subsidies 43 per cent got on electricity, 29 per cent on water and
27 per cent on land and buildings. About 2 per cent of
firms received subsidy on all the three facilities and 1
per cent for purchasing machinery. Nearly 43 per cent
of micro and small firms received at least one subsidy,
while only less than one-fifth of medium enterprises
received at least one subsidy.
III.3 Empirical Findings
The MSME sector was severely impacted by the
COVID pandemic with both revenue and productivity
witnessing a decline (Yangdol et al, 2023). The survey
results indicate that in terms of the change in net
profit margin (NPM) between 2022-23 and 2019-20,
metals, wearing apparel and motor vehicles posted
Source: Authors’ estimates based on the survey. growth while pharmaceuticals, wood products and
furniture registered decline over 2019-20 (Chart 9).
facility. Non-response firms accounted for one-fifth
To determine how the various expenses affect the
of total firms and remaining firms have warehousing
MSME units’ NPM, we use the relative importance of
facility outside 5 km radius.
regressors in the linear model approach by Lindeman,
Regarding financial support for physical Merenda and Gold (1980). This methodology traces
infrastructure5, about 40 per cent of firms across the contribution of each explanatory variable to the
various clusters received one form of subsidy or the selected dependent variable. For a linear model with
other (Chart 8). Amongst the firms receiving subsidies, p regressors,

Chart 9: Change in Net Profit Margin Post-COVID (2022-23) over Pre-COVID (2019-20)

Source: Authors’ estimates based on the survey.

5 Subsidies received for electricity, water, land and buildings are considered as infrastructure subsidy.

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ARTICLE COVID-19 and Performance of MSME Clusters in India

y = α + β1 x1+ β2 x2 + ... + βp xp + ϵ ...(1) Chart 10 outlines the summary of the results.

Rent and electricity expenses are seen as the most
Where y is the dependent variable, xis are
important determinants of profitability of the
explanatory variables and ϵ is the error term that
surveyed MSME units, followed by debt servicing
follows a standard normal distribution. R2overall provides
and employees expenses. As noted earlier, firms in
the proportionate contribution each predictor makes certain clusters were receiving financial support in
considering both the direct effects and its effects the form of government subsidies towards electricity,
combined with other variables in equation 1 (Pal and land or machinery. To examine the impact of these
Bharati, 2019). All the explanatory variables contribute financial incentives on firms’ profitability, a linear
to this R2overall. The analysis of variance (ANOVA) also model is employed incorporating cluster effects for
estimates the relative contribution; however, this is state and MSME clusters along with other response
sensitive to the ordering of explanatory variables. variables. Based on firms’ response to the availability
Lindeman, Merenda and Gold (1980) approach of financial support, a binary or dummy variable has
estimates all orders based on the Shapley value been created, taking the value 1 if the unit has received
methodology. This approach takes care of the ordering some form of subsidy and 0 otherwise. The unit’s
NPM is the dependent variable in the exercise. The
issue encountered in the case of the ANOVA. The NPM
model’s estimation also has dummy control variables,
is used as the dependent variable for this analysis. To
including age, employee size, access to Udyam, ESIC,
examine whether increases in certain expenses share
EPFO, and level of formalisation regarding salary
have impacted the NPM, dummy variables for the
payment through a bank account (For yes, it takes
changes in the shares of expenses are considered. The value 1, else 0). The regression results suggest that
dummy takes a value of 1 if the expenses share in a MSME units receiving subsidies had a higher NPM
particular segment in the post-COVID period is higher than those that have not received any subsidy. The
than the pre-COVID period; otherwise, it takes a value results remain broadly consistent irrespective of the
of 0. source of subsidy (Table 3).

Chart 10: Important Determinants of Net Profit Margin

Source: Authors' estimates based on the survey.

244 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

Table 3: Impact of Subsidy on Firm Profitability Table 4: Difference-in-Differences (DID) Estimates

Dependent variable=
of Performance of MSMEs After ECLGS
Net Profit Margin (NPM)
Implementation
Net Profit Margin (NPM)
Model 1 Model 2 Model 3
Year Dummy 0.19**
Central government Subsidies 11.40 **
(0.0947)
(3.90)
ECLGS Dummy 6.96*
State government Subsidies 10.74 ** (0.5435)
(3.68)
ECLGS* Year Dummy 2.51*
Central and State government 11.94 ** (0.2094)
Subsidies (4.11) Age -0.09*
Constant 18.54 *** 19.23 *** 19.39 *** (0.0172)
(1.65) (1.64) (1.76) NIC Dummy Yes
No of Observations 1957 1957 1957 Constant 14.2*
R2 0.18 0.15 0.16 (0.5347)
Observations 8726
State and Cluster fixed effect Yes Yes Yes
R2 0.15
Note: Standard errors are in parentheses. * p < 0.1, ** p < 0.05,
*** p < 0.01. Estimation controls for various unit-specific factors, Notes: 1. The dummy for NIC has been used.
including age, employee size, access to Udyam, ESIC, EPFO, and salary 2. * and ** represent significance at 1 and 5 per cent, respectively.
payment through a bank account. 3. Figures in parentheses indicate standard errors.
Source: Authors’ estimates based on the survey. Source: Authors’ estimates based on the survey.

III.4 Recent Government Schemes and MSMEs ECLGS is the dummy variable for firms taking
recourse to the ECLGS. β2 is the time dummy, which
As noted earlier, various measures have been
undertaken to ease the financing of MSMEs, takes value 1 for the year after 2021-22 (though ECLGS
particularly after the pandemic. Further, the is operationalised in 2020). The interaction term
Production Linked Incentive (PLI) scheme, initiated is ECLGS dummy * Year dummy. The coefficient of
for 14 sectors, benefits MSMEs along with large ECLGS dummy * Year dummy is the DID representing
firms. In our survey, one-third of respondents the effect of ECLGS on NPM after the implementation
responded to the query on the various schemes and of the ECLGS.
among these respondents, ECLGS ranked as the most The empirical analysis suggests that the average
beneficial followed by Mudra, PLI and TReDS. To NPM increased for all firms during 2022-23 (Table 4).
further explore the impact of ECLGS, a difference-in- Further, it increased for the firms taking recourse to
difference (DID) approach is applied to the NPM. It the ECLGS relative to the firms which did not avail
uses the NPM as the dependent variable along with
this scheme, as indicated by the significance of the
the dummy for ECLGS use and its interaction terms
interaction term.
concerning a particular year (ECLGS* Year dummy).
The firm’s age is also used in the regression as an IV. Conclusion
additional control. The effect of ECLGS on NPM is The study examined the performance of Micro,
examined for 2022-23. In estimating the impact of Small, and Medium Enterprises (MSMEs) across
the ECLGS, firms taking part in the ECLGS are the various clusters in India. It utilised primary survey
treatment firms, whereas other firms are the control data, which predominantly consisted of micro-
firms. For this exercise, the following equation 2 is enterprises, followed by small and medium-sized
estimated.
enterprises, reflecting the typical economic structure.
yit = β0 + β1 ECLGS dummyi + β2 Year dummyt According to the survey, a substantial portion of the
+ δ (ECLGS dummy * Year dummy)it + εit ...(2) respondent MSMEs in the surveyed clusters have

RBI Bulletin October 2024 245

ARTICLE COVID-19 and Performance of MSME Clusters in India

formalised their operations through registration Introduction to bivariate and multivariate analysis.
and benefited from various government schemes. A Glenview, IL: Scott, Foresman.
majority of the respondent MSMEs rely on internal
Magar, S. (2017). Cluster Approach for Development
sources such as savings or retained profits, while
of MSME Sector in India. International Journal of
a notable proportion accessed external financing,
Advanced Research, 5(11), 414-420. doi:10.21474/
primarily through bank loans and loans from long-
IJAR01/5784.
term financial institutions. An empirical analysis,
using difference-in-difference approach, suggests Pachouri, A., Sharma, S. (2016). Barriers to Innovation
that firms receiving financial support from the in Indian Small and Medium-Sized Enterprises. ADBI
government under the ECLGS exhibited higher NPMs Working Paper 588. doi:10.2139/ssrn.2838109.
in 2022-23 compared to those without government Pal, M., Bharati, P. (2019). Relative Contribution of
assistance. The paper’s observations and results may Regressors. Applications of Regression Techniques,
not necessarily hold for the entire MSME sector, as 155-169. Singapore: Springer.
the current study is limited to MSME firms within the
sampled clusters and the characteristics and behaviour Porter, M. (1990). The Competitive Advantage
of the firms outside the clusters could be different. of Nations. Harvard Business Review, 68(2), 73-
Overall, the ongoing support for MSMEs, particularly 93. Retrieved from https://hbr.org/1990/03/the-
in providing basic infrastructure like land, buildings, competitive-advantage-of-nations.
and power, is crucial. Porter, M. (1998). Clusters and New Economics of
References Competition. Harvard Business Review, 76(6), 77-90.
Retrieved from https://hbr.org/1998/11/clusters-and-
Dhawan, R. (2001). Firm size and productivity
the-new-economics-of-competition.
differential: theory and evidence from a panel of US
firms. Journal of Economic Behavior and Organization, RBI. (2019). Report of the Expert Committee on Micro,
44(3), 269-293. doi:10.1016/S0167-2681(00)00139-6. Small and Medium Enterprises (Chairman:U K Sinha).
Reserve Bank of India.
GoI. (1997). Report of the Expert Committee on Small
Enterprises (Chairman:Abid Hussain). Government of UNIDO. (2020). The UNIDO Approach to Cluster
India. Development: Key Principles and Project Experiences.
Vienna: United Nations Industrial Development
GoI. (2014). Understanding Innovation: Indian
Organisation.
National Innovation Survey. New Delhi: Department
of Science and Technology, Government of India. Utterback, J. (1994). Mastering the Dynamics of
Haider, K., Khanna, M., Kotei, M., Kushnir, K., Singh, Innovation. Boston: Harvard Business School Press.
S. and Sridhar, T. (2019). Micro, Small and Medium Williamson, O. (1967). Hierarchical control and
Enterprises-Economic Indicators (MSME-EI) : Analysis optimum firm size. Journal of Political Economy, 75,
Note. World Bank Group. 123-138. doi:abs/10.1086/259258.
Krugman, P. (1991). Increasing Returns and Economic Yangdol, R., Acharya, A. and Dhanya, V. (2023).
Geography. Journal of Political Economy,99(3),483-99. COVID-19 and Productivity Performance of MSMEs
doi:abs/10.1086/261763#. and Large Firms in India. Reserve Bank of India
Lindeman, R. H., Merenda, P. F. and Gold, R. Z. (1980). Occasional Papers, 44(1).

246 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

Annex
MSME Survey Questionnaire
Name of the Cluster: ______________ Sr.No. ___________
Date of Visit: ___________ Name of Surveyor: ______________
1. Location and Nature of the firm:
Location/ Village/ State Cluster owned by Name and address of the E-mail id and website of
District Town enterprise enterprise

Central Government/State Government/

Private Sector/Cooperate

2. Company Profile:
Sector Product NIC Type of Ownership Co. – listed or Whether bank Whether seasonal Whether export
details code product type unlisted accounts are operations oriented or
(Final/ (proprietary/ maintained (Y/N) domestic
Intermediate/ partnership/
both) self-help
group/trust/
private ltd

Manufacturing

Services

3. Company Details
3.1. Financial Details
2019-20 2020-21 2021-22 2022-23 (expected)

Sales in Rupees lakh

Employees (no.)

Operating cost (% of gross profit)

Net profit margin (%)

3.2. Size of Investment and operations (Please tick the correct one)
Investment Annual turnover Number of employees Year of establishment/age of
(in Rupees crore) (in Rupees crore) firm
Permanent Contractual
< 1 crore <5 crore
< 10 crore <50 crore
<50 crore <250 crore
>50 crore >250 crore
Actual amount in Rupees Actual amount in Rupees

3.3. Formalisation of MSMEs

Is the company registered in Udyam portal? Yes / No
Are your employees registered in Employees’ Provident Fund Organisation (EPFO)? Yes / No
Are your employees registered in Employees’ State Insurance Corporation (ESIC)? Yes / No
Whether the company deposits salary to employees’ bank accounts? Yes / No

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ARTICLE COVID-19 and Performance of MSME Clusters in India

3.4. Composition of workers in terms of skills and their wages:

Number of employees Average wages per month

Permanent employees Contractual employees Total employees Permanent employees Contractual employees

Skilled

Semi-Skilled

Unskilled

Total

4. Subsidies in the cluster

4.1. Infrastructure facilities/subsidies in the cluster
Subsidy (as % of cost) Land/Building Electricity Water Others (please specify)

75- 100 %

50-75 %

25- 50 %

No subsidy

4.2. Distance of the following from manufacturing units (in km)

Port Warehouse Bank Railway Station Roads

5. Market (Buying/Sales Source)

5.1. Sale of output/ sourcing of Inputs. Please indicate Yes/No and share under each (in per cent )
Another Single large Multiple More than Mostly Only within Only export/ Mostly
MSME corporate small one large domestic, state import export/
within India within India buyers/ corporates within or % % imports
% % sellers % outside %
within India State %
%

Output sold to

Inputs/ raw material

purchased from

5.2. Does the enterprise undertake any work on contract basis Yes/No. If Yes, type of contract
Working solely for other enterprise/contractor

Mainly for contract, but for other customers without contract also

Mainly without contract but also work on contract

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COVID-19 and Performance of MSME Clusters in India ARTICLE

Sourcing of Inputs (Please tick applicable)

Self-procured Supplied by contractor Both

Equipment

Raw material

Design of product

Trade Credit

5.3. If an exporting enterprise, please give details.

Major destination countries Major competitors Whether exporting destination a Exchange rate risk covered (Y/N)
part of FTA

Note: FTA- Free Trade Agreement

5.4. Whether raw materials are sourced/imported from outside, Yes / No. If yes, please give details.
Major source countries Type of raw material imported Imported from FTA countries (Y/N) Whether exchange rate risk covered (Y/N)

5.5. If raw materials are sourced from outside, please give the reason for doing so (Please tick the applicable).

Name of raw material Cost advantage Better quality product Established chain Not available within Others (please specify)
globally India

6. Business Operations:
6.1. Major operating expenses as a per cent of total expenses

Electricity Rent Cost of Employee Taxes Transportation Debt Advertising Others

capital cost servicing (please specify)

Pre-COVID

Post- COVID

6.2a. What are the most pressing business problems your unit is facing? (Please rank as per importance; same
rank also may be given) 5- Most Important, 4- Important, 3- Somewhat important, 2- Not important, and 1- Not
at all important.

Competition GST Shortage/ Technological Power supply Government Absence Regulatory Others
from other access to disruptions clearance of skilled compliances (please
firms finance labour specify)

Pre-COVID

Post-COVID

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ARTICLE COVID-19 and Performance of MSME Clusters in India

6.2b. What are the economic issues affecting your business? (Please rank as per importance; same rank also may
be given against more than one) 5- Most Important, 4- Important, 3- Somewhat important, 2- Not important, and
1- Not at all important.

Pressure Rising price Lack of High labour Shortage Availability High High Foreign
to reduce of inputs demand cost of raw of finance interest exchange competition
prices materials rates rates

Pre-COVID

Post-COVID

7. Finance
7.1. What is the most important source of finance for your firm as percentage of total finance? (please rank as
per importance) 5- Most Important, 4- Important, 3- Somewhat important, 2- Not important, and 1- Not at all
important.
Trade Retained Bank loans Equity Friends/ Private NBFCs Personal Fintech Others
credit earnings relatives money savings (please
lenders specify)

Pre-COVID

Post COVID

Note: Fintech refers to borrowing and lending through online platforms – payment apps, business-to-business
lending, peer-to-peer lending etc.

7.2. Share of bank loan in total financing

Share of bank loan 75-100% 50-75% 25-50% >25%

Pre-COVID

Post-COVID

7.3. Type of loan

Term loan Demand loans6
(cash credit, overdraft, bills purchased and
1 year to 3 years Above 3 years
discounted etc.)

Share in the total (bank and non-bank)

loan portfolio

Share in total bank loan

6 All loans repayable on demand (such as cash credit, overdraft, bills purchased and discounted, etc.) and short-term loans with maturity up to one year,

whether secured or unsecured, are considered demand loans.

250 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

7.4. Loan Outstanding – as of March 2023

Source of borrowing Amount outstanding (in ₹ lakh) Interest rate payable (per annum)

Central/state-level term lending institutions

Government

Commercial banks

Cooperatives

Micro-finance institutions

Other institutional agencies

Money lenders

Business partners

Suppliers/contractors

Friends & relatives

Others

7.5. Have you insured your assets/plants/business? Yes/No

8. Innovation
8.1. Particulars on use of information and communication technology (ICT) by the enterprise.
Yes No

Does the enterprise use internet banking?

Does the enterprise have a web presence on the date of the survey?

Did the enterprise receive orders for goods or services over the Internet or email during the last one year?

The average number of persons employed who routinely use the Internet at work during last one year among
the total employees

Does the enterprise have a Local Area Network (LAN) as on date of the survey

8.2. During the fiscal year 2020-21 to 2022-23, has the establishment introduced or significantly changed in any
of the following:
Yes No Do not know Does not apply

Packaging

Branding/logo/name/trademark

Products appearance

Advertising methods

Sales channels or sales points

Discount schemes

Pricing strategies other than discounts

Payment schemes

New training to staff

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ARTICLE COVID-19 and Performance of MSME Clusters in India

8.3. Whether the firm has introduced any new or significantly improved process/product or service during the
post-covid period? Yes/ No/ Do not know. If no, skip to Question No. 9
8.4. If yes, please describe in detail how the new process/ product or service is different than the most similar
product or service, if any, previously produced by this establishment.
Yes No Don’t know NA

Does it have completely new functions?

Is it cheaper to produce or offer?

Is it a better-quality product or service?

Does it use different inputs?

Is it based on a technology or industrial design not already used

by this establishment?

8.5. Reason for introducing the new product/process/service

Yes No Don’t know NA

To replace an existing product/process/service of the firm

To extend the range of products/process/service of the firm

To open new market and to increase market share

To decrease the cost of production

To meet competition

To comply with regulations or standards

To deal with decrease in demand for other products/services

9. Post-COVID
9.1. After COVID how the following indicators have performed during 2022 as compared to pre-COVID period.
(Please tick applicable)
Sales Employment Wage cost Input Cost Capacity Availability of
utilization finance

Domestic Exports

Increased

Stayed the same

Decreased

9.2. How do you expect your business to perform in the coming 3 years? (Please tick applicable)
Sales revenue Input cost Profits

Will increase substantially

Marginal increase

Stay the same

Will come down

252 RBI Bulletin October 2024

COVID-19 and Performance of MSME Clusters in India ARTICLE

10. Government Schemes

10.1. Type of assistance received from the State/Central government (please select all that is received) (tick
appropriate columns):
Loan Subsidy Machinery Skill Marketing Raw material Export Others (please
/equipment development incentives specify)
Central government
State government

10.2. Whether availed the scheme/subsidy from government (Please order the scheme as per the utility)
Schemes Please rank the scheme as per Not aware of any scheme If no, please give reason
your utility (1 ranks the highest)
ECLGS
Mudra Loan
PLI
TReDS
Others (please specify)

Note: ECLGS _Emergency credit line guarantee scheme, PLI _Production linked incentive scheme, TReDS _Trade receivables discounting system.

10.3a. If yes, how far you find these schemes useful?

Very useful Useful Not useful Do not know

In improving revenue

In improving sales volume/quantity

Getting working capital finances

Better access to credit

10.3b. If part of PLI, what per cent of incremental sales can be attributed to PLI.
>50% 25-50% <25% No change

11. What further support is required for sector in which you operate for business development?
Please specify………………………………………………………………………

12. Any other suggestions:

RBI Bulletin October 2024 253

Cash Usage Indicator for India ARTICLE

Cash Usage Indicator for India of measuring cash usage in important economies
is presented in section III. The methods proposed
by Pradip Bhuyan^ to measure the usage of cash in India are discussed
in section IV. Results are analysed in section V.
The anonymous nature of cash payments and the use Conclusions are laid out in section VI.
of cash as both a mode of payment and a store of value
II. Currency with the Public in India
presents significant challenges to measuring its usage. This
article presents several approaches to measure the usage of CWP is defined by CIC minus cash with banks and
cash and develops a quarterly indicator to measure the use accounts for around 95-97 per cent of CIC. There was
of cash as a mode of payment in India to help policies on a decline in the ratio of CWP to GDP from 2011-12 to
currency management. 2014-15 (Table 1). The ratio saw a rise in 2015-16 but
a sharp drop in 2016-17 due to the withdrawal of the
Introduction
legal tender character of the then existing ₹500 and
Data on cash usage can help a central bank in ₹1000 banknotes in November 2016. CWP increased
assessing the cash required in the system. Cash or in the next year due to remonetisation. The ratio
currency in circulation (CIC) represents the total increased sharply in 2020-21 due to increase in cash
notes and coins in circulation in the economy. Cash intensity in the wake of the pandemic (RBI, 2021). The
is not only used as a mode of payment but also as a ratios have decreased in the subsequent years.
store of value. The use of cash could be on account
In recent years, significant growth has been
of payments for consumption (to purchase goods and observed in retail digital payments (RDP), which
services), other purposes (lending, debt repayment, is the total digital payments except for payments
gift, donation, etc.) and precautionary holding (cash through real-time gross settlement (Table 2). Unified
for emergency purposes such as medical emergencies). payments interface (UPI) launched in 2016, accounted
The Reserve Bank of India (RBI) is responsible for for the highest share in RDP in volume in the last five
the overall supply and management of CIC in India.
Table 1: Movement in GDP and CWP
Unlike electronic and digital payments, cash payments
Years CWP to GDP Y-o-Y Growth
do not leave any trail. It is therefore not possible to
CWP Nominal GDP
measure the direct usage of cash. Hence, an indirect 2011-12 11.7 12.3 14.4
approach is required to measure the same. The main 2012-13 11.5 11.5 13.8
objective of this article is to develop an indicator for 2013-14 11.1 9.2 13.0

the measurement of the usage of cash in India as a 2014-15 11.1 11.3 11.0

mode of payment for financial transaction. 2015-16 11.6 15.2 10.5

2016-17 8.2 -20.9 11.8
The rest of the article is organised as follows. 2017-18 10.3 39.2 11.0
Section II describes the recent trend in currency with 2018-19 10.9 16.6 10.6
the public (CWP) in India. The literature on methods 2019-20 11.7 14.5 6.4
2020-21 13.9 17.1 -1.2
^ The author is from the Department of Currency Management (DCM),
Reserve Bank of India (RBI). The author is thankful to Shri Suman Ray, 2021-22 12.9 10.3 18.9
CGM in Charge, other officials of DCM, Dr. Praggya Das, Adviser-in-Charge, 2022-23 12.2 7.9 14.2
in the Monetary Policy Department and Shri Joice John, Director in the
Department of Statistics and Information Management of RBI for their 2023-24 11.5 4.1 9.6
valuable suggestions. The views are personal views of the author and do Note: Data are in per cent.
not represent the views of the RBI. Source: DBIE; Author’s calculations.

RBI Bulletin October 2024 255

ARTICLE Cash Usage Indicator for India

Table 2: Movement in RDP and UPI Transactions1

Years Y-o-Y Growth (in per cent) Share of UPI in RDP Average Ticket Size of
(in per cent) UPI (in ₹)
RDP UPI
Volume Value Volume Value Volume Value
2016-17 64.2 45.2 - - 0.2 0.1 3872.8
2017-18 51.0 45.7 4992.0 1477.9 6.3 0.5 1200.0
2018-19 59.9 38.3 489.1 698.5 23.3 3.1 1626.6
2019-20 46.5 9.9 132.2 143.1 37.0 6.9 1702.9
2020-21 28.6 16.4 78.4 92.5 51.3 11.4 1837.7
2021-22 64.8 27.6 105.8 105.1 64.0 18.4 1831.3
2022-23 58.4 28.4 82.2 65.3 73.6 23.7 1662.2
2023-24 44.4 22.5 56.6 43.8 79.9 27.8 1525.2
Source: DBIE; and Author’s calculations.

years under reference. Moreover, y-o-y growth in UPI in total UPI transactions increased from 16.6 per cent
exceeded that in RDP in volume and value from 2017- in April 2021 to 26.2 per cent in March 2024 in value
18. The growth in UPI in value was higher than that (Chart 1). In volume, the share increased from 45.2
in volume during the period. However, from 2021- per cent to 61.7 per cent during the same period. In
22 to 2023-24 (post COVID-19 period), the growth this period, P2M payments increased nearly six-fold
in UPI in volume was higher than that in value. in volume and over five-fold in value and the growth
Consequently, the average size of UPI transactions far exceeded that observed for P2P (person to person)
decreased from ₹1838 in 2020-21 to ₹1525 in 2023- payments (Table 3). The decline in the average size of
24. The share of P2M (person to merchant) payments UPI transactions, the increase in the share of P2M in

Chart 1: Shares of P2M in UPI

Source: DBIE; and Author’s calculations.

1 The pilot launch of UPI was in April 2016; banks started their UPI enabled apps from August, 2016 onwards; https://www.npci.org.in/what-we-do/upi/
product-overview.

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Cash Usage Indicator for India ARTICLE

Table 3: Growth in UPI (March 2024 over April 2021)

UPI P2P P2M
Volume Value Volume Value Volume Value
403.7 297.9 244.9 248.1 596.6 548.8
Note: Data are in per cent.
Source: NPCI; and Author’s calculations.

UPI (in volume and value) and the moderation in the compared to an average of 45.2 per cent observed in
ratio of CWP to GDP in 2023-24 from its pre-pandemic 2021. Information available across various economies
level suggest substitution of cash with UPI for small suggests decline in use of cash in those countries
value transactions. Raj et al.  (2020) found a reduction (Table 4). On the other hand, surveys conducted by
in demand for currency in the recent period with Chile’s central bank indicated –that the proportion of
increased use of digital payments. people using cash more than once per week fell to 60
per cent in 2021 from 75 per cent in 2019 but rose to
III. Literature Review
79 per cent in 2022 (Central Banking, 2023).
Benchmarking Currency (2023a) found usage Based on the literature available on the usage of
of cash2 for just over two-fifths of payments among cash, the methods adopted for the measurement of
17 central banks in 2022, slightly lower than that cash usage can be divided into two – sample surveys
observed for 2021. The report found an increase in the and administrative records. In the information on
value of cash in circulation in many jurisdictions and usage of cash provided above, use cases in a few
noted that cash retained its role as a store of value. economies are based on surveys. Methods that can be
Benchmarking Currency (2023b) report found cash applied based on administrative records are discussed
usage averaged 40.6 per cent in 17 nations in 2022, as below.

Table 4: Studies on Cash Usage in Select Countries

Country Period Decline in cash usage Source
Australia 2007-2019 Consumer payments survey revealed a decline in the share of cash in total retail Caddy et al., (2020)
payments from 69 per cent in 2007 to 27 per cent in 2019.
UK 2010-2020 The share of transactional cash use declined from over 50 per cent of payments BoE (2021)
in 2010 to 17 per cent of all payments in 2020.
Euro area 2016-2022 Study on the payment attitudes of consumers found share of cash payments at ECB (2022)
the point of sale (PoS) in terms of volume and value declined to 59 and 42 per
cent respectively in 2022 from 79 and 54 per cent in 2016.
New Zealand 2017-2020 Cash use survey found proportion of the population indicating cash as one way RBNZ (2021)
to pay for daily things declined from 96 per cent in 2017 to 70 per cent in 2020
US 2020-2022 Diary of consumer payment choice survey revealed slight decline in 2022 in the Cubides and
share of payments made using cash to 18 per cent of all payments as compared O’Brien, (2023)
to that in 2021 and 2020 due to increase in non-cash payments
Canada 2017-2021 Methods-of-Payment Survey revealed share of purchases using cash in volume Henry et al., (2023)
declined by 11 percentage points in 2021 from that in 2017 and was found as 22
per cent in 2021. In terms of value, the share however was almost the same, 14
per cent in 2021 and 15 per cent in 2017
Sweden 2020 As per the survey of the payment behaviour, 9 per cent of respondents informed SR (2020)
to use cash to make payments in 2020 in their most recent purchase.

2 the proportion of payments in cash.

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ARTICLE Cash Usage Indicator for India

CIC to GDP is frequently used to measure cash (ii) Method based on the share of cash withdrawals
demand (Amromin and Chakravorti, 2007). Drawing in HC: It assumes that cash withdrawn from ATMs
attention to the situation of a high stock of cash, and over-the-counter (OTC) at banks (referred to as
Amromin and Chakravorti (2009) stated that if more ATM cash and OTC cash respectively henceforth) in
merchants and consumers accepted cash alternatives, a country is almost all spent on HC items and defines
payment objectives were not the sole use of cash. the following measure:
They focussed on the ratio of coin and low-value
… (2)
currency denominations (small CIC) to GDP, as
most cash was used for low-value purchases. A key (iii) Method based on the share of cash withdrawals
feature of their method was the disentanglement of in total cash and cash-like payments: It is based on the
dual roles of cash as a store of value and medium of value of cash withdrawals as a percent of the value of
payment and isolating the transactional role of cash transactions made using these withdrawals plus cash
by focusing on small-denomination class, which substitutes viz. ‘Card’ and ‘E money’. The measure is
they defined as currency and coin that were lower defined as follows:
in value than that commonly dispensed by ATMs.
… (3)
They segregated the ratio of outstanding cash to
GDP into large, medium, and small denominations. Summarising the results of their three methods
Medium denomination banknotes were defined as presented above, Khiaonarong and Humphrey (2019)
those prevalently distributed by ATMs based on their observed that the cash share levels were mismeasured
survey of thirteen central banks. Banknotes of small to differing degrees due to missing data. The use of
and large denominations were defined as those above the value of cash withdrawn from ATMs to measure
and below this threshold. According to Khiaonarong the use of cash would provide more accuracy and
and Humphrey (2019), there was more information would be a more timely measure (Khiaonarong and
on payment instruments that substituted for cash Humphrey, 2023). They stated that cash withdrawn at
than on cash itself and suggested three alternative ATMs is of medium value denominations of currency
measures for cash use in a country as explained below. notes commonly used for legal payment transactions
(i) Method based on residual household and thus would exclude other uses (hoarding and
consumption (HC): This method estimates the use of illegal use).
cash in consumption as a residual, on the argument IV. Methodology
that, if information on cash use in a country is
The methods discussed in section
not sufficient, the same may be approximated
III were evaluated for their applicability in
by subtracting the value of all non-cash payment
estimating cash use in India. Measuring the usage of
instruments used in consumption from total value of
cash through surveys may be difficult for challenges
HC. It is thus based on the share of residual HC to
as alluded to before. The ratio of CIC to GDP, although
total HC in the national accounts as shown below:
popular, does not distinguish between the demand
… (1) for currency and the usage of cash for transaction
where ‘Card’ is the value of all debit/ credit card purposes. Although transactions and precautionary
payments, and ‘E money’ is the value of privately motives were the original causes for holding currency,
stored value cards or mobile phones with the value other motives however appeared with the progress of
stored on a chip. the financial system (Nachane et al., 2013). Awasthy et

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al. (2022) found precautionary and store-of-value datasets required for this method are broadly available.
motives influenced the sustained growth in currency Cash usage (CU) in India is therefore estimated based
demand. Methods popularly used to measure the on the following in this article.
demand for cash, viz. cash holdings per capita and cash
(i) CIC of small and medium denominations
outstanding to GDP do not distinguish between store
(CICsm)
of value and payment functions of cash (Amromin
and Chakravorti, 2007). Khiaonarong and Humphrey (ii) CIC of small, medium, and high
(2019) stated that the ratio of CIC to consumption denominations (CICsmh)
component of GDP could be more useful as cash is (iii) Residual HC.
commonly used for consumption purpose. They
The methodologies proposed are explained
further stated that CIC to GDP was frequently used to
below. Based on the analysis of CU derived, the paper
measure cash use as data on CIC and GDP were easily
proposes a cash usage indicator for India.
available. In the same vein, this paper suggests that CIC
to GDP ratio may not be a good indicator for cash use. IV.1 CU based on CICsm
The second measure by Khiaonarong and Humphrey Consequent upon commencement of withdrawal
(2019) assumes that cash withdrawn from ATMs of ₹2000 banknotes from circulation [although
and OTC at banks is almost all spent on household continues to remain legal tender (RBI, 2023)], ₹500
consumption. Cash withdrawn could also be used as a banknote is practically the highest denomination in
store of value, and hence entire amount (almost) may circulation in the country. Hence, this paper considers
not be spent for consumption. For example, the high denominations up to ₹200 banknotes as small and
rise in CIC during the COVID-19 pandemic was partly medium and defines small and medium CIC in India
motivated by the precautionary response. Moreover, as follows:
although data on ATM cash withdrawal is available in CIC of small and medium denominations at
India in public, the same for OTC cash is not available. period t,
It is therefore not possible to know the share of ATM
cash in total cash withdrawal in India. Therefore, …(4.1)
the methods based on small CIC to GDP (Amromin where coins are of all denominations and
and Chakravorti, 2007) and that on residual measure banknotes are of denominations up to ₹200 at period
(Khiaonarong and Humphrey, 2019) are used India to t. Accordingly, the following formulae are used to
estimate the use of cash for financial transactions in measure the usage of cash based on CICsm at period t.
the country. …(4.2)
Amromin and Chakravorti (2007, 2009) used the …(4.3)
ratio of denominations lower to ATM dispensed notes
to define small CIC. This paper however also adds GDPt and HCt are values of GDP and HC
some denominations dispensed by ATMs in India to respectively at period t (at current prices). For HC,
small CICs, as explained later. The residual measure data on private final consumption expenditure were
used (discussed later). CU based on CICsm could help
is suggested if there is not sufficient information in
to know the usage of cash in the form of small and
a country on cash use (Khiaonarong and Humphrey,
medium denominations.
2019). Although an indirect approach, it is applicable
for measuring the use of cash in India, and also, IV.2 CU based on CICsmh

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The high denomination considered for this for PFCE (i.e., PFCEcash). PFCEdigital is estimated using
paper is taken as ₹500. Inclusion of denominations data on retail digital payments to merchants by
above ₹500 will mean that CICsmh is same as total consumers to purchase goods and services as shown
CIC and cash outstanding to GDP do not distinguish below. Regarding credit and debit cards, disaggregated
between store of value and payment functions of cash data on payments are available for ‘PoS based’ and
(Amromin and Chakravorti, 2007). Definition used for ‘Others’. For prepaid instruments, such data through
CICsmh is as shown below: ‘wallet’, ‘PoS based’ and ‘Others’ are available. PoS
CIC of small, medium, and high denominations based payments are payments to merchants. However,
at period t, payments to merchants through cards also happen
outside ‘PoS’ and hence would be part of ‘Others’.
…(5.1)
At the same time, card payments on ‘Others’ could
where coins include all denominations, and also possibly cover payments other than to merchants
banknotes include denominations up to ₹500 at e.g. transfer of funds to bank accounts, other card
period t. The formulae used to measure the usage of accounts etc. Unlike cards, data on ‘PoS based’ are
cash based on CICsmh at period t are as follows. not available separately for wallet. The entire data on
‘wallet’ are therefore assumed to be for payments to
…(5.2)
merchants. P2M of UPI, BHIM Aadhaar pay, national
…(5.3) electronic toll collection (NETC) are instruments used
CU based on CICsmh could help to know the usage for payments to merchants. The components of RDP
of cash including higher denominations. and their usability as non-cash payments to estimate
payments to merchants is discussed in Annex A.
IV.3 CU based on Residual HC
PFCEdigital at period t is therefore estimated at two
HC in the national accounts and non-cash levels, lower and upper, as shown below:
payment instruments are the inputs used for this
PFCE(digital) (lower level) at period t,
method (Khiaonarong and Humphrey, 2019). Private
final consumption expenditure (PFCE) as part of
national accounts statistics published by the Ministry
of Statistics and Programme Implementation (MoSPI)
…(6.1)
which is made up of expenses by households on
goods/ services acquired for consumption is taken PFCE(digital) (upper level) at period t,
as the measure of HC. PFCE also includes the final
consumption of non-profit institutions serving
households (NPISH). PFCE accounts for around 60 per
…(6.2)
cent of GDP in India.
Accordingly, PFCE(cash) at period t is also
The residual method subtracts the value of all
estimated at two levels as follows:
non-cash payment instruments used in HC and
estimates cash use as the residual. Total PFCE minus PFCE(cash) (lower level) at period t,
the value of retail payments to merchants to purchase
…(7.1)
goods and services through digital mode used for
PFCE (i.e., PFCEdigital) can be used as an estimate for PFCE(cash) (upper level) at period t,
the residual HC, which is the value of cash payments …(7.2)

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All the items considered for PFCE(digitalL represent    …(8.2)

payments to merchants. PFCE(digital)U includes, in
Similarly, cash usage (CU) in PFCE at period t is
addition to these items, ‘Others’ also on card payments.
also defined between two bounds as follows.
This item may not entirely represent payments to
merchants as discussed above and some amount
under this item may be for payments to merchants.        …(9.1)
Disaggregated data for it are however not available.
Hence, PFCE(digital)L and PFCE(digital)U at period t are
taken respectively as likely lower (excludes ‘Others’)          …(9.2)
and upper levels (includes ‘Others’) of PFCE(digital) at V. Results
period t. PFCE(digital)L and PFCE(digital)U respectively
can then be assumed as minimum and maximum The CICsm to GDP ratio declined in pre-
possible values of digital modes of payments by demonetisation period (i.e., from 2011-12 to 2015-
consumers. Similarly, PFCE(cash)L and PFCE(cash)U at 16) (Table 5). The ratio increased in the year 2016-17
period t are respectively taken as probable lower and mainly due to higher infusion of banknotes of lower
upper levels of PFCE(cash) at period t. Accordingly, denominations following demonetisation (RBI, 2017).
use of digital payments (DP) in PFCE at period t is The ratio started declining again after 2016-17 until
thus defined between two bounds, lower and upper 2020-21, the COVID-19 induced lockdown year (the
as presented below. ratio remained at same level in 2018-19 and 2019-20).
In 2020-21 the ratio increased due to a fall in GDP and
also higher precautionary holding of cash. The ratio
…(8.1) however started declining again after 2020-21. Overall,
although it increased marginally in 2023-24, the ratio

Table 5. CU based on the ratios of CICsm and CICsmh to GDP

Years CICsm to GDP CICsmh to GDP Shares in CIC (Volume) Shares in CIC (Value)

CICsm CICsmh CICsm CICsmh

2011-12 2.4 8.2 90.7 97.6 19.4 67.5
2012-13 2.2 7.5 90.5 97.3 18.2 63.6
2013-14 2.0 7.1 90.2 97.0 17.1 60.9
2014-15 1.9 7.1 89.7 96.9 15.9 61.3
2015-16 1.8 7.5 88.8 96.8 14.7 62.0
2016-17 2.4 4.3 95.7 98.4 28.1 50.1
2017-18 2.2 6.7 91.5 98.5 20.6 62.9
2018-19 2.1 7.8 89.2 98.6 18.8 69.2
2019-20 2.1 9.4 86.5 98.8 17.4 77.6
2020-21 2.2 11.9 83.4 99.0 15.1 82.8
2021-22 1.8 11.5 81.3 99.2 13.7 86.3
2022-23 1.6 11.2 79.8 99.3 12.9 89.3
2023-24 1.7 11.9 78.4 99.9 14.1 99.8
Note: Data are in per cent.
Source: Author’s calculations based on Annual Reports of RBI (various years) and (GoI, 2024).

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was lower than that in 2020-21. Regarding CICsmh to V.2 Issues on use of CU based on CICsm and CICsmh
GDP, the ratio remained in the range of 7 to 8 per cent
It is found that the ratios CICsm to GDP, CICsm to
during the period from 2011-12 to 2018-19 except in
PFCE, CICsmh to GDP and CICsmh to PFCE were broadly
2016-17 and 2017-18 (the ratio sharply fell in 2016-17
unchanged during the period under study. On the other
due to demonetisation and then increased in 2017-18
hand, the ratios of RDP to GDP increased from around
for remonetisation). The ratio increased noticeably
70 per cent in 2015-16 to nearly 244 per cent in 2023-
from 2018-19 to 2020-21, probably due to higher
24 (Chart 2). In the absence of comprehensive data
holding of cash (arising from heightened uncertainty
on the use CICsm and CICsmh for financial transactions,
caused by COVID-19) but declined in 2021-22 and
the direct use of their values alone will not help to
2022-23. There was some increase in the ratio in 2023-
measure appropriately use of cash in India in the light
24, due to rise in the share of ₹100, ₹200 and ₹500
of fast adoption of digital modes of payments in the
banknotes in value terms as that of ₹2000 banknotes
country.
declined sharply reflecting the withdrawal of the
latter denomination from circulation [RBI (2024)]. The V.3 CU based on Residual HC
ratio however remained in the range of 11 to 12 per
Following the approach stated in section IV3, the
cent in the last four years under reference. The share
estimated values of PFCE(digital)L, PFCE(digital)U,
of CICsmh in total CIC however continuously increased
PFCE(cash)L and PFCE(cash)U are presented in Table 7.
from 2016-17 in volume and from 2017-18 in value.
The y-o-y growth in cash payments by households
V.1 CU based on the ratios of CICsm and CICsmh to PFCE [PFCE(cash)L and PFCE(cash)U] was positive in the
Values of the ratios are presented in Table 6.
Chart 2: Values of RDP to GDP
Observations are almost similar in nature to those
observed in the corresponding ratios to GDP and
suggest declining use of CIC by households.

Table 6: CU based on the ratios of CICsm and

CICsmh to PFCE
Years CICsm to PFCE CICsmh to PFCE
2011-12 4.2 14.6
2012-13 3.8 13.4
2013-14 3.4 12.2
2014-15 3.2 12.2
2015-16 3.0 12.7
2016-17 4.1 7.3
2017-18 3.8 11.5
2018-19 3.6 13.2
Source: Author’s calculations using data from PSI and (GoI, 2024).
2019-20 3.5 15.5
2020-21 3.5 19.5
3 Values are presented from the quarter ending March 2021. Disaggregated
2021-22 3.0 18.8 data on UPI in terms of P2P and P2M payments are available only from April
2022-23 2.6 18.4 2021 onwards in NPCI. The same for the quarter ending March 2021 were
estimated using the share of P2P and P2M payments in UPI available in
2023-24 2.8 19.7 Worldline (2021) (explained in detail in Annex B). The author could not
Note: Data are in per cent. find any other source publishing data on P2P and P2M payments for period
Source: Author’s calculations. earlier to the quarter end March 2021.

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Table 7: Estimated Values of PFCE(digital) and PFCE(cash)

Years Quarters PFCE (total) PFCE (digital)L PFCE (digital)U PFCE (cash)L PFCE (cash)U
Jan-Mar 34.5 4.8 6.7 27.8 29.7
April-Jun 29.6 4.7 6.6 23.0 24.8
2021
Jul-Sep 34.5 6.3 8.5 26.0 28.2
Oct-Dec 40.5 7.8 10.3 30.2 32.7
39.3 8.0 10.5 28.8 31.3
Jan-Mar
(14.1) (66.6) (56.7) (3.8) (5.6)
38.4 9.2 12.0 26.4 29.2
Apr-Jun
(30.0) (94.7) (83.5) (14.8) (17.7)
2022
40.5 10.4 13.4 27.1 30.1
Jul-Sep
(17.5) (64.1) (57.3) (4.5) (7.0)
43.8 11.7 14.7 29.1 32.1
Oct-Dec
(8.2) (50.6) (42.2) -(3.4) -(1.9)
41.5 12.1 15.1 26.3 29.4
Jan-Mar
(5.5) (52.1) (44.5) -(8.7) -(6.3)
41.5 13.4 16.6 25.0 28.2
Apr-Jun
(8.1) (45.1) (37.6) -(5.4) -(3.6)
2023
43.3 14.9 18.4 24.9 28.4
Jul-Sep
(6.9) (44.0) (37.4) -(8.2) -(5.9)
48.0 17.1 21.0 27.1 31.0
Oct-Dec
(9.7) (46.2) (43.0) -(7.0) -(3.5)
2024 45.3 18.2 21.8 23.5 27.1
Jan-Mar
(9.3) (49.9) (43.8) -(10.6) -(7.5)
Financial Years
2021-22 143.8 26.8 35.9 108.0 117.1
2022-23 164.2 43.4 55.2 109.0 120.8
(14.2) (62.1) (54.0) (1.0) (3.2)
2023-24 178.2 63.6 77.7 100.5 114.7
(8.5) (46.5) (40.7) -(7.8) -(5.1)
Notes: 1. PFCE(total) = ‘PFCE(digital)L + PFCE(cash)U’ or ‘PFCE(digital)U + PFCE(cash)L’.
2. Values are in ₹ lakh crore.
3. Figures in brackets are y-o-y growths in per cent.
Source: Author’s estimates.

quarters ending with March, June, and September V.4. Construction of Cash Usage Indicator (CUI) for
in the year 2022; the growth was negative in the India
subsequent quarters. The growth in digital payments
CICsm and CICsmh are based on CIC and are more
by households on the other hand was significantly
appropriate for measuring demand for cash, but they
higher. The distribution of PFCE(digital) is presented
may not properly reflect the usage of cash. They do
in Annex B. P2M of UPI accounted for the highest
share in PFCE(digital). The estimated shares of cash not discriminate between cash holdings for payment
and digital payments in PFCE are presented in Table 8. vis-à-vis that for store of value purposes (Amromin
It may be observed that the use of cash was dominant and Chakravorti, 2007). The residual method, on
in PFCE during the period under study but with a the other hand, could reflect better the actual usage
declining share . of cash in retail payments by the households. This

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ARTICLE Cash Usage Indicator for India

Table 8: Use of Cash and Digital Payments in PFCE Table 9: Estimated Values of CUI for India
Years Quarters Use of cash Use of digital modes Years Quarters Values of CUI
in PFCE in PFCE Jan-Mar 80.6 - 86.1
CUL CUU DPL DPU Apr-Jun 77.8 - 84.0
Jan-Mar 80.6 86.1 13.9 19.4 2021
Jul-Sep 75.3 - 81.7
Apr-Jun 77.8 84.0 16.0 22.2
2021 Oct-Dec 74.5 - 80.8
Jul-Sep 75.3 81.7 18.3 24.7
Jan-Mar 73.3 - 79.7
Oct-Dec 74.5 80.8 19.2 25.5
Apr-Jun 68.7 - 76.0
Jan-Mar 73.3 79.7 20.3 26.7 2022
Jul-Sep 66.9 - 74.4
Apr-Jun 68.7 76.0 24.0 31.3
2022 Oct-Dec 66.5 - 73.3
Jul-Sep 66.9 74.4 25.6 33.1
Jan-Mar 63.5 - 70.8
Oct-Dec 66.5 73.3 26.7 33.5
Apr-Jun 60.1 - 67.8
Jan-Mar 63.5 70.8 29.2 36.5 2023
Jul-Sep 57.5 - 65.5
Apr-Jun 60.1 67.8 32.2 39.9
2023 Oct-Dec 56.4 - 64.5
Jul-Sep 57.5 65.5 34.5 42.5
2024 Jan-Mar 51.9 - 59.9
Oct-Dec 56.4 64.5 35.5 43.6 Financial Years
2024 Jan-Mar 51.9 59.9 40.1 48.1 2021-22 75.1 - 81.4
Financial Years
2022-23 66.4 - 73.6
2021-22 75.1 81.4 18.6 24.9
2023-24 56.4 - 64.3
2022-23 66.4 73.6 26.4 33.6 Note: Data are in per cent.
2023-24 56.4 64.3 35.7 43.6 Source: Author’s estimates.

Notes: 1. Data are in per cent.

2. Total = CUL + DPU (or CUU + DPL) been declining during the period under study. CUI
Source: Author’s estimates.
developed in the article is a quarterly indicator and
paper, therefore, proposes an interval-based cash can facilitate currency management.
usage indicator (CUI) using the residual measure as
References
shown below:
Amromin, G., & Chakravorti, S. (2007). Debit Card
… (10)
and Cash Usage. A Cross-Country Analysis, Federal
where and represent the lower and Reserve Bank of Chicago, Working Papers, No. 4.
the upper bounds of cash usage respectively. The
Amromin, G., & Chakravorti, S. (2009). Whither
estimates of CUI are presented in Table 9 below (based
Loose Change? The Diminishing Demand for Small-
on Table 8).
Denomination Currency, Journal of Money, Credit
VI. Conclusion
and Banking, Vol 41(2/3), 315-335.
This article attempts to measures the usage of
Awasthy, S., Misra, R., & Dhal, S. (2022). Cash versus
cash in India as a mode of payment using different
Digital Payment Transactions in India: Decoding the
methods and the analysis suggests that the residual
Currency Demand Paradox, Reserve Bank of India
household consumption expenditure-based approach
Occasional Papers, Vol. 43(2), 1-45.
could be more appropriate. A cash usage indicator
(CUI) constructed in the article taking into account Benchmarking Currency (2023a). Central Banks Report
both physical and digital modes of payments indicates – Executive Summary, Benchmarking Currency 2023,
that the cash usage remains significant but has November, Central Banking, www.centralbanking.com.

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Cash Usage Indicator for India ARTICLE

Benchmarking Currency (2023b). Central Banks Khiaonarong, T., & Humphrey, D. (2019). Cash Use
Report Continued Fall in Cash Usage, Benchmarking Across Countries and the Demand for Central Bank
Currency 2023, Central Banking, November, www. Digital Currency. IMF Working Paper, No. 19/46, www.
centralbanking.com. imf.org.
BoE (2021). Update on the future of Wholesale Cash Khiaonarong, T., & Humphrey, D. (2023). Measurement
Distribution in the UK. December, Bank of England. and Use of Cash by Half the World’s Population. IMF
https://www.bankofengland.co.uk/paper/2021/ Working Paper, No. 23/62, www.imf.org.
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Nachane, D. M., Chakraborty, A. B., Mitra, A. K., &
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Bordoloi, S. (2013). Modelling Currency Demand in
Caddy, J., Delaney, L., & Fisher, C. (2020). Consumer India: An Empirical Study”, DRG Study No. 39, RBI.
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Raj, J., Bhattacharyya, I., Behera, S. R., John, J., & Talwar,
2019 Consumer Payments Survey, RBA Research
B. A. (2020). Modelling and Forecasting Currency
Discussion Paper No. 2020-06.
Demand in India: A Heterodox Approach, Reserve
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Rebounded Since Pandemic, Survey Finds. Central
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Chapter VIII. www.rbi.org.in.
Cubides, E., & O’Brien, S. (2023). 2023 Findings from
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the Diary of Consumer Payment Choice. The Federal
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cash/wp-content/uploads/sites/7/2023-Findings-from- RBI (2023). ₹2000 Denomination Banknotes –
the-Diary-of-Consumer-Payment-Choice.pdf. Withdrawal from Circulation; Will continue as Legal
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europa.eu/stats/ecb_sur veys/space/html/ecb. RBNZ (2021). Cash and Payments Data Update:
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ARTICLE Cash Usage Indicator for India

Annex A
Components of RDP and their usability as non-cash payments to estimate payments to merchants

I. Components of RDP
(i) Unified Payments Interface (UPI) @
(ii) BHIM Aadhaar Pay
(iii) Aadhaar Enabled Payment System (AePS) @
(iv) National Electronic Toll Collection (NETC)
(v) Credit Cards
(vi) PoS based $
(vii) Others $
(viii) Debit Cards
(ix) PoS based $
(x) Others $
(xi) Prepaid Payment Instruments
(xii) Wallets
(xiii) Cards (PoS based) $
(xiv) Others $
(xv) National Electronic Funds Transfer (NEFT)
(xvi) Immediate Payment Service (IMPS)
(xvii) National Automated Clearing House (NACH)
(xviii) Aadhaar Payment Bridge System (APBS) $
@: New inclusion w.e.f. November 2019; $: Inclusion separately initiated from November 2019 - would have been part of other items hitherto.

Source: PSI in DBIE in www.rbi.org.in.

II. Usability of RDP components as non-cash payments to estimate payments to merchants

(i) Usage of UPI
UPI is used for payments to merchants as well as for fund transfer. NPCI started publishing data on
payments done through UPI, segregating them into P2M and P2P payments from April 2021 onwards.
P2M payments are by a person to a merchant, identified as peer to merchant payments. P2P payments
are by a person to a person, known as peer to peer payments. NPCI classifies the merchants into three
broad categories viz., ‘High Transacting Categories’, ‘Medium Transacting Categories’ and ‘All Other
Categories’ covering wide varieties of merchants as shown below (Table A).

266 RBI Bulletin October 2024

Cash Usage Indicator for India ARTICLE

Table A: Category wise Classification of Merchants

High Transacting Categories Groceries and supermarkets
Eating places and restaurants
Telecommunication services, including local and long distance calls, credit card calls, calls through use
of magnetic stripe reading telephones and faxes
Fast food restaurants
Department stores
Service stations (with or without ancillary services)
Digital Goods: Games
Bakeries
Drug stores and pharmacies
Debit card to wallet credit (Wallet top up)
Medium Transacting Categories Dairies
Utilities electric, gas, water and sanitary
Drinking places (alcoholic beverages) bars, taverns, night-clubs, cocktail lounges and discothques
Miscellaneous personal services not elsewhere classified
Debt collection agencies
Variety stores
Financial institutions merchandise and services
Freezer and locker meat provisioners
Miscellaneous general merchandise
Men’s, women’s and children’s uniforms and commercial clothing
All Other Categories Electronics shops
Candy, nut and confectionery shops
Securities brokers and dealers
Beauty and barber shops
Online Marketplaces
Government services not elsewhere classified
Cable and other pay television services
Stationery, office and school supply shops
Taxi-cabs and limousines
Others

Source: NPCI (https://www.npci.org.in/what-we-do/upi/upi-ecosystem-statistics).

(ii) Usage of BHIM Aadhaar pay, AePS and NETC

BHIM Aadhaar pay enables merchants to receive digital payments from customers over the counter through
Aadhaar authentication. AePS also offers BHIM Aadhaar pay. NETC enables customers to use their FASTag
as payment modes at any of the toll plazas.
(iii) Usage of Cards (debit, credit and PPI)
Cards are used for payments to merchants as well as for funds transfer. Cards and PPIs can also be used for
cash withdrawal. For transactions through cards, disaggregated data are available on payments and also on
cash withdrawal in RBI website. Regarding data on payments through cards (credit as well debit), further
disaggregation is available in terms of ‘PoS based’ and ‘Others’. For PPI, disaggregated data on payments

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ARTICLE Cash Usage Indicator for India

through ‘wallet’, ‘PoS based’ and ‘Others’ are available. Further disaggregation on data under ‘Others’ are
not available for payments through cards (credit/debit/PPI).
(iv) Usage of funds transfer (NEFT, IMPS, NACH) and paper-based instruments
National electronic funds transfer (NEFT), immediate payment service (IMPS), national automated clearing
house (NACH) and paper-based instruments are also non-cash modes of payments. Disaggregated data,
however, are not available in public in respect of these instruments to identify payments done for the
purpose of purchase of goods and services for consumption and for other purposes. Hence, payments
through these instruments are excluded to estimate non-cash payments.
(v) Aadhar Based Payment System (ABPS)
Pertains to the transfer of benefits and subsidies under Direct Benefit Transfer scheme launched by GoI.
Hence not included to estimate non-cash payments by consumers.

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Annex B
Table B: Distribution of Digital Payment for PFCE
Components Vol 2020-21 2021-22 2022-23 2023-24
and
Jan- Mar April- Jul- Oct- Jan- April- Jul- Oct- Jan- April- Jul- Oct- Jan-
Val
June Sept Dec Mar June Sept Dec Mar June Sept Dec Mar
UPI_P2M Vol 51.6 57.4 59.8 58.2 63.8 67.0 73.7 77.5 80.0 82.0 84.3 85.2 87.0
Val 33.2 40.9 42.4 44.4 48.7 50.3 54.1 57.5 59.6 61.3 64.1 65.1 68.8
BHIM Aadhaar Vol 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pay Val 0.1 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1
NETC Vol 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.2 0.2 0.2
Val 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0
Credit Card PoS based Vol 4.5 3.2 3.6 3.7 3.3 3.3 2.9 2.6 2.4 2.2 2.0 2.0 1.9
Val 13.5 10.5 11.2 10.9 9.9 10.2 9.8 9.8 9.5 9.1 8.3 8.4 8.0
Credit Card Vol 3.9 4.0 3.4 3.5 3.2 3.0 2.5 2.2 2.1 2.0 1.9 1.9 1.8
Others Val 16.0 16.0 16.2 16.6 16.9 17.1 16.3 15.5 15.8 15.7 15.4 15.7 14.1
Debit Card PoS based Vol 10.1 7.1 7.7 7.6 6.3 5.7 4.5 3.7 3.0 2.5 2.0 1.7 1.3
Val 17.9 13.2 13.7 13.0 10.9 10.6 9.0 8.4 7.0 6.5 5.4 4.8 4.0
Debit Cards Vol 7.2 6.9 5.6 4.7 3.8 3.1 2.3 1.7 1.3 1.0 0.8 0.6 0.5
Others Val 10.5 9.7 8.5 7.4 6.4 5.3 5.1 4.0 3.5 3.1 3.0 2.3 2.0
PPI Wallets Vol 18.0 17.6 15.8 17.6 15.0 13.8 10.8 9.4 8.9 8.4 7.0 6.9 5.8
Val 6.1 6.8 6.4 6.2 5.5 4.8 4.1 3.7 3.6 3.6 3.2 3.0 2.5
PPI PoS based Vol 0.2 0.2 0.4 0.3 0.4 0.3 0.2 0.1 0.1 1.1 1.0 0.9 0.8
Val 0.7 0.6 0.4 0.4 0.8 0.5 0.3 0.2 0.2 0.2 0.1 0.1 0.1
PPI Others Vol 4.1 3.2 3.3 4.1 3.7 3.3 2.8 2.4 2.0 0.8 0.8 0.7 0.7
Val 2.0 2.1 1.2 0.8 0.7 1.0 1.1 0.9 0.7 0.5 0.5 0.5 0.5
HH digital Vol 100 100 100 100 100 100 100 100 100 100 100 100 100
payments Val 100 100 100 100 100 100 100 100 100 100 100 100 100

Notes: 1. Data are in per cent.

2. Disaggregated data on UPI in terms of P2P and P2M payments are available only from April 2021 onwards in NPCI. The same for the quarter
ending March 2021 were estimated as follows. In Worldline (2021), data on the share (not data on amount) of P2P and P2M payments in UPI
are available. In the RBI site, aggregate data on UPI are available. Based on these, disaggregated data on P2P and P2M payments were estimated
for the quarter ending March 2021. The author could not find any other source publishing data on P2P and P2M payments for period earlier to
the quarter end March 2021.
3. ‘Vol’ and ‘Val’ represent volume and value respectively.
Source: Author’s calculations based on data from RBI, NPCI and Worldline (2021).

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New Digital Economy and the Paradox of Productivity ARTICLE

New Digital Economy and the Brynjolfsson and McAfee (2014) and Bartelsman
et al. (2017) do not find any significant impact of
Paradox of Productivity digitalisation on productivity. These studies have
by Sadhan Kumar Chattopadhyay, reignited discussions over Robert Solow’s 1987
Sreerupa Sengupta and Shruti Joshi^ “productivity paradox” resurgence in the light of
sluggish global productivity growth.
This article estimates the contribution of Following the global trend, India is also
digitalisation to productivity growth and examines experiencing rapid digitalisation, and the impact of
the Solow Productivity paradox for India. The analysis digital goods and services on India’s economic growth
indicates that the contribution of Information and has become more pronounced, especially after the
Communication Technology (ICT) to output growth COVID-19 pandemic (Gajbhiye et al., 2022). While a
increased from 5.0 per cent in 1981-1990 to 13.2 per host of studies examine the existence of a productivity
cent during 1992-2023. On average, the ICT sector’s paradox in advanced economies, especially OECD
productivity fared better than the non-ICT sector for the countries, there are limited studies that enrich
whole sample period. understanding of the existence of a productivity
Introduction paradox in emerging market economies like India.
In this light, this article examines the existence of a
Digitalisation, a form of innovation, is expected
productivity paradox in India.
to improve productivity in the long run (Solow, 1987).
First, digital technologies let businesses innovate Following Das and Erumban (2016), the effect
by streamlining operations and lowering expenses of digitalisation1 on productivity is assessed through
associated with communications with clients and two separate channels - (i) the contribution of ICT as
suppliers (Akerman et al., 2013). Second, information an input in driving output and labour productivity
and communication technology (ICT), when used as growth and (ii) estimating the productivity potentials
an input in the production process, also improves by examining the differential between ICT sector
productivity via deepening. Third, companies can and non-ICT sector. The remaining sections of
reduce their ICT expenditures and associated costs the article are arranged as follows. Section II deals
like energy, labour and maintenance by switching with the literature survey on digitalisation and the
from owning ICT assets to acquiring ICT services. productivity paradox. Section III describes the data and
The economy’s overall productivity performance may methodology used in this paper. Section IV presents
eventually benefit from these savings as they improve the results of the empirical analysis for digitalisation
resource allocation and increase efficiency (van Ark, and the productivity paradox for India. Finally, the
2020). last section concludes the study.

Some studies have contended that the rise of II. Literature Review
the new digital economy has not been accompanied The weak association between ICT and
by a subsequent rise in productivity (van Ark, 2016). productivity was described as “computer is everywhere
Moreover, the recent work of Acemoglu et al. (2014), except in productivity statistics” –known as the
“Solow Paradox” in literature. Early studies on ICT and
^ The authors are from the Department of Economic and Policy Research,
Reserve Bank of India, Mumbai. The views expressed in this article are
1 As per OECD (2020) the extent of digitalisation can be measured by
those of the authors and do not represent the views of the Reserve Bank
of India. estimating the contribution of the ICT sector to economic growth.

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ARTICLE New Digital Economy and the Paradox of Productivity

productivity found evidence of the Solow paradox and in both advanced economies as well as emerging
found an insignificant relationship exists between economies (Conference Board total economy database).
ICT and productivity (Berndt and Morrison, 1995; Gopane (2020) confirmed the emergence of a new
Brynjolfsson and Yang, 1996; Franke, 1987). Schreyer productivity paradox with accelerated digitalisation
(2001) argued that when ICT was at its infant stage, its in the production process that is not manifested
share in the total economy was too low, and hence, it in productivity growth statistics. All these studies
was not reflected in productivity. Further, using ICT have reinvigorated discussions on Solow’s 1987
in a wide range of activities and internalising its full productivity paradox. Some authors point out that
benefits take a long time (Basu and Fernald, 2007). digital technologies have had only a transitory impact
Brynjolfsson (1996) found that labour and capital on productivity and will not fundamentally alter long-
in the Information Technology (IT) industry have term living standards (Gordon, 2012). Others argue
a substantial relationship with output and that the that firms are in the learning phase, and there is a
marginal products of IT industries are larger than time lag between digital technology adoption and the
those of non-IT industries. According to Brynjolfsson effect to be reflected in TFP numbers (van Ark, 2016).
and Hitt (2000), IT capital increased output growth and Moreover, even with new empirical research, there are
productivity in the short term (with a one-year lag), but limited studies that deepen the understanding of the
the impact was five times larger in the long term (with productivity paradox in emerging market economies.
a five to seven-year lag). Siegel and Griliches (1992) For India, Jorgenson and Vu (2005), using
found a significant positive relationship between ICT spending data from the World Information
computer investment and productivity growth in Technology and Services Alliance (WITSA),
developed economies. estimate the total investment in ICT in the
van Ark and Inklaar (2006) found that the economy. Erumban and Das (2016) found an
association between the use of ICT and productivity increased contribution from ICT investment
was U-shaped, which suggests that returns of ICT to India’s overall economic growth, mostly
investment are initially followed by a period of focused on the service sector. This article builds
experimentation, during which it shows a negative on Erumban and Das (2016) in two ways - first,
relation with TFP growth. In the later phase, it directly examines the productivity paradox
productivity gains are realised in line with the for India using regression techniques and
marginal cost of ICT. In a related study, van Ark (2008) analyses the productivity difference between the
found that the slower development of the knowledge ICT and non-ICT sectors. Erumban and Das (2016)
economy in Europe relative to the US was the cause have used shift share and Domar aggregation2
of the decline in productivity in that continent. analysis to identify the contribution of ICT and
According to these findings, higher IT investment is non-ICT sectors to aggregate TFP growth in India.
linked to higher productivity growth rates. Secondly, the present study covers a larger period
The productivity paradox seems to have surfaced from 1980 to 2019 and uses Conference Board
again. The recent trends in global productivity and India KLEMS datasets.
indicate that despite the increasing adoption of The literature has segmented the digital
digital technology, particularly in the form of cloud
2 Domar aggregation is a weighted sum of industrial productivity growth,
computing, i-cloud, big data, and robotics across the
with the sum of its weights higher than unity in input-output economies
globe, there has been a fall in productivity growth (Santini and Araujo, 2021).

272 RBI Bulletin October 2024

New Digital Economy and the Paradox of Productivity ARTICLE

economy into ICT-producing and ICT-using sectors growth, and represents growth in
(Mesenbourg, 2011) - the former produces ICT capital deepening, represents growth in labour
infrastructure while the latter uses ICT for another quality . Equation 2 shows the ICT capital investment’s
3

economic process. van Ark (2003) has also provided a contribution to labour productivity growth.
classification of industries based on ICT usage. Based To estimate the above equation, the study utilises
on van Ark (2003), 27 KLEMS industries are classified the KLEMS-India dataset published by the RBI. The
into ICT-using, ICT-producing and non-ICT industries. KLEMS framework measures factor inputs within the
In addition to van Ark, Erumban and Das (2016) have production function approach, while incorporating
also classified KLEMS industries in a similar way. a quality index in input measurement. For instance,
Based on van Ark (2003), the contribution of ICT labour input categorises educational attainment to
and non-ICT to labour productivity and TFP growth address productivity variations between low and high-
is examined. Lastly, it also tests whether there is any skilled labour services. Similarly, the measurement of
significant difference in the productivity of ICT and capital stock accounts for asset heterogeneity. The
non-ICT industries. gross value added (GVA) data in KLEMS are derived
III. Data and Method from India’s National Accounts Statistics (NAS).

The study uses the growth accounting approach Labour data are based on quinquennial
suggested by Jorgenson et al. (2007), which is as Employment Unemployment Survey (EUS) rounds
follows: for 1991-2016 and Periodic Labor Force Survey
(PLFS) data for 2017 onwards. Employment and
(1) wage data are categorised based on the skill level
of workers defined by education categories. Wage
In the above equation, the total economy value
rates for self-employed workers are estimated
added (Y) is obtained by summing up industry value-
using the Mincer equation (KLEMS Manual, 2023).
added growths. K and L denote the growth of
Capital input data in the KLEMS framework is
factor inputs - capital and labour. The capital input
estimated from NAS data by obtaining investment
is segregated into ICT capital and is denoted as ICTK
data categorised by asset type. The capital stock is
,and non-ICT capital is denoted as ICTnonK. is the
estimated using the perpetual inventory method,
average share of two consecutive years of ICT capital
assuming an 8.0 per cent depreciation rate for
in aggregate value-added, is the average share
machinery, 2.5 per cent for construction, and 10.0
of two consecutive years of non-ICT capital in value-
per cent for transport equipment, respectively
added growth. is the two consecutive years average
(KLEMS Manual, 2023). The rental price of capital
share of labour in aggregate value-added. ΔTFP is
represents the external rate of return. Capital
growth in aggregate TFP growth.
input at the total economy level is segregated into
By subtracting employment growth rates from ICT and non-ICT capital using data from the Total
both sides of equation (1), the following equation is Economy database (2023), Conference Board,
obtained: published by Groningen University, Netherlands.
IV. Effect of ICT on GVA and Productivity Growth
(2)
3 The contribution of labour is split into the contribution of pure
In equation 2, represents labour productivity employment quantity and labour quality.

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ARTICLE New Digital Economy and the Paradox of Productivity

As seen from Chart 1a, the share of the ICT sector The share of ICT capital deepening to labour
in the total economy GVA increased over time. In productivity growth fell to 11.3 per cent during
particular, this is true for ICT-using services, whereas 2011-23 (Chart 2b). These results indicate that
the share of non-ICT service sectors and non-ICT during 1980s to 2000s, the contribution of ICT to
other sectors (agriculture, mining, construction, productivity was high, refuting the productivity
electricity) has declined. The share of ICT-producing/ paradox but the paradox appears to have emerged
using manufacturing sectors, on the other hand, has in the; post-2010s period consistent with the
remained constant over time (Chart 1a and 1b). global trends (Sayeh, Dabla-Norris and Kinda,
2023).
The contribution of ICT capital as an input
to GVA and labour productivity growth is further Is the Difference in Productivity Statistically
analysed by estimating Equations 1 and 2 Significant?
described above. The decomposition results show It is observed that, on average, the performance of
that ICT capital services, on average, contributed the ICT sector is better than that of non-ICT in terms
5.0 per cent to output growth during 1981-91 and of partial and aggregate productivity. Next, in order
this contribution increased to about 16.0 per cent to examine if the productivity difference between
during 1992-2000 and 14.3 per cent during 2001- ICT and non-ICT sectors is statistically significant, the
2010. Subsequently, it moderated to 10.3 per cent following regression equations are estimated.
during 2011-2023 (Chart 2a). The share of ICT
(3)
capital deepening to labour productivity growth
rose from 8.4 per cent in 1981-90 to 20.8 per cent (4)
during 1992-2000 and 17.4 per cent during 2001- In Equation (3), is the total factor productivity
2010, suggesting an improvement in the role of growth rate, i is the industry, and t is the year (1980-
ICT capital investment in catalysing output and 2020). ICT is the industry dummy and takes the value
productivity growth during the 1990s and 2000s. of 1 if the industry is ICT and 0 otherwise. is a vector

Chart 1: Sectoral Share in GVA

Note: Classification adopted from Erumban and Das (2016). Non-market services include health, social work, education, public administration and defence.
Source: Authors’ calculations.

274 RBI Bulletin October 2024

New Digital Economy and the Paradox of Productivity ARTICLE

Chart 2: Contribution of ICT Capital to GVA and Productivity Growth

Note: *1991 and 2020, the post-economic crisis and COVID years, respectively, are removed from the analysis due to negative labour productivity growth.
Source: Conference Board; and Total Economy Database, 2023.

of control variables, including labour quality, capital 1980-2020. Next, the model was run for different
quality and total capital stock. Additionally, industry sub-periods. It is found that the productivity impact
and time-fixed effects have been controlled. is the of ICT was the highest from 1980 to 2010. However,
estimated average productivity growth rate for the during the period from 2010 to 2020, the productivity
non-ICT industry and is the estimated average differential between the ICT sector and the non-ICT
productivity growth rate for ICT industry. Therefore, sector was insignificant, consistent with the post-GFC
shows the difference in the productivity growth rate productivity slowdown observed in many parts of the
of the ICT and non-ICT industries. In Equation (4), world.
is the annual labour productivity growth rate, and all These results are corroborated in Table 2. In
other variables are the same as in Equation 3. terms of labour productivity growth, the ICT sector
The results from Table 1 show that, on average, performs better than the non-ICT sector for the full
the ICT sector’s productivity performance, which period and subsequent sub-periods. Although a
includes both ICT-producing and ICT-using sectors, slight moderation in labour productivity growth is
is higher than the non-ICT for the entire period observed in the last decade, overall, the ICT sector’s

Table 1: Regression Results for Total Factor Productivity Growth

∆P ∆P ∆P ∆P ∆P
1980-2020 1980-1990 1990-2000 2000-2010 2010-2020
ICT Sector Dummy 0.16*** 0.31* 0.52 0.68* -0.31
(3.46) (1.83) (1.39) (1.99) (-0.91)
Non-ICT Sector Dummy 0.12* 0.27 0.45 0.60* -0.33
(2.69) (1.56) (1.24) (1.82) (-0.99)
Difference of ICT over non-ICT 0.04*** 0.04*** 0.07* 0.07** 0.01
(5.46) (9.15) (2.69) (3.24) (1.33)
N 1053 243 243 243 243
Note: No cross- sectional dependence in the data was found and all the variables were panel stationary.
*
p < 0.05, ** p < 0.01, *** p < 0.001
Source: Authors’ calculations.

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ARTICLE New Digital Economy and the Paradox of Productivity

Table 2: Regression Results for Labour Productivity Growth

∆LPG ∆LPG ∆LPG ∆LPG ∆LPG
1980-2020 1980-1990 1990-2000 2000-2010 2010-2020
ICT 0.074 0.451 *
0.334 0.740* -0.64
(1.06) (2.26) (1.03) (2.11) (-1.53)
Non-ICT 0.070 0.42* 0.27 0.71* -0.523
(1.06) (2.18) (0.91) (2.12) (-1.43)
Difference over non-ICT 0.0036 0.031** 0.0586** 0.027* -0.046*
(0.72) (3.83) (2.52) (1.82) (-2.75)
N 1014 234 234 234 234
Note: No cross-sectional dependence in the data was found; all the variables were panel-stationary.
*, **and *** indicate statistically significant at 5 per cent, 10 per cent and 1per cent level.
Source: Authors’ calculations.

productivity performance was better than that of the takes a value of 1 if the industry is ICT-using and 0 if
non-ICT sectors. it is ICT-producing.
ICT-using vs ICT-producing industries From Table 3, it is found that, on average, the
To identify the productivity differences between productivity performance of ICT-producing industries
ICT producing and ICT using sectors, the following was better than that of ICT-using industries. Further,
regressions are run for the disaggregated ICT sectors: from Table 4, in terms of labour productivity, the
ICT-producing sector also outperforms the ICT–using
(5)
sector. The moderation in the labour productivity
(6) growth of the ICT sector in 2000-2020 is attributable
A dummy for ICT-using and producing industries to the moderation in the labour productivity growth
is introduced in equations (5) and (6). The dummy rate of ICT–using industries. Hence, industries

Table 3: Regression Results for Total Factor Productivity Growth

∆P ∆P ∆P
1980-2020 1980-2000 2000-2020
ICT -using 0.15*** 0.34*** 0.041
(3.16) (3.30) (0.39)
ICT-producing 0.18*** 0.33*** 0.079
(3.48) (3.36) (0.70)
Non-ICT 0.12* 0.29** 0.031
(2.69) (2.87) (0.32)

Difference over non-ICT

ICT-using 0.030*** 0.06*** 0.009*
(5.46) (4.57) (2.03)

ICT-producing 0.055*** 0.05*** 0.04**

(6.53) (4.61) (3.31)

N 1014 494 494

Note: No cross- sectional dependence in the data was found and all the variables were panel stationary.
*, **and *** indicate statistically significant at 5 per cent, 10 per cent and 1 per cent level.
Source: Authors’ calculations.

276 RBI Bulletin October 2024

New Digital Economy and the Paradox of Productivity ARTICLE

Table 4: Regression Results for Labour Productivity Growth

∆LPG ∆LPG ∆LPG
1980-2020 1980-2000 2000-2020
ICT -using 0.08 0.314* -0.050
(1.25) (2.71) (-0.37)
ICT-producing 0.110 0.328** -0.002
(1.61) (-0.01)
(2.75)
Non-ICT 0.0776 0.308* -0.0363
(1.23) (2.68) (-0.28)
Difference over non-ICT
ICT-using 0.00258* 0.00632*** -0.0138*
(2.47) (5.52) (-2.53)
ICT-producing 0.0330*** 0.0197*** 0.0341
(5.23) (3.96) (1.77)
N 1053 513 513
Note: No cross- sectional dependence in the data was found, and all the variables were panel-stationary.
*, **and *** indicate statistically significant at 5%, 10% and 1% level.
Source: Authors’ calculations.

that produce ICT goods and services or use ICT in with the post-GFC productivity slowdown observed in
the provision of goods and services have higher many parts of the world.
productivity than those that are less intensive users
References
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and non-ICT increasing over time. Acemoglu, D., Gallego, F. A., and Robinson, J. A. (2014).
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VI. Conclusion
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The skill complementarity of broadband internet.
approaches. In the first approach, the role of ICT
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non-ICT sectors using regression models. The stylised Bartelsman, E. J., and Wolf, Z. (2017). Measuring
facts indicate that the contribution of ICT capital to productivity dispersion.
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thereby refuting Solow’s productivity paradox for
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level evidence on the returns to information systems B. (2020). European productivity in the digital age:
spending. Management Science, 42(4), 541-558. evidence from EU KLEMS. Measuring economic
Brynjolfsson, E., and Hitt, L. M. (2000). Beyond growth and productivity (pp. 75-94). Academic Press.
computation: Information technology, organizational Jorgenson, D. W., and Vu, K. (2005). Information
transformation and business performance. Journal of technology and the world economy. The Scandinavian
Economic Perspectives, 14(4), 23-48. Journal of Economics, 107(4), 631-650.
Brynjolfsson, E., and Hitt, L. M. (2003). Computing Jorgenson, D. W., Ho, M. S., and Stiroh, K. J. (2008).
productivity: Firm-level evidence. Review of A retrospective look at the US productivity growth
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Brynjolfsson, E., and McAfee, A. (2011). Race against 3-24.
the machine: How the digital revolution is accelerating McAfee, A., and Brynjolfsson, E. (2008). Investing in
innovation, driving productivity, and irreversibly the IT that makes a competitive difference. Harvard
transforming employment and the economy. Business Review, 86(7/8), 98.
Brynjolfsson, E., and McAfee, A. (2014). The second Mesenbourg Jr, T. (2011). The role of the
machine age: Work, progress, and prosperity in a time
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Brynjolfsson, E., and Yang, S. (1996). Information
Santini, T., and Araujo, R.A. (2021). Productivity
technology and productivity: A review of the
growth and sectoral interactions under Domar
literature. Advances in computers, 43, 179-214.
aggregation: A study for the Brazilian economy from
Erumban, A. A., and Das, D. K. (2016). Information 2000 to 2014. Economic Structures 10, 14.
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Schreyer, P., and Pilat, D. (2001). Measuring
in India. Telecommunications Policy, 40(5), 412-431.
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Franke, R. H. (1987). Technological revolution and
Siegel, D. S., and Griliches, Z. (1991). Purchased
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services, outsourcing, computers, and productivity in
financial industry. Technological Forecasting and
manufacturing.
Social Change, 31(2), 143-154.
Gajbhiye, D., Arora, R., Arham,N., Rigzen,Y., and van Ark, B. (2016). The productivity paradox of the
Ishu,T. (2022). Measuring India’s digital economy. RBI new digital economy. International Productivity
Bulletin. Monitor, 31, 3-18.

Gopane, T. J. (2020). Digitalisation, productivity, and van Ark, B., and Inklaar, R. (2006). Catching up or
measurability of digital economy: evidence from getting stuck? Europe’s troubles to exploit ICT’s
BRICS. In Digital Economy. Emerging Technologies productivity potential.
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on Digital Economy, ICDEc 2020, Bucharest, Romania, ICT and Productivity in Europe and the United States
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Inklaar, R., Jäger, K., O’Mahony, M., and van Ark, Perspectives, 22(1), 25-44.

278 RBI Bulletin October 2024

New Digital Economy and the Paradox of Productivity ARTICLE

Appendix Table 1: Classification of ICT and Non-ICT Industries

KLEMS industry Industry group

Agriculture, Hunting, Forestry and Fishing Non-ICT others

Mining and Quarrying Non-ICT others

Food Products, Beverages and Tobacco Non-ICT manufacturing

Textiles, Textile Products, Leather and Footwear Non-ICT manufacturing

Wood and Products of Wood Non-ICT manufacturing

Pulp, Paper, Paper Products, Printing and Publishing ICT-using manufacturing

Coke, Refined Petroleum Products and Nuclear Fuel Non-ICT manufacturing

Chemicals and Chemical Products Non-ICT manufacturing

Rubber and Plastic Products Non-ICT manufacturing

Other Non-Metallic Mineral Products Non-ICT manufacturing

Basic Metals and Fabricated Metal Products Non-ICT manufacturing

Machinery, nec ICT-using manufacturing

Electrical and Optical Equipment ICT-producing manufacturing

Transport Equipment ICT-using manufacturing

Manufacturing, nec; recycling ICT-using manufacturing

Electricity, Gas and Water Supply Non-ICT others

Construction Non-ICT others

Trade ICT-using service

Hotels and Restaurants Non-ICT service

Transport and Storage Non-ICT service

Post and Telecommunication ICT-producing service

Financial Intermediation ICT-using service

Business Services ICT-using service

Public Administration and Defense; Compulsory Social Security Non-ICT service

Education Non-ICT service

Health and Social Work Non-ICT service

Other Services Non-ICT service

RBI Bulletin October 2024 279

CURRENT STATISTICS

Select Economic Indicators

Reserve Bank of India

Money and Banking

Prices and Production

Government Accounts and Treasury Bills

Financial Markets

External Sector

Payment and Settlement Systems

Occasional Series
 CURRENT STATISTICS

Contents

No. Title Page

1 Select Economic Indicators 283

Reserve Bank of India
2 RBI – Liabilities and Assets 284
3 Liquidity Operations by RBI 285
4 Sale/ Purchase of U.S. Dollar by the RBI 286
4A Maturity Breakdown (by Residual Maturity) of Outstanding Forwards of RBI (US$ Million) 287
5 RBI's Standing Facilities 287
Money and Banking
6 Money Stock Measures 288
7 Sources of Money Stock (M3) 289
8 Monetary Survey 290
9 Liquidity Aggregates 291
10 Reserve Bank of India Survey 292
11 Reserve Money – Components and Sources 292
12 Commercial Bank Survey 293
13 Scheduled Commercial Banks' Investments 293
14 Business in India – All Scheduled Banks and All Scheduled Commercial Banks 294
15 Deployment of Gross Bank Credit by Major Sectors 295
16 Industry-wise Deployment of Gross Bank Credit 296
17 State Co-operative Banks Maintaining Accounts with the Reserve Bank of India 297
Prices and Production
18 Consumer Price Index (Base: 2012=100) 298
19 Other Consumer Price Indices 298
20 Monthly Average Price of Gold and Silver in Mumbai 298
21 Wholesale Price Index 299
22 Index of Industrial Production (Base: 2011-12=100) 303
Government Accounts and Treasury Bills
23 Union Government Accounts at a Glance 303
24 Treasury Bills – Ownership Pattern 304
25 Auctions of Treasury Bills 304
Financial Markets
26 Daily Call Money Rates 305
27 Certificates of Deposit 306
28 Commercial Paper 306
29 Average Daily Turnover in Select Financial Markets 306
30 New Capital Issues by Non-Government Public Limited Companies 307

RBI Bulletin October 2024 281

CURRENT STATISTICS

No. Title Page

External Sector
31 Foreign Trade 308
32 Foreign Exchange Reserves 308
33 Non-Resident Deposits 308
34 Foreign Investment Inflows 309
35 Outward Remittances under the Liberalised Remittance Scheme (LRS) for Resident Individuals 309
36 Indices of Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER)
of the Indian Rupee 310
37 External Commercial Borrowings (ECBs) – Registrations 311
38 India’s Overall Balance of Payments (US $ Million) 312
39 India's Overall Balance of Payments (` Crore) 313
40 Standard Presentation of BoP in India as per BPM6 (US $ Million) 314
41 Standard Presentation of BoP in India as per BPM6 (` Crore) 315
42 India’s International Investment Position 316

Payment and Settlement Systems

43 Payment System Indicators 317

Occasional Series
44 Small Savings 319
45 Ownership Pattern of Central and State Governments Securities 320
46 Combined Receipts and Disbursements of the Central and State Governments 321
47 Financial Accommodation Availed by State Governments under various Facilities 322
48 Investments by State Governments 323
49 Market Borrowings of State Governments 324
50 (a) Flow of Financial Assets and Liabilities of Households - Instrument-wise 325
50 (b) Stocks of Financial Assets and Liabilities of Households- Select Indicators 328

Notes: .. = Not available.

– = Nil/Negligible.
P = Preliminary/Provisional. PR = Partially Revised.

282 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 1: Select Economic Indicators

2022-23 2023-24 2024-25
Item 2023-24
Q4 Q1 Q4 Q1
1 2 3 4 5
1 Real Sector (% Change)
1.1 GVA at Basic Prices 7.2 6.0 8.3 6.3 6.8
1.1.1 Agriculture 1.4 7.6 3.7 0.6 2.0
1.1.2 Industry 9.3 1.7 5.0 8.3 7.4
1.1.3 Services 7.9 7.3 10.4 7.0 7.7
1.1a Final Consumption Expenditure 3.8 3.5 4.6 3.4 6.3
1.1b Gross Fixed Capital Formation 9.0 3.8 8.5 6.5 7.5
2023 2024
2023-24
Jul. Aug. Jul. Aug.
1 2 3 4 5
1.2 Index of Industrial Production 5.9 6.2 10.9 4.7 -0.1
2 Money and Banking (% Change)
2.1 Scheduled Commercial Banks
2.1.1 Deposits 12.9 12.0 12.4 11.0 12.3
(13.5) (12.9) (13.2) (10.6) (11.9)
2.1.2 Credit # 16.3 14.6 14.9 15.1 14.4
(20.2) (19.5) (19.7) (13.7) (13.1)
2.1.2.1 Non-food Credit # 16.3 14.7 15.0 15.1 14.4
(20.2) (19.7) (19.8) (13.7) (13.1)
2.1.3 Investment in Govt. Securities 11.1 14.2 14.2 9.1 7.2
(12.8) (16.5) (16.5) (8.1) (6.3)
2.2 Money Stock Measures
2.2.1 Reserve Money (M0) 5.6 5.4 9.8 7.2 4.8
2.2.2 Broad Money (M3) 11.1 10.6 10.8 10.0 10.2
(11.6) (11.3) (11.5) (9.7) (9.8)
3 Ratios (%)
3.1 Cash Reserve Ratio 4.50 4.50 4.50 4.50 4.50
3.2 Statutory Liquidity Ratio 18.00 18.00 18.00 18.00 18.00
3.3 Cash-Deposit Ratio 5.0 5.2 5.8 5.1 5.1
(5.0) (5.2) (5.7) (5.1) (5.1)
3.4 Credit-Deposit Ratio 78.1 74.6 75.0 77.3 76.5
(80.3) (77.1) (77.5) (79.3) (78.4)
3.5 Incremental Credit-Deposit Ratio # 95.8 51.6 60.9 56.3 50.4
(113.4) (99.0) (103.8) (53.1) (47.7)
3.6 Investment-Deposit Ratio 29.5 30.1 30.3 29.6 29.1
(29.8) (30.5) (30.7) (29.8) (29.3)
3.7 Incremental Investment-Deposit Ratio 25.8 32.1 35.6 31.4 22.5
(28.4) (37.8) (40.6) (28.8) (20.8)
4 Interest Rates (%)
4.1 Policy Repo Rate 6.50 6.50 6.50 6.50 6.50
4.2 Fixed Reverse Repo Rate 3.35 3.35 3.35 3.35 3.35
4.3 Standing Deposit Facility (SDF) Rate * 6.25 6.25 6.25 6.25 6.25
4.4 Marginal Standing Facility (MSF) Rate 6.75 6.75 6.75 6.75 6.75
4.5 Bank Rate 6.75 6.75 6.75 6.75 6.75
4.6 Base Rate 9.10/10.25 8.85/10.10 8.85/10.10 9.10/10.40 9.10/10.40
4.7 MCLR (Overnight) 8.00/8.60 7.95/8.35 7.95/8.40 8.10/8.60 8.15/8.45
4.8 Term Deposit Rate >1 Year 6.50/7.25 6.00/7.25 6.00/7.25 6.00/7.30 6.00/7.25
4.9 Savings Deposit Rate 2.70/3.00 2.70/3.00 2.70/3.00 2.70/3.00 2.70/3.00
4.10 Call Money Rate (Weighted Average) 6.85 6.50 6.75 6.59 6.59
4.11 91-Day Treasury Bill (Primary) Yield - 6.72 6.82 6.67 6.63
4.12 182-Day Treasury Bill (Primary) Yield 7.28 6.86 7.02 6.79 6.72
4.13 364-Day Treasury Bill (Primary) Yield 7.31 6.89 7.03 6.80 6.72
4.14 10-Year G-Sec Par Yield (FBIL) 7.31 7.17 7.14 6.97 6.90
5 Reference Rate and Forward Premia
5.1 INR-US$ Spot Rate (Rs. Per Foreign Currency) 83.37 82.25 82.65 83.73 83.87
5.2 INR-Euro Spot Rate (Rs. Per Foreign Currency) 90.22 90.32 89.17 90.86 92.91
5.3 Forward Premia of US$ 1-month (%) 1.00 1.17 1.31 1.11 1.12
3-month (%) 1.11 1.22 1.38 1.20 1.34
6-month (%) 1.31 1.33 1.40 1.43 1.64
6 Inflation (%)
6.1 All India Consumer Price Index 5.4 7.4 6.8 3.6 3.7
6.2 Consumer Price Index for Industrial Workers 5.19 7.5 6.9 2.1 2.4
6.3 Wholesale Price Index -0.7 -1.2 -0.5 2.1 1.3
6.3.1 Primary Articles 3.6 8.2 6.7 3.2 2.4
6.3.2 Fuel and Power -4.6 -12.7 -6.3 1.9 -0.7
6.3.3 Manufactured Products -1.7 -2.6 -2.3 1.6 1.2
7 Foreign Trade (% Change)
7.1 Imports -5.3 -16.1 0.7 7.4 3.3
7.2 Exports -3.1 -10.0 3.4 -1.8 -9.3
Note : Financial Benchmark India Pvt. Ltd. (FBIL) has commenced publication of the G-Sec benchmarks with effect from March 31, 2018 as per RBI circularFMRD.DIRD.
7/14.03.025/2017-18 dated March 31, 2018. FBIL has started dissemination of reference rates w.e.f. July 10, 2018.
#: Bank credit growth and related ratios for all fortnights from December 3, 2021 to November 18, 2022 are adjusted for past reporting errors by select scheduled commercial banks (SCBs).
Figures in parentheses include the impact of merger of a non-bank with a bank.
*: As per Press Release No. 2022-2023/41 dated April 08, 2022.

RBI Bulletin October 2024 283

CURRENT STATISTICS

Reserve Bank of India

No. 2: RBI - Liabilities and Assets *
(₹ Crore)
Item As on the Last Friday/ Friday

2023-24 2023 2024

Sep. Aug. 30 Sep. 06 Sep. 13 Sep. 20 Sep. 27

1 2 3 4 5 6 7

1 Issue Department

1.1 Liabilities

1.1.1 Notes in Circulation 3482333 3257516 3458493 3471089 3474449 3455943 3447381
1.1.2 Notes held in Banking Department 11 10 14 14 15 14 22
1.1/1.2 Total Liabilities (Total Notes Issued) or Assets 3482344 3257526 3458507 3471104 3474463 3455957 3447403
1.2 Assets
1.2.1 Gold 162996 137471 188699 188209 190852 192298 199209
1.2.2 Foreign Securities 3318885 3119750 3269461 3282415 3283188 3263285 3247889
1.2.3 Rupee Coin 463 305 347 479 424 375 305
1.2.4 Government of India Rupee Securities - - - - - - -
2 Banking Department
2.1 Liabilities
2.1.1 Deposits 1782333 1678098 1702744 1744535 1715825 1784146 1851979
2.1.1.1 Central Government 101 100 100 100 100 100 100
2.1.1.2 Market Stabilisation Scheme - - - - - -
2.1.1.3 State Governments 42 42 42 42 42 42 42
2.1.1.4 Scheduled Commercial Banks 1008618 969235 1019456 988846 1004956 956255 1020447
2.1.1.5 Scheduled State Co-operative Banks 10092 8917 8019 8151 8383 7923 8254
2.1.1.6 Non-Scheduled State Co-operative Banks 6412 4900 5186 5328 5220 5046 5134
2.1.1.7 Other Banks 48725 49321 49701 49736 49501 49752 49498
2.1.1.8 Others 545400 518710 479121 534528 493671 604088 600409
2.1.1.9 Financial Institution Outside India 162944 126871 141119 157803 153951 160940 168095
2.1.2 Other Liabilities 1804747 1498291 1917383 1948716 1967285 1965094 2008888
2.1/2.2 Total Liabilities or Assets 3587080 3176389 3620127 3693251 3683109 3749240 3860867
2.2 Assets
2.2.1 Notes and Coins 11 10 14 14 15 14 22
2.2.2 Balances Held Abroad 1480408 1235681 1790736 1824082 1816602 1833767 1944750
2.2.3 Loans and Advances
2.2.3.1 Central Government - - - - - - -
2.2.3.2 State Governments 2300 11606 13381 35426 29725 26447 24412
2.2.3.3 Scheduled Commercial Banks 266021 170292 6968 7740 10917 51223 33302
2.2.3.4 Scheduled State Co-op.Banks - - - - - - -
2.2.3.5 Industrial Dev. Bank of India - - - - - - -
2.2.3.6 NABARD - - - - - - -
2.2.3.7 EXIM Bank - - - - - - -
2.2.3.8 Others 12398 3030 8547 7123 7123 8547 8496
2.2.3.9 Financial Institution Outside India 162650 127232 141402 157993 154366 161507 167968
2.2.4 Bills Purchased and Discounted
2.2.4.1 Internal - - - - - - -
2.2.4.2 Government Treasury Bills - - - - - - -
2.2.5 Investments 1365425 1388293 1317280 1317112 1315545 1315672 1316708
2.2.6 Other Assets 297868 240246 341800 343760 348816 352064 365211
2.2.6.1 Gold 272028 226353 330135 332122 336784 339336 351532
* Data are provisional.

284 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 3: Liquidity Operations by RBI

(₹ Crore)

Date Standing OMO (Outright) Net Injection (+)/

Liquidity Absorption (-)
Liquidity Adjustment Facility Facilities (1+3+5+7+9-2-4-6
-8)

Sale Purchase
Variable
Variable
Reverse Rate
Repo Rate MSF SDF
Repo Reverse
Repo
Repo

1 2 3 4 5 6 7 8 9 10
Aug. 1, 2024 - - - 32831 579 81930 - 675 - -114857
Aug. 2, 2024 - - - 59860 781 186921 - 465 - -246465
Aug. 3, 2024 - - - - 263 158577 - - - -158314
Aug. 4, 2024 - - - - 63 136919 - - - -136856
Aug. 5, 2024 - - - 78955 1517 138445 -767 305 - -216955
Aug. 6, 2024 - - - 43757 4212 89857 -89 930 - -130421
Aug. 7, 2024 - - - - 16750 40842 -368 1055 - -25515
Aug. 8, 2024 - - - - 43791 37087 1216 220 - 7700
Aug. 9, 2024 - - - 60190 2685 102634 -39 0 - -160178
Aug. 10, 2024 - - - - 562 57020 - - - -56458
Aug. 11, 2024 - - - - 1139 58431 - - - -57292
Aug. 12, 2024 - - - 42970 1236 69627 8 215 - -111568
Aug. 13, 2024 - - - 22505 2107 59451 -1424 165 - -81438
Aug. 14, 2024 - - - 30457 1204 47059 1410 100 - -75002
Aug. 15, 2024 - - - - 19 39799 - - - -39780
Aug. 16, 2024 - - - 93237 6960 67431 - 705 - -154413
Aug. 17, 2024 - - - - 6548 68029 - - - -61481
Aug. 18, 2024 - - - - 5563 62069 - - - -56506
Aug. 19, 2024 - - - 21685 1690 95740 - 270 - -116005
Aug. 20, 2024 - - - 875 1202 103244 - 610 - -103527
Aug. 21, 2024 - - - - 14226 69962 - 300 - -56036
Aug. 22, 2024 - - - - 1019 84413 - 365 - -83759
Aug. 23, 2024 - - - 20377 1818 98793 - 230 - -117582
Aug. 24, 2024 - - - - 722 66501 - - - -65779
Aug. 25, 2024 - - - - 1794 66500 - - - -64706
Aug. 26, 2024 - - - 29080 1576 47791 5 0 - -75290
Aug. 27, 2024 - - - - 2365 69908 - 330 - -67873
Aug. 28, 2024 - - - 9875 1477 50427 - 410 - -59235
Aug. 29, 2024 - - - - 7893 63663 - 95 - -55865
Aug. 30, 2024 - - - 4000 2128 113478 - 245 - -115595
Aug. 31, 2024 - - - - 1140 89068 - - - -87928

RBI Bulletin October 2024 285

CURRENT STATISTICS

No. 4: Sale/ Purchase of U.S. Dollar by the RBI

i) Operations in onshore / offshore OTC segment

Item 2023 2024

2023-24
Aug. Jul. Aug.

1 2 3 4

1 Net Purchase/ Sale of Foreign Currency (US $ Million) (1.1-1.2) 41271 -3856 6934 -6494

1.1 Purchase (+) 194296 500 23569 16141

1.2 Sale (–) 153025 4356 16635 22635

2 ₹ equivalent at contract rate (₹ Crores) 339528 -31994 57887 -54476

3 Cumulative (over end-March) (US $ Million) 41271 19195 5402 -1092

(₹ Crore) 339528 157279 44872 -9604

4 Outstanding Net Forward Sales (-)/ Purchase (+) at the end of month (US
-541 10068 -9100 -18980
$ Million)

ii) Operations in currency futures segment

Item 2023 2024

2023-24
Aug. Jul. Aug.

1 2 3 4

1 Net Purchase/ Sale of Foreign Currency (US $ Million) (1.1-1.2) 0 0 0 0

1.1 Purchase (+) 7930 441 2144 1993

1.2 Sale (–) 7930 441 2144 1993

2 Outstanding Net Currency Futures Sales (-)/ Purchase (+) at the end of -1080 0 -340 -897
month (US $ Million)

286 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 4 A : Maturity Breakdown (by Residual Maturity) of

Outstanding Forwards of RBI (US $ Million)

Item As on August 31 , 2024

Long (+) Short (-) Net (1-2)
1 2 3
1. Upto 1 month 0 13800 -13800
2. More than 1 month and upto 3 months 0 5180 -5180
3. More than 3 months and upto 1 year 0 0 ..
4. More than 1 year 0 0 ..
Total (1+2+3+4) .. 18980 -18980

No. 5: RBI’s Standing Facilities

(₹ Crore)
Item As on the Last Reporting Friday
2023-24 2023 2024

Sep. 22 Apr. 19 May. 31 Jun. 28 Jul. 26 Aug. 23 Sep. 20

1 2 3 4 5 6 7 8

1 MSF 49906 168348 3238 14601 46848 2021 1818 21731

2 Export Credit Refinance for Scheduled Banks

2.1 Limit - - - - - - - -

2.2 Outstanding - - - - - - - -

3 Liquidity Facility for PDs

3.1 Limit 9900 4900 9900 9900 9900 9900 9900 9900

3.2 Outstanding 9810 3054 8770 9311 9061 9062 8541 8547

4 Others

4.1 Limit 76000 76000 76000 76000 76000 76000 76000 76000

4.2 Outstanding - - - - - - - -

5 Total Outstanding (1+2.2+3.2+4.2) 59716 171402 12008 23912 55909 11083 10359 30278

RBI Bulletin October 2024 287

CURRENT STATISTICS

Money and Banking

No. 6: Money Stock Measures
(₹ Crore)

Figures in parentheses include the impact of merger of a non-bank with a bank.

288 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 7 : Sources of Money Stock (M3)

(₹ Crore)

Sources Outstanding as on March 31/last reporting Fridays of the

month/reporting Fridays

2023-24 2023 2024

Aug. 25 Jul. 26 Aug. 09 Aug. 23

1 2 3 4 5
1 Net Bank Credit to Government 7512016 7274511 7612861 7674995 7629866

1 Net Bank Credit to Government (Including Merger) (7603571) (7387274) (7678213) (7739908) (7694769)

1.1 RBI’s net credit to Government (1.1.1–1.1.2) 1193213 1185246 1060910 1107752 1025545

1.1.1 Claims on Government 1370428 1415628 1341836 1351627 1343455

1.1.1.1 Central Government 1363828 1399159 1320596 1318634 1316653

1.1.1.2 State Governments 6600 16470 21239 32993 26802

1.1.2 Government deposits with RBI 177215 230382 280926 243875 317910

1.1.2.1 Central Government 177172 230340 280883 243833 317868

1.1.2.2 State Governments 42 42 42 42 42

1.2 Other Banks’ Credit to Government 6318803 6089264 6551951 6567243 6604322

1.2 Other Banks Credit to Government (Including Merger) (6410358) (6202028) (6617302) (6632157) (6669224)

2 Bank Credit to Commercial Sector 16672145 15052452 17084181 17155454 17224460

2 Bank Credit to Commercial Sector (Including Merger) (17202832) (15654654) (17577818) (17644067) (17709792)

2.1 RBI’s credit to commercial sector 14406 5186 10935 10439 10307

2.2 Other banks’ credit to commercial sector 16657739 15047266 17073246 17145015 17214153

2.2 Other banks credit to commercial sector (Including Merger) (17188425) (15649468) (17566883) (17633628) (17699485)

2.2.1 Bank credit by commercial banks 15901477 14315110 16320298 16391688 16459977

2.2.1 Bank credit by commercial banks (Including Merger) (16432164) (14917312) (16813935) (16880301) (16945309)

2.2.2 Bank credit by co-operative banks 738194 714934 733892 735027 735395

2.2.3 Investments by commercial and co-operative banks in other securities 18068 17222 19056 18299 18781

2.2.3 Investments by commercial and co-operative banks in other securities (Including Merger) (18068) (17222) (19056) (18299) (18781)

3 Net Foreign Exchange Assets of Banking Sector (3.1 + 3.2) 5543700 4993999 5736662 5773433 5866203

3.1 RBIs net foreign exchange assets (3.1.1 - 3.1.2) 5240824 4751175 5433786 5470557 5563327

3.1.1 Gross foreign assets 5241083 4751434 5434044 5470816 5563586

3.1.2 Foreign liabilities 259 259 259 259 259

3.2 Other banks’ net foreign exchange assets 302876 242825 302876 302876 302876

4 Government’s Currency Liabilities to the Public 33432 31400 34306 34306 34306

5 Banking Sector’s Net Non-monetary Liabilities 4929674 4026453 4877557 4910172 5050735

5 Banking Sectors Net Non-monetary Liabilities (Including Merger) (5443674) (4594622) (5353343) (5383035) (5522022)

5.1 Net non-monetary liabilities of RBI 1789875 1510374 1718379 1816054 1892962

5.2 Net non-monetary liabilities of other banks (residual) 3139799 2516079 3159178 3094118 3157772

5.2 Net non-monetary liabilities of other banks (residual) (Including Merger) (3653798) (3084248) (3634964) (3566981) (3629060)

M₃(1+2+3+4–5) 24831618 23325909 25590453 25728017 25704100

M3 (1+2+3+4-5) (Including Merger) (24939860) (23472705) (25673654) (25808680) (25783048)

Figures in parentheses include the impact of merger of a non-bank with bank.

RBI Bulletin October 2024 289

CURRENT STATISTICS

No. 8: Monetary Survey

(₹ Crore)
Item Outstanding as on March 31/last reporting Fridays of the
month/reporting Fridays

2023-24 2023 2024

Aug. 25 Jul. 26 Aug. 09 Aug. 23

1 2 3 4 5

Monetary Aggregates

NM₁ (1.1+1.2.1+1.3) 6091700 5628293 6104726 6075784 6085046

NM₂ (NM₁ + 1.2.2.1) 14424855 13510696 14761845 14806439 14798820

NM2 (NM1 + 1.2.2.1) (Including Merger) (14473564) (13576754) (14799285) (14842738) (14834346)

NM₃ (NM₂ +1.2.2.2 + 1.4 = 2.1 + 2.2 + 2.3 – 2.4 – 2.5) 25387764 23962818 26277956 26327878 26360365

NM3 (NM2 + 1.2.2.2 + 1.4 = 2.1 + 2.2 + 2.3 - 2.4 - 2.5) (Including Merger) (25496006) (24109614) (26361158) (26408542) (26439312)

1 Components

1.1 Currency with the Public 3410276 3205051 3426089 3425336 3404741

1.2 Aggregate Deposits of Residents 21105009 19867806 21825453 21959202 21952425

1.2 Aggregate Deposits of Residents (Including Merger) (21213252) (20014602) (21908655) (22039866) (22031372)

1.2.1 Demand Deposits 2586888 2351355 2587413 2557746 2588482

1.2.2 Time Deposits of Residents 18518121 17516451 19238040 19401456 19363943

1.2.2 Time Deposits of Residents (Including Merger) (18626364) (17663247) (19321242) (19482120) (19442890)

1.2.2.1 Short-term Time Deposits 8333155 7882403 8657118 8730655 8713774

1.2.2.1 Short-term Time Deposits (Including Merger) (8381864) (7948461) (8694559) (8766954) (8749300)

1.2.2.1.1 Certificates of Deposits (CDs) 369399 296520 420069 430842 441388

1.2.2.2 Long-term Time Deposits 10184967 9634048 10580922 10670801 10650168

1.2.2.2 Long-term Time Deposits (Including Merger) (10244500) (9714786) (10626683) (10715166) (10693589)

1.3 'Other' Deposits with RBI 94536 71887 91225 92702 91822

1.4 Call/Term Funding from Financial Institutions 777942 818074 935190 850638 911377

2 Sources

2.1 Domestic Credit 25295986 23445850 25825974 25987260 26020508

2.1 Domestic Credit (Including Merger) (25918227) (24160815) (26384962) (26540787) (26570742)

2.1.1 Net Bank Credit to the Government 7512016 7274511 7612861 7674995 7629866

2.1.1 Net Bank Credit to the Government (Including Merger) (7603571) (7387274) (7678213) (7739908) (7694769)

2.1.1.1 Net RBI credit to the Government 1193213 1185246 1060910 1107752 1025545

2.1.1.2 Credit to the Government by the Banking System 6318803 6089264 6551951 6567243 6604322

2.1.1.2 Credit to the Government by the Banking System (Including Merger) (6410358) (6202028) (6617302) (6632157) (6669224)

2.1.2 Bank Credit to the Commercial Sector 17783970 16171339 18213113 18312265 18390642

2.1.2 Bank Credit to the Commercial Sector (Including Merger) (18314656) (16773541) (18706750) (18800878) (18875973)

2.1.2.1 RBI Credit to the Commercial Sector 14406 5186 10935 10439 10307

2.1.2.2 Credit to the Commercial Sector by the Banking System 17769564 16166153 18202178 18301826 18380335

2.1.2.2 Credit to the Commercial Sector by the Banking System (Including Merger) (18300250) (16768355) (18695815) (18790439) (18865667)

2.1.2.2.1 Other Investments ( Non-SLR Securities) 1089184 1099978 1112229 1140039 1150445

2.2 Government's Currency Liabilities to the Public 33432 31148 34306 34306 34306

2.3 Net Foreign Exchange Assets of the Banking Sector 5110820 4797159 5304164 5358037 5420007

2.3.1 Net Foreign Exchange Assets of the RBI 5240824 4751175 5433786 5470557 5563327

2.3.2 Net Foreign Currency Assets of the Banking System -130004 45984 -129622 -112520 -143320

2.4 Capital Account 3912897 3900890 4317778 4361103 4421744

2.5 Other items (net) 1653576 978618 1044496 1163485 1163999

Figures in parentheses include the impact of merger of a non-bank with a bank.

290 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 9: Liquidity Aggregates

(₹ Crore)

Aggregates 2023-24 2023 2024

Aug. Jun. Jul. Aug.

1 2 3 4 5
1 NM₃ 25387764 23962818 26225278 26277956 26360365

(25496006) (24109614) (26314675) (26361158) (26439312)

2 Postal Deposits 729246 687547 729246 729246 729246

3 L₁ ( 1 + 2) 26117010 24650365 26954524 27007202 27089611

(26225252) (24797161) (27043921) (27090404) (27168558)

4 Liabilities of Financial Institutions 85150 71557 68179 68324 68118

4.1 Term Money Borrowings 2375 1137 748 748 395

4.2 Certificates of Deposit 70245 60285 54670 54670 54670

4.3 Term Deposits 12531 10136 12761 12905 13054

5 L₂ (3 + 4) 26202160 24721922 27022704 27075526 27157730

(26310403) (24868718) (27112100) (27158728) (27236677)

6 Public Deposits with Non-Banking Financial Companies 102994 .. 102994 .. ..

7 L₃ (5 + 6) 26305155 .. 27125698 .. ..

Note : 1. Figures in the columns might not add up to the total due to rounding off of numbers.
2. Figures in parentheses include the impact of merger of a non-bank with a bank.

RBI Bulletin October 2024 291

CURRENT STATISTICS

No. 10: Reserve Bank of India Survey

(₹ Crore)
Item Outstanding as on March 31/last reporting Fridays of the
month/reporting Fridays

2023-24 2023 2024

Aug. 25 Jul. 26 Aug. 9 Aug. 23

1 2 3 4 5
1 Components
1.1 Currency in Circulation 3511461 3309813 3537180 3525656 3512941
1.2 Bankers’ Deposits with the RBI 1025449 1073614 1039059 1033815 1023595
1.2.1 Scheduled Commercial Banks 956011 1010361 976073 971052 960220
1.3 ‘Other’ Deposits with the RBI 94536 71887 91225 92702 91822
Reserve Money (1.1 + 1.2 + 1.3 = 2.1 + 2.2 + 2.3 – 2.4 – 2.5) 4631446 4455314 4667464 4652173 4628359
2 Sources
2.1 RBI’s Domestic Credit 1147066 1183365 917751 963363 923688
2.1.1 Net RBI credit to the Government 1193213 1185246 1060910 1107752 1025545

2.1.1.1 Net RBI credit to the Central Government (2.1.1.1.1 +

2.1.1.1.2 + 2.1.1.1.3 + 2.1.1.1.4 – 2.1.1.1.5) 1186655 1168819 1039713 1074801 998785
2.1.1.1.1 Loans and Advances to the Central Government - - - - -
2.1.1.1.2 Investments in Treasury Bills - - - - -
2.1.1.1.3 Investments in dated Government Securities 1363369 1398848 1320373 1318325 1316259
2.1.1.1.3.1 Central Government Securities 1363369 1398848 1320373 1318325 1316259
2.1.1.1.4 Rupee Coins 459 311 223 308 393
2.1.1.1.5 Deposits of the Central Government 177172 230340 280883 243833 317868
2.1.1.2 Net RBI credit to State Governments 6557 16427 21197 32951 26760
2.1.2 RBI’s Claims on Banks -60553 -7067 -154094 -154828 -112164
2.1.2.1 Loans and Advances to Scheduled Commercial Banks -60553 -7067 -154094 -154828 -112164
2.1.3 RBI’s Credit to Commercial Sector 14406 5186 10935 10439 10307
2.1.3.1 Loans and Advances to Primary Dealers 9358 3122 9062 8547 8541
2.1.3.2 Loans and Advances to NABARD - - - - -
2.2 Government’s Currency Liabilities to the Public 33432 31148 34306 34306 34306
2.3 Net Foreign Exchange Assets of the RBI 5240824 4751175 5433786 5470557 5563327
2.3.1 Gold 439319 366616 483062 497338 511818
2.3.2 Foreign Currency Assets 4801522 4384576 4950741 4973236 5051527
2.4 Capital Account 1589134 1641017 1774642 1809690 1863913
2.5 Other Items (net) 200741 -130643 -56263 6364 29049

No. 11: Reserve Money - Components and Sources

(₹ Crore)

Item Outstanding as on March 31/last Fridays of the month/Fridays

2023-24 2023 2024

Aug. 25 Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30
1 2 3 4 5 6 7
Reserve Money (1.1 + 1.2 + 1.3 = 2.1 + 2.2 + 2.3 + 2.4 + 2.5 – 2.6) 4631446 4455566 4663647 4652173 4655359 4628359 4668483

1 Components

1.1 Currency in Circulation 3511461 3310065 3523570 3525656 3516861 3512941 3493088

1.2 Bankers' Deposits with RBI 1025449 1073614 1048181 1033815 1046644 1023595 1082361

1.3 ‘Other’ Deposits with RBI 94536 71887 91896 92702 91855 91822 93034

2 Sources

2.1 Net Reserve Bank Credit to Government 1193213 1185246 1173784 1107752 1114650 1025545 1085576

2.2 Reserve Bank Credit to Banks -60553 -7067 -264214 -154828 -163770 -112164 -130881

2.3 Reserve Bank Credit to Commercial Sector 14406 5186 10591 10439 10603 10307 10604

2.4 Net Foreign Exchange Assets of RBI 5240824 4751175 5498839 5470557 5508534 5563327 5579046

2.5 Government's Currency Liabilities to the Public 33432 31400 34306 34306 34306 34306 34594

2.6 Net Non- Monetary Liabilities of RBI 1789875 1510374 1789658 1816054 1848963 1892962 1910457

292 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 12: Commercial Bank Survey

(₹ Crore)
Item Outstanding as on last reporting Fridays of the month/
reporting Fridays of the month
2023-24 2023 2024
Aug. 25 Jul. 26 Aug. 9 Aug. 23
1 2 3 4 5
1 Components
1.1 Aggregate Deposits of Residents 20145188 18913252 20862822 20997281 20991067
(20253430) (19060048) (20946024) (21077944) (21070014)
1.1.1 Demand Deposits 2443853 2212312 2444220 2414560 2446039
1.1.2 Time Deposits of Residents 17701334 16700940 18418602 18582720 18545028
(17809577) (16847736) (18501804) (18663384) (18623975)
1.1.2.1 Short-term Time Deposits 7965600 7515423 8288371 8362224 8345262
1.1.2.1.1 Certificates of Deposits (CDs) 369399 296520 420069 430842 441388
1.1.2.2 Long-term Time Deposits 9735734 9185517 10130231 10220496 10199765
1.2 Call/Term Funding from Financial Institutions 777942 818074 935190 850638 911377
2 Sources
2.1 Domestic Credit 23019606 21214123 23688947 23803124 23918044
(23641847) (21929088) (24247935) (24356651) (24468278)
2.1.1 Credit to the Government 6014054 5788050 6247305 6262951 6300226
(6105610) (5900814) (6312657) (6327864) (6365128)
2.1.2 Credit to the Commercial Sector 17005551 15426073 17441642 17540173 17617818
(17536238) (16028274) (17935278) (18028786) (18103150)
2.1.2.1 Bank Credit 15901477 14315110 16320298 16391688 16459977
(16432164) (14917312) (16813935) (16880301) (16945309)
2.1.2.1.1 Non-food Credit 15878397 14295755 16292108 16363757 16435616
(16409083) (14897956) (16785745) (16852370) (16920948)
2.1.2.2 Net Credit to Primary Dealers 22904 19173 16966 17035 16000
2.1.2.3 Investments in Other Approved Securities 949 775 1111 373 358
2.1.2.4 Other Investments (in non-SLR Securities) 1080222 1091015 1103267 1131076 1141482
2.2 Net Foreign Currency Assets of Commercial Banks (2.2.1-2.2.2-2.2.3) -130004 45984 -129622 -112520 -143320
2.2.1 Foreign Currency Assets 241661 336338 284197 301751 283039
2.2.2 Non-resident Foreign Currency Repatriable Fixed Deposits 221796 180913 247686 250776 255112
2.2.3 Overseas Foreign Currency Borrowings 149868 109441 166133 163495 171247
2.3 Net Bank Reserves (2.3.1+2.3.2-2.3.3) 893350 1110573 1229518 1214484 1168575
2.3.1 Balances with the RBI 931483 1010361 976073 971052 960220
2.3.2 Cash in Hand 89433 93145 99350 88604 96191
2.3.3 Loans and Advances from the RBI 127566 -7067 -154094 -154828 -112164
2.4 Capital Account 2299592 2235702 2518965 2527243 2533660
2.5 Other items (net) (2.1+2.2+2.3-2.4-1.1-1.2) 560230 403653 471866 529926 507195
2.5.1 Other Demand and Time Liabilities (net of 2.2.3) 787560 781267 732752 744746 759393
2.5.2 Net Inter-Bank Liabilities (other than to PDs) 197781 180408 149681 137511 122730
Figures in parentheses include the impact of merger of a non-bank with a bank.

No. 13: Scheduled Commercial Banks’ Investments

(₹ Crore)
Item As on 2023 2024
March 22,
2024 Aug. 25 Jul. 26 Aug. 09 Aug. 23

1 2 3 4 5
1 SLR Securities 6106558 5901589 6313767 6328238 6365487
(6015003) (5788825) (6248416) (6263324) (6300584)
2 Other Government Securities (Non-SLR) 177136 180085 157537 158404 158529
3 Commercial Paper 61175 57376 52091 57615 66610
4 Shares issued by
4.1 PSUs 8475 9048 12950 12829 12930
4.2 Private Corporate Sector 77722 83515 93831 94706 96898
4.3 Others 5624 5576 7367 2961 7348
5 Bonds/Debentures issued by
5.1 PSUs 103070 90401 121092 123549 120537
5.2 Private Corporate Sector 287596 288808 242161 245255 243210
5.3 Others 124690 109063 138806 123160 144139
6 Instruments issued by
6.1 Mutual funds 62499 76060 96391 103474 109634
6.2 Financial institutions 172340 191082 181041 209123 181647

Note: Data against column Nos. (1), (2) & (3) are Final and for column Nos. (4) & (5) data are Provisional.
1. Data since July 14, 2023 include the impact of the merger of a non-bank with a bank.
2. Figures in parentheses exclude the impact of the merger.

RBI Bulletin October 2024 293

CURRENT STATISTICS

No. 14: Business in India - All Scheduled Banks and All Scheduled Commercial Banks
(₹ Crore)

Item As on the Last Reporting Friday (in case of March)/ Last Friday

All Scheduled Banks All Scheduled Commercial Banks

2023 2024 2023 2024

2023-24 2023-24
Aug. Jul. Aug. Aug. Jul. Aug.

1 2 3 4 5 6 7 8

Number of Reporting Banks 210 212 208 208 137 137 135 135

1 Liabilities to the Banking System 554117 511608 500022 541312 549351 508423 495645 536780

1.1 Demand and Time Deposits from Banks 298452 243491 285475 334046 294471 241128 281386 330012

1.2 Borrowings from Banks 182566 199138 138779 128765 182429 199018 138752 128550

1.3 Other Demand and Time Liabilities 73100 68978 75768 78501 72452 68276 75507 78218

2 Liabilities to Others 22664868 21406268 23505257 24097455 22190597 20949742 23027643 23629065

2.1 Aggregate Deposits 20932067 19680101 21654100 22139250 20475226 19240961 21193568 21688112

(20823825) (19533305) (21570898) (22061445) (20366984) (19094165) (21110367) (21610308)

2.1.1 Demand 2492916 2256991 2493596 2715452 2443853 2212312 2444220 2666996

2.1.2 Time 18439151 17423111 19160504 19423797 18031373 17028649 18749348 19021116

2.2 Borrowings 782260 822369 939516 920015 777942 818074 935190 915858

2.3 Other Demand and Time Liabilities 950541 903798 911642 1038191 937428 890708 898885 1025094

3 Borrowings from Reserve Bank 222716 93310 7161 6968 222716 93310 7161 6968

3.1 Against Usance Bills /Promissory Notes - - - - - - - -

3.2 Others 222716 93310 7161 6968 222716 93310 7161 6968
4 Cash in Hand and Balances with Reserve Bank 1043272 1126135 1097637 1134910 1020916 1103506 1075424 1112899
4.1 Cash in Hand 91886 95460 101799 95928 89433 93145 99350 93444
4.2 Balances with Reserve Bank 951386 1030676 995838 1038982 931483 1010361 976073 1019456
5 Assets with the Banking System 455057 409036 432441 479881 374474 347187 363113 414893
5.1 Balances with Other Banks 246384 226965 242359 284096 198327 185201 193127 233398
5.1.1 In Current Account 12010 12120 12352 28162 8971 9164 9487 25424
5.1.2 In Other Accounts 234373 214845 230007 255934 189357 176037 183640 207974
5.2 Money at Call and Short Notice 39614 37031 29827 23818 12355 20919 13930 13637
5.3 Advances to Banks 51325 47079 42711 42175 48368 46290 41613 41391
5.4 Other Assets 117734 97961 117544 129792 115424 94777 114443 126467
6 Investment 6256962 6047925 6466548 6509652 6106558 5901589 6313767 6357943
(6165407) (5935162) (6401196) (6445920) (6015003) (5788825) (6248416) (6294211)
6.1 Government Securities 6249319 6041382 6458194 6501765 6105610 5900814 6312657 6357504
6.2 Other Approved Securities 7643 6543 8354 7887 949 775 1111 439
7 Bank Credit 16866336 15313741 17254613 17448862 16432164 14917312 16813935 17010621
(16335650) (14711539) (16760977) (16966951) (15901477) (14315110) (16320298) (16528710)
7a Food Credit 75472 67044 78811 77846 23081 19355 28190 24036
7.1 Loans, Cash-credits and Overdrafts 16565348 15056247 16938015 17133011 16134303 14662675 16500433 16697901
7.2 Inland Bills-Purchased 60471 43973 68987 68481 60467 43961 67638 67049
7.3 Inland Bills-Discounted 199761 171306 208216 208532 197358 169119 207073 207367
7.4 Foreign Bills-Purchased 16662 17545 16061 16582 16412 17323 15852 16397
7.5 Foreign Bills-Discounted 24094 24669 23334 22256 23624 24233 22940 21906
Note: Data in column Nos. (4) & (8) are Provisional
1. Data since July 2023 include the impact of the merger of a non-bank with a bank.
2. Figures in parentheses exclude the impact of the merger.

294 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 15: Deployment of Gross Bank Credit by Major Sectors

(₹ Crore)
Outstanding as on Growth(%)

Mar. 22, Financial

2024 2023 2024 Y-o-Y
Sector year so far

Aug. 25 Jul. 26 Aug. 23 2024-25 2024

1 2 3 4 % %

I. Bank Credit (II + III) 16432164 14917312 16814792 16945162 3.1 13.6
(15901477) (14315110) (16321156) (16459830) (3.5) (15.0)
II. Food Credit 23081 19355 28190 24361 5.5 25.9
III. Non-food Credit 16409083 14897956 16786602 16920802 3.1 13.6
(15878397) (14295755) (16292966) (16435470) (3.5) (15.0)
1. Agriculture & Allied Activities 2071251 1835215 2156320 2160634 4.3 17.7
2. Industry (Micro and Small, Medium and Large) 3652804 3423736 3724547 3756194 2.8 9.7
(3635810) (3405466) (3707719) (3740619) (2.9) (9.8)
2.1 Micro and Small 726315 655556 729948 743704 2.4 13.4
2.2 Medium 303998 272435 317323 324747 6.8 19.2
2.3 Large 2622490 2495745 2677277 2687744 2.5 7.7
3. Services 4592227 4076334 4623910 4643586 1.1 13.9
(4490467) (3945238) (4538080) (4559593) (1.5) (15.6)
3.1 Transport Operators 230175 206113 244262 243486 5.8 18.1
3.2 Computer Software 25917 22953 27356 27990 8.0 21.9
3.3 Tourism, Hotels & Restaurants 77513 73913 79202 80570 3.9 9.0
3.4 Shipping 7067 6571 7076 7257 2.7 10.4
3.5 Aviation 43248 39063 44637 44837 3.7 14.8
3.6 Professional Services 167234 148659 171393 173738 3.9 16.9
3.7 Trade 1025752 911267 1043753 1052622 2.6 15.5
3.7.1. Wholesale Trade¹ 538744 469729 545170 553316 2.7 17.8
3.7.2 Retail Trade 487008 441538 498582 499305 2.5 13.1
3.8 Commercial Real Estate 469013 437615 484531 494809 5.5 13.1
(400470) (347121) (426515) (437854) (9.3) (26.1)
3.9 Non-Banking Financial Companies (NBFCs)² of which, 1548027 1360082 1528856 1522204 -1.7 11.9
3.9.1 Housing Finance Companies (HFCs) 325626 311387 322052 322093 -1.1 3.4
3.9.2 Public Financial Institutions (PFIs) 226963 179094 202991 196565 -13.4 9.8
3.10 Other Services³ 998281 870098 992845 996074 -0.2 14.5
(978198) (845128) (974349) (977918) (0.0) (15.7)
4. Personal Loans 5331290 4876136 5507740 5555484 4.2 13.9
(4919468) (4423287) (5117905) (5170917) (5.1) (16.9)
4.1 Consumer Durables 23713 22164 24606 24396 2.9 10.1
4.2 Housing 2718715 2505634 2810108 2833166 4.2 13.1
(2331935) (2081117) (2443529) (2471488) (6.0) (18.8)
4.3 Advances against Fixed Deposits 125239 112334 120373 121817 -2.7 8.4
4.4 Advances to Individuals against share & bonds 8492 7668 9422 9722 14.5 26.8
4.5 Credit Card Outstanding 257016 230657 275601 276576 7.6 19.9
4.6 Education 119380 106578 123066 126148 5.7 18.4
4.7 Vehicle Loans 589251 536214 606174 610792 3.7 13.9
4.8 Loan against gold jewellery 102562 99626 132535 140391 36.9 40.9
4.9 Other Personal Loans 1386921 1255262 1405854 1412476 1.8 12.5
(1362113) (1227512) (1382681) (1389666) (2.0) (13.2)
5. Priority Sector (Memo)
(i) Agriculture & Allied Activities⁴ 2081856 1851818 2196939 2152535 3.4 16.2
(ii) Micro & Small Enterprises⁵ 1974191 1786828 1998597 2027278 2.7 13.5
(iii) Medium Enterprises⁶ 490703 438500 511874 529582 7.9 20.8
(iv) Housing 755222 725674 748840 749534 -0.8 3.3
(660572) (624801) (633763) (661835) (0.2) (5.9)
(v) Education Loans 62235 60127 61523 61988 -0.4 3.1
(vi) Renewable Energy 5991 4727 7075 6844 14.2 44.8
(vii) Social Infrastructure 2613 2566 2937 1072 -59.0 -58.2
(viii) Export Credit 12855 13738 12163 11530 -10.3 -16.1
(ix) Others 61336 50079 58548 60587 -1.2 21.0
(x) Weaker Sections including net PSLC- SF/MF 1647778 1443758 1743686 1692726 2.7 17.2

Notes:
(1) Data are provisional. Bank credit, Food credit and Non-food credit data are based on Section-42 return, which covers all scheduled commercial banks (SCBs), while sectoral
non-food credit data are based on sector-wise and industry-wise bank credit (SIBC) return, which covers select banks accounting for about 95 per cent of total non-food credit
extended by all SCBs, pertaining to the last reporting Friday of the month.
(2) Data since July 28, 2023 include the impact of the merger of a non-bank with a bank. Figures in parentheses exclude the impact of the merger.
1 Wholesale trade includes food procurement credit outside the food credit consortium.
2 NBFCs include HFCs, PFIs, Microfinance Institutions (MFIs), NBFCs engaged in gold loan and others.
3 “Other Services” include Mutual Fund (MFs), Banking and Finance other than NBFCs and MFs and other services which are not indicated elsewhere under services.
4 “Agriculture and Allied Activities” under the priority sector also include priority sector lending certificates (PSLCs).
5 “Micro and Small Enterprises” under the priority sector include credit to micro and small enterprises in industry and services sectors and also include PSLCs.
6 “Medium Enterprises” under the priority sector include credit to medium enterprises in industry and services sectors.

RBI Bulletin October 2024 295

CURRENT STATISTICS

No. 16: Industry-wise Deployment of Gross Bank Credit

(₹ Crore)
Outstanding as on Growth(%)
Financial
2023 2024 Y-o-Y
Mar. 22, year so far
Industry
2024
Aug. 25 Jul. 26 Aug. 23 2024-25 2024
1 2 3 4 % %
2 Industries (2.1 to 2.19) 3652804 3423736 3724547 3756194 2.8 9.7
(3635810) (3405466) (3707719) (3740619) (2.9) (9.8)
2.1 Mining & Quarrying (incl. Coal) 54166 51165 54719 52810 -2.5 3.2
2.2 Food Processing 208864 174421 205744 199514 -4.5 14.4
2.2.1 Sugar 26383 17237 22622 20808 -21.1 20.7
2.2.2 Edible Oils & Vanaspati 19700 17624 18179 18436 -6.4 4.6
2.2.3 Tea 5692 5673 6058 6043 6.2 6.5
2.2.4 Others 157089 133887 158886 154227 -1.8 15.2
2.3 Beverage & Tobacco 31136 25040 30470 31077 -0.2 24.1
2.4 Textiles 256048 240548 255111 255993 0.0 6.4
2.4.1 Cotton Textiles 99199 92572 94890 94108 -5.1 1.7
2.4.2 Jute Textiles 4280 3714 4125 4130 -3.5 11.2
2.4.3 Man-Made Textiles 45111 40537 45754 46081 2.1 13.7
2.4.4 Other Textiles 107458 103725 110341 111675 3.9 7.7
2.5 Leather & Leather Products 12588 11947 12548 12615 0.2 5.6
2.6 Wood & Wood Products 23839 22037 24458 24731 3.7 12.2
2.7 Paper & Paper Products 46426 43610 47826 49051 5.7 12.5
2.8 Petroleum, Coal Products & Nuclear Fuels 132356 118231 136958 158505 19.8 34.1
2.9 Chemicals & Chemical Products 249347 221992 254881 257192 3.1 15.9
2.9.1 Fertiliser 37569 29693 34891 34119 -9.2 14.9
2.9.2 Drugs & Pharmaceuticals 81036 74023 82308 82683 2.0 11.7
2.9.3 Petro Chemicals 23157 21301 27879 29019 25.3 36.2
2.9.4 Others 107584 96974 109803 111370 3.5 14.8
2.10 Rubber, Plastic & their Products 90420 83334 89581 91839 1.6 10.2
2.11 Glass & Glassware 12090 10373 12431 12515 3.5 20.6
2.12 Cement & Cement Products 59757 59264 60728 60851 1.8 2.7
2.13 Basic Metal & Metal Product 384447 356361 402716 413557 7.6 16.1
2.13.1 Iron & Steel 273803 240583 285055 295207 7.8 22.7
2.13.2 Other Metal & Metal Product 110645 115778 117661 118350 7.0 2.2
2.14 All Engineering 196643 184962 204685 215640 9.7 16.6
2.14.1 Electronics 43175 41963 45156 52395 21.4 24.9
2.14.2 Others 153468 142998 159529 163244 6.4 14.2
2.15 Vehicles, Vehicle Parts & Transport Equipment 113185 108337 109189 112816 -0.3 4.1
2.16 Gems & Jewellery 84860 94630 82940 86229 1.6 -8.9
2.17 Construction 133520 127646 141194 141627 6.1 11.0
2.18 Infrastructure 1304096 1259843 1301135 1306202 0.2 3.7
2.18.1 Power 644042 613403 636926 638639 -0.8 4.1
2.18.2 Telecommunications 138192 134591 129614 132305 -4.3 -1.7
2.18.3 Roads 318072 314854 327581 328001 3.1 4.2
2.18.4 Airports 7280 7812 8004 8261 13.5 5.7
2.18.5 Ports 6681 7846 6331 6340 -5.1 -19.2
2.18.6 Railways 13062 11849 11835 11988 -8.2 1.2
2.18.7 Other Infrastructure 176767 169489 180844 180669 2.2 6.6
2.19 Other Industries 259016 229996 297232 273430 5.6 18.9
Note: (1) Data since July 28, 2023 include the impact of the merger of a non-bank with a bank. Figures in parentheses exclude the impact of the merger.

296 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 17: State Co-operative Banks Maintaining Accounts with the Reserve Bank of India
(₹ Crore)
Last Reporting Friday (in case of March)/Last Friday/
Item
Reporting Friday

2023 2024
2023-24
Jul. 28 May 03 May 17 May 31 Jun. 14 Jun. 28 Jul. 12 Jul. 26

1 2 3 4 5 6 7 8 9
Number of Reporting Banks 33 33 33 33 33 33 33 34 34
1 Aggregate Deposits (2.1.1.2+2.2.1.2) 138788.9 139476.4 137855.6 135672.9 135938.7 134828.9 133938.0 134144.6 134816.8
2 Demand and Time Liabilities
2.1 Demand Liabilities 30226.7 28096.2 29748.9 27309.7 28297.6 28943.0 27801.7 27708.4 28112.2
2.1.1 Deposits
2.1.1.1 Inter-Bank 9101.3 7260.0 7934.7 7634.3 7482.3 7685.6 7904.7 8145.7 8204.5
2.1.1.2 Others 15000.4 15206.0 16196.2 14617.1 15241.7 15296.8 14567.8 13823.1 13980.0
2.1.2 Borrowings from Banks 130.0 499.7 154.9 179.9 179.9
2.1.3 Other Demand Liabilities 5995.0 5630.2 5118.3 5058.3 5418.7 5780.7 5329.2 5739.6 5747.8
2.2 Time Liabilities 198141.8 184270.2 190499.2 189412.7 187897.4 185975.8 185708.9 183696.0 183917.4
2.2.1 Deposits
2.2.1.1 Inter-Bank 72308.4 56504.5 66911.4 66378.9 65382.8 64573.2 64501.4 61491.5 61265.5
2.2.1.2 Others 123788.5 124270.4 121659.4 121055.8 120697.0 119532.1 119370.2 120321.5 120836.7
2.2.2 Borrowings from Banks 673.6 2399.5 879.3 920.1 663.8 653.2 653.2 651.8 653.8
2.2.3 Other Time Liabilities 1371.3 1095.8 1049.1 1057.9 1153.8 1217.2 1184.1 1231.2 1161.3
3 Borrowing from Reserve Bank 0.0 150.0
4 Borrowings from a notified bank / Government 95914.5 69968.4 85136.5 84716.3 84175.6 84574.6 85281.4 86852.7 86318.6
4.1 Demand 27317.7 17964.1 23767.7 23507.7 23112.7 23242.7 23887.4 24191.9 24467.9
4.2 Time 68596.8 52004.3 61368.8 61208.6 61062.9 61331.9 61394.0 62660.8 61850.7
5 Cash in Hand and Balances with Reserve Bank 16263.7 11770.2 13141.4 10494.5 12165.3 11435.2 13323.7 12646.4 13611.0
5.1 Cash in Hand 960.0 766.7 819.5 853.6 714.6 770.9 759.4 797.8 687.9
5.2 Balance with Reserve Bank 15303.7 11003.5 12321.9 9640.9 11450.7 10664.3 12564.3 11848.6 12923.1
6 Balances with Other Banks in Current Account 2088.1 1704.7 1573.3 1480.0 1528.5 1694.6 1631.9 2109.0 1700.0
7 Investments in Government Securities 77700.5 72244.8 75604.0 76369.8 76376.5 76482.9 75500.4 76042.2 75409.2
8 Money at Call and Short Notice 34355.3 20748.8 22827.2 22441.5 21180.5 19092.4 20740.5 18751.9 18960.1
9 Bank Credit (10.1+11) 135141.9 127405.4 137182.4 135776.2 135733.7 137026.6 134324.1 137253.1 136993.2
10 Advances
10.1 Loans, Cash-Credits and Overdrafts 134936.8 127329.1 136992.2 135600.7 135524.3 136811.1 134111.9 137025.2 136836.3
10.2 Due from Banks 142185.2 119210.1 135859.4 135411.7 136109.4 136794.5 135046.8 135412.8 134692.9
11 Bills Purchased and Discounted 205.1 76.3 190.2 175.5 209.4 215.5 212.2 227.9 156.9

RBI Bulletin October 2024 297

CURRENT STATISTICS

Prices and Production

No. 18: Consumer Price Index (Base: 2012=100)
Group/Sub group 2023-24 Rural Urban Combined

Rural Urban Combined Sep.23 Aug.24 Sep.24 (P) Sep.23 Aug.24 Sep.24 (P) Sep.23 Aug.24 Sep.24 (P)

1 2 3 4 5 6 7 8 9 10 11 12

1 Food and beverages 185.9 192.7 188.4 186.7 200.2 202.1 193.0 207.1 209.5 189.0 202.7 204.8

1.1 Cereals and products 181.4 181.7 181.5 181.4 192.6 194.3 181.3 191.9 192.8 181.4 192.4 193.8

1.2 Meat and fish 213.0 221.3 215.9 214.5 220.1 220.2 223.7 229.2 229.5 217.7 223.3 223.5

1.3 Egg 185.4 189.5 187.0 178.5 188.0 190.2 184.2 190.7 195.2 180.7 189.0 192.1

1.4 Milk and products 181.4 181.5 181.4 181.5 186.2 186.6 181.6 187.1 187.6 181.5 186.5 187.0

1.5 Oils and fats 165.3 158.7 162.9 164.5 164.1 169.4 158.3 157.1 160.8 162.2 161.5 166.2

1.6 Fruits 172.1 179.9 175.7 173.6 186.1 188.1 182.7 197.5 195.1 177.8 191.4 191.4

1.7 Vegetables 183.9 229.9 199.5 184.5 245.0 251.0 225.5 291.2 306.4 198.4 260.7 269.8

1.8 Pulses and products 192.2 196.5 193.7 195.0 212.5 214.1 200.1 219.0 219.7 196.7 214.7 216.0

1.9 Sugar and confectionery 126.2 128.1 126.9 126.6 130.7 131.0 128.4 132.8 132.9 127.2 131.4 131.6

1.10 Spices 238.0 228.4 234.8 246.3 229.6 229.6 236.0 225.0 224.7 242.9 228.1 228.0

1.11 Non-alcoholic beverages 180.7 168.2 175.5 180.5 183.8 184.7 168.2 172.8 173.3 175.4 179.2 179.9

1.12 Prepared meals, snacks, sweets 193.3 200.9 196.8 193.2 198.5 198.9 200.7 208.3 209.3 196.7 203.0 203.7

2 Pan, tobacco and intoxicants 202.0 207.1 203.3 202.2 206.8 206.9 207.2 213.1 213.3 203.5 208.5 208.6

3 Clothing and footwear 192.9 181.5 188.4 192.7 197.2 197.6 181.2 186.0 186.5 188.1 192.8 193.2

3.1 Clothing 193.5 183.5 189.6 193.3 198.0 198.5 183.2 188.1 188.7 189.3 194.1 194.6

3.2 Footwear 189.4 170.2 181.4 189.4 192.3 192.4 170.2 174.2 174.7 181.4 184.8 185.0

4 Housing -- 176.7 176.7 -- -- -- 176.2 181.1 181.1 176.2 181.1 181.1

5 Fuel and light 183.0 178.9 181.4 181.6 180.9 181.0 175.5 169.8 169.8 179.3 176.7 176.8

6 Miscellaneous 181.7 173.7 177.8 181.6 188.3 189.0 173.7 180.1 180.8 177.8 184.3 185.0

6.1 Household goods and services 181.5 171.8 176.9 181.3 184.9 185.2 171.7 176.4 177.0 176.8 180.9 181.3

6.2 Health 190.8 185.2 188.7 190.4 197.3 197.9 184.9 192.2 193.0 188.3 195.4 196.0

6.3 Transport and communication 171.1 161.4 166.0 171.3 176.1 176.3 161.3 165.3 165.4 166.0 170.4 170.6

6.4 Recreation and amusement 175.8 171.1 173.2 175.9 179.6 179.8 171.2 174.9 175.4 173.3 177.0 177.3

6.5 Education 184.0 179.1 181.1 184.9 191.7 191.6 180.3 186.5 187.4 182.2 188.7 189.1

6.6 Personal care and effects 186.3 187.4 186.8 185.1 199.1 201.4 186.1 201.0 203.4 185.5 199.9 202.2

General Index (All Groups) 185.6 182.4 184.1 185.8 195.4 196.7 182.2 190.3 191.4 184.1 193.0 194.2

Source: National Statistical Office, Ministry of Statistics and Programme Implementation, Government of India.
P: Provisional

No. 19: Other Consumer Price Indices

Item Base Year Linking 2023-24 2023 2024
Factor Aug. Jul. Aug.
1 2 3 4 5 6
1 Consumer Price Index for Industrial Workers 2016 2.88 137.9 139.2 142.7 142.6

2 Consumer Price Index for Agricultural Labourers 1986-87 5.89 1229 1224 1290 1297

3 Consumer Price Index for Rural Labourers 1986-87 - 1240 1234 1302 1309
Source: Labour Bureau, Ministry of Labour and Employment, Government of India.

No. 20: Monthly Average Price of Gold and Silver in Mumbai

Item 2023 2024

2023-24
Aug. Jul. Aug.
1 2 3 4
1 Standard Gold (₹ per 10 grams) 60624 58738 71189 70441
2 Silver (₹ per kilogram) 72243 72135 88058 82751
Source: India Bullion & Jewellers Association Ltd., Mumbai for Gold and Silver prices in Mumbai.

298 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 21: Wholesale Price Index

(Base: 2011-12 = 100)

Commodities Weight 2023-24 2023 2024

Sep. Jul. Aug.(P) Sep.(P)
1 2 3 4 5 6
1 ALL COMMODITIES 100.000 151.4 151.8 155.3 154.5 154.6

1.1 PRIMARY ARTICLES 22.618 183.0 183.6 197.8 194.9 195.7

1.1.1 FOOD ARTICLES 15.256 191.3 189.1 213.1 209.1 210.9

1.1.1.1 Food Grains (Cereals+Pulses) 3.462 193.8 194.2 208.1 209.7 211.8

1.1.1.2 Fruits & Vegetables 3.475 210.2 198.5 277.6 259.1 263.8

1.1.1.3 Milk 4.440 180.3 180.0 186.0 185.9 185.7

1.1.1.4 Eggs, Meat & Fish 2.402 172.1 174.2 173.7 173.2 172.8

1.1.1.5 Condiments & Spices 0.529 235.4 254.0 237.0 237.0 244.6

1.1.1.6 Other Food Articles 0.948 189.5 180.7 207.8 207.3 209.1

1.1.2 NON-FOOD ARTICLES 4.119 162.4 164.6 158.9 159.8 161.9

1.1.2.1 Fibres 0.839 168.0 171.4 163.9 160.6 163.8

1.1.2.2 Oil Seeds 1.115 185.0 185.5 180.2 177.7 183.6

1.1.2.3 Other non-food Articles 1.960 134.9 137.9 137.1 140.0 140.2

1.1.2.4 Floriculture 0.204 279.7 277.6 232.6 248.6 244.7

1.1.3 MINERALS 0.833 217.7 220.9 226.6 223.5 227.6

1.1.3.1 Metallic Minerals 0.648 204.2 200.6 212.4 212.4 217.4

1.1.3.2 Other Minerals 0.185 265.0 292.1 276.5 262.4 263.4

1.1.4 CRUDE PETROLEUM & NATURAL GAS 2.410 153.6 168.0 157.9 155.0 146.1

1.2 FUEL & POWER 13.152 152.0 153.1 148.2 148.1 146.9

1.2.1 COAL 2.138 136.4 136.7 135.6 135.6 135.6

1.2.1.1 Coking Coal 0.647 143.4 143.4 143.4 143.4 143.4

1.2.1.2 Non-Coking Coal 1.401 124.8 125.8 125.8 125.8 125.8

1.2.1.3 Lignite 0.090 267.6 258.1 232.0 232.0 232.0

1.2.2 MINERAL OILS 7.950 159.0 163.7 157.4 156.9 154.2

1.2.3 ELECTRICITY 3.064 145.0 137.0 132.9 134.0 135.8

1.3 MANUFACTURED PRODUCTS 64.231 140.2 140.4 141.7 141.6 141.8

1.3.1 MANUFACTURE OF FOOD PRODUCTS 9.122 160.5 160.4 166.1 166.6 169.2

1.3.1.1 Processing and Preserving of meat 0.134 145.3 143.6 155.7 153.7 152.6

1.3.1.2 Processing and Preserving of fish, Crustaceans, Molluscs and products thereof 0.204 142.9 143.4 141.9 147.1 142.5

1.3.1.3 Processing and Preserving of fruit and Vegetables 0.138 130.4 130.8 131.8 131.8 132.8

1.3.1.4 Vegetable and Animal oils and Fats 2.643 145.0 142.7 149.3 150.2 157.7

1.3.1.5 Dairy products 1.165 179.1 180.0 178.5 178.5 179.6

1.3.1.6 Grain mill products 2.010 175.6 176.6 184.9 185.4 185.9

1.3.1.7 Starches and Starch products 0.110 157.1 152.7 169.4 173.2 174.3

1.3.1.8 Bakery products 0.215 165.4 165.5 167.3 167.3 168.7

1.3.1.9 Sugar, Molasses & honey 1.163 134.6 134.5 138.3 139.6 138.7

1.3.1.10 Cocoa, Chocolate and Sugar confectionery 0.175 139.8 138.3 155.2 157.1 160.3

1.3.1.11 Macaroni, Noodles, Couscous and Similar farinaceous products 0.026 149.9 149.6 150.8 150.8 153.6

1.3.1.12 Tea & Coffee products 0.371 176.2 178.9 205.9 199.4 202.6

1.3.1.13 Processed condiments & salt 0.163 192.1 193.8 191.6 192.9 192.4

1.3.1.14 Processed ready to eat food 0.024 146.3 146.4 151.9 151.1 151.5

1.3.1.15 Health supplements 0.225 179.1 181.7 184.6 186.2 186.8

1.3.1.16 Prepared animal feeds 0.356 208.3 212.1 207.4 208.4 210.6

1.3.2 MANUFACTURE OF BEVERAGES 0.909 131.5 131.3 133.5 133.9 133.9

1.3.2.1 Wines & spirits 0.408 133.3 133.3 135.1 135.7 135.9

1.3.2.2 Malt liquors and Malt 0.225 135.6 135.2 138.2 138.7 137.2

1.3.2.3 Soft drinks; Production of mineral waters and Other bottled waters 0.275 125.5 125.2 127.3 127.3 128.2

1.3.3 MANUFACTURE OF TOBACCO PRODUCTS 0.514 173.5 173.8 176.7 178.9 176.9

1.3.3.1 Tobacco products 0.514 173.5 173.8 176.7 178.9 176.9

RBI Bulletin October 2024 299

CURRENT STATISTICS

No. 21: Wholesale Price Index (Contd.)

(Base: 2011-12 = 100)

Commodities Weight 2023-24 2023 2024

Sep. Jul. Aug.(P) Sep.(P)

1 2 3 4 5 6

1.3.4 MANUFACTURE OF TEXTILES 4.881 134.6 134.3 136.8 136.5 135.8

1.3.4.1 Preparation and Spinning of textile fibres 2.582 120.1 120.0 122.4 122.5 121.6

1.3.4.2 Weaving & Finishing of textiles 1.509 157.5 157.1 158.2 157.6 156.3

1.3.4.3 Knitted and Crocheted fabrics 0.193 120.0 119.1 125.0 123.6 123.4

1.3.4.4 Made-up textile articles, Except apparel 0.299 156.6 156.8 159.1 160.2 160.7

1.3.4.5 Cordage, Rope, Twine and Netting 0.098 139.2 139.2 141.1 141.1 141.1

1.3.4.6 Other textiles 0.201 129.6 125.2 136.7 133.7 135.8

1.3.5 MANUFACTURE OF WEARING APPAREL 0.814 150.8 150.6 152.2 152.8 153.5

1.3.5.1 Manufacture of Wearing Apparel (woven), Except fur Apparel 0.593 148.7 148.4 150.1 150.2 150.9

1.3.5.2 Knitted and Crocheted apparel 0.221 156.6 156.4 157.7 159.7 160.5

1.3.6 MANUFACTURE OF LEATHER AND RELATED PRODUCTS 0.535 124.1 123.9 124.4 124.7 125.1

1.3.6.1 Tanning and Dressing of leather; Dressing and Dyeing of fur 0.142 107.3 106.2 103.8 103.6 105.1

1.3.6.2 Luggage, HandbAgs, Saddlery and Harness 0.075 140.9 141.2 141.9 142.9 142.7

1.3.6.3 Footwear 0.318 127.7 127.7 129.4 129.9 129.8

1.3.7 MANUFACTURE OF WOOD AND PRODUCTS OF WOOD AND CORK 0.772 146.6 146.5 149.4 149.5 148.8

1.3.7.1 Saw milling and Planing of wood 0.124 137.8 138.7 140.2 140.8 141.9

1.3.7.2 Veneer sheets; Manufacture of plywood, Laminboard, Particle board and Other panels and Boards 0.493 146.1 146.3 149.0 149.0 147.6

1.3.7.3 Builder's carpentry and Joinery 0.036 206.4 203.2 215.6 215.9 216.4

1.3.7.4 Wooden containers 0.119 139.8 138.7 141.2 141.1 140.9

1.3.8 MANUFACTURE OF PAPER AND PAPER PRODUCTS 1.113 140.3 138.4 138.5 139.7 139.4

1.3.8.1 Pulp, Paper and Paperboard 0.493 147.6 145.7 144.7 145.3 144.8

1.3.8.2 Corrugated paper and Paperboard and Containers of paper and Paperboard 0.314 140.9 140.1 144.9 146.1 145.8

1.3.8.3 Other articles of paper and Paperboard 0.306 128.0 124.9 121.9 124.1 124.0

1.3.9 PRINTING AND REPRODUCTION OF RECORDED MEDIA 0.676 182.3 182.5 186.5 186.0 185.2

1.3.9.1 Printing 0.676 182.3 182.5 186.5 186.0 185.2

1.3.10 MANUFACTURE OF CHEMICALS AND CHEMICAL PRODUCTS 6.465 136.9 136.3 136.7 136.6 136.4

1.3.10.1 Basic chemicals 1.433 139.9 139.0 137.6 137.7 138.0

1.3.10.2 Fertilizers and Nitrogen compounds 1.485 142.8 140.6 143.4 143.2 142.7

1.3.10.3 Plastic and Synthetic rubber in primary form 1.001 132.3 132.8 135.3 134.2 133.4

1.3.10.4 Pesticides and Other agrochemical products 0.454 132.8 132.8 128.9 128.8 129.4

1.3.10.5 Paints, Varnishes and Similar coatings, Printing ink and Mastics 0.491 143.7 144.2 140.2 140.3 141.1

1.3.10.6 Soap and Detergents, Cleaning and Polishing preparations, Perfumes and Toilet preparations 0.612 139.7 140.0 138.8 138.9 139.1

1.3.10.7 Other chemical products 0.692 134.4 134.1 136.1 136.4 136.2

1.3.10.8 Man-made fibres 0.296 103.6 103.4 107.0 106.9 104.7

1.3.11 MANUFACTURE OF PHARMACEUTICALS, MEDICINAL CHEMICAL AND BOTANICAL PRODUCTS 1.993 142.9 142.7 144.7 144.6 144.8

1.3.11.1 Pharmaceuticals, Medicinal chemical and Botanical products 1.993 142.9 142.7 144.7 144.6 144.8

1.3.12 MANUFACTURE OF RUBBER AND PLASTICS PRODUCTS 2.299 127.5 128.0 129.1 129.0 129.0

1.3.12.1 Rubber Tyres and Tubes; Retreading and Rebuilding of Rubber Tyres 0.609 113.7 113.4 114.6 114.6 115.1

1.3.12.2 Other Rubber Products 0.272 107.3 106.8 112.9 112.7 113.9

1.3.12.3 Plastics products 1.418 137.3 138.2 138.5 138.3 137.8

1.3.13 MANUFACTURE OF OTHER NON-METALLIC MINERAL PRODUCTS 3.202 134.7 135.0 130.0 129.8 130.4

1.3.13.1 Glass and Glass products 0.295 163.8 163.5 163.4 163.2 164.1

1.3.13.2 Refractory products 0.223 119.7 119.6 118.8 118.8 119.7

1.3.13.3 Clay Building Materials 0.121 123.9 130.3 119.0 121.6 123.9

1.3.13.4 Other Porcelain and Ceramic Products 0.222 122.3 122.1 124.6 124.6 124.6

1.3.13.5 Cement, Lime and Plaster 1.645 137.3 137.4 128.7 127.9 128.4

300 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 21: Wholesale Price Index (Contd.)

(Base: 2011-12 = 100)

Commodities Weight 2023-24 2023 2024

Sep. Jul. Aug.(P) Sep.(P)

1 2 3 4 5 6

1.3.13.6 Articles of Concrete, Cement and Plaster 0.292 137.7 138.2 138.3 138.2 138.0

1.3.13.7 Cutting, Shaping and Finishing of Stone 0.234 130.3 131.3 133.2 133.7 135.4

1.3.13.8 Other Non-Metallic Mineral Products 0.169 102.4 101.5 95.7 96.8 97.2

1.3.14 MANUFACTURE OF BASIC METALS 9.646 141.0 143.0 140.8 139.5 138.5

1.3.14.1 Inputs into steel making 1.411 140.3 145.7 135.6 133.1 130.4

1.3.14.2 Metallic Iron 0.653 153.6 156.0 148.4 146.5 142.8

1.3.14.3 Mild Steel - Semi Finished Steel 1.274 119.9 121.7 118.7 117.8 117.0

1.3.14.4 Mild Steel -Long Products 1.081 141.3 143.8 139.7 138.9 138.8

1.3.14.5 Mild Steel - Flat products 1.144 143.4 144.7 138.8 137.0 133.3

1.3.14.6 Alloy steel other than Stainless Steel- Shapes 0.067 137.6 140.1 136.5 134.6 133.5

1.3.14.7 Stainless Steel - Semi Finished 0.924 136.4 137.1 130.8 128.9 131.9

1.3.14.8 Pipes & tubes 0.205 169.7 169.5 166.3 166.3 163.7

1.3.14.9 Non-ferrous metals incl. precious metals 1.693 144.8 144.5 156.2 154.7 155.7

1.3.14.10 Castings 0.925 141.0 144.4 145.2 145.4 144.4

1.3.14.11 Forgings of steel 0.271 173.3 174.0 171.6 170.7 170.8

1.3.15 MANUFACTURE OF FABRICATED METAL PRODUCTS, EXCEPT MACHINERY AND EQUIPMENT 3.155 138.6 139.4 136.3 136.8 136.4

1.3.15.1 Structural Metal Products 1.031 132.3 134.5 131.1 131.2 131.4

1.3.15.2 Tanks, Reservoirs and Containers of Metal 0.660 157.6 157.1 151.4 152.0 150.6

1.3.15.3 Steam generators, Except Central Heating Hot Water Boilers 0.145 106.3 106.1 111.5 111.5 110.8

1.3.15.4 Forging, Pressing, Stamping and Roll-Forming of Metal; Powder Metallurgy 0.383 141.4 143.3 135.6 138.4 138.6

1.3.15.5 Cutlery, Hand Tools and General Hardware 0.208 108.4 108.4 101.7 101.9 102.0

1.3.15.6 Other Fabricated Metal Products 0.728 143.8 143.5 145.1 145.1 144.3

1.3.16 MANUFACTURE OF COMPUTER, ELECTRONIC AND OPTICAL PRODUCTS 2.009 119.3 119.8 121.1 121.3 121.7

1.3.16.1 Electronic Components 0.402 115.0 116.7 117.7 117.4 117.6

1.3.16.2 Computers and Peripheral Equipment 0.336 135.3 135.9 136.0 136.2 135.4

1.3.16.3 Communication Equipment 0.310 136.1 136.1 145.4 145.4 145.1

1.3.16.4 Consumer Electronics 0.641 103.6 103.5 100.5 100.5 101.2

1.3.16.5 Measuring, Testing, Navigating and Control equipment 0.181 113.8 114.0 118.1 118.1 120.9

1.3.16.6 Watches and Clocks 0.076 157.2 158.0 163.1 166.3 166.3

1.3.16.7 Irradiation, Electromedical and Electrotherapeutic equipment 0.055 108.3 109.6 111.1 115.0 117.7

1.3.16.8 Optical instruments and Photographic equipment 0.008 103.8 103.5 106.7 106.7 106.9

1.3.17 MANUFACTURE OF ELECTRICAL EQUIPMENT 2.930 131.4 131.3 133.4 133.4 133.4

1.3.17.1 Electric motors, Generators, Transformers and Electricity distribution and Control apparatus 1.298 130.1 129.9 131.1 131.4 131.6

1.3.17.2 Batteries and Accumulators 0.236 137.8 137.2 141.7 141.8 141.3

1.3.17.3 Fibre optic cables for data transmission or live transmission of images 0.133 123.4 124.8 120.7 120.7 121.2

1.3.17.4 Other electronic and Electric wires and Cables 0.428 146.1 146.8 154.4 153.4 153.1

1.3.17.5 Wiring devices, Electric lighting & display equipment 0.263 116.8 116.2 119.0 119.1 118.7

1.3.17.6 Domestic appliances 0.366 133.8 133.2 132.1 132.4 132.3

1.3.17.7 Other electrical equipment 0.206 120.9 120.8 123.3 122.6 123.0

1.3.18 MANUFACTURE OF MACHINERY AND EQUIPMENT 4.789 129.0 129.2 130.5 130.7 130.8

1.3.18.1 Engines and Turbines, Except aircraft, Vehicle and Two wheeler engines 0.638 128.9 129.3 133.0 132.4 133.6

1.3.18.2 Fluid power equipment 0.162 131.9 131.2 134.5 133.9 133.7

1.3.18.3 Other pumps, Compressors, Taps and Valves 0.552 117.4 116.6 118.2 118.2 118.5

1.3.18.4 Bearings, Gears, Gearing and Driving elements 0.340 127.7 127.1 128.0 127.9 126.2

1.3.18.5 Ovens, Furnaces and Furnace burners 0.008 83.7 82.3 86.7 83.8 88.4

1.3.18.6 Lifting and Handling equipment 0.285 128.6 128.2 130.3 129.6 129.9

RBI Bulletin October 2024 301

CURRENT STATISTICS

No. 21: Wholesale Price Index (Concld.)

(Base: 2011-12 = 100)

Commodities Weight 2023-24 2023 2024

Sep. Jul. Aug.(P) Sep.(P)

1 2 3 4 5 6

1.3.18.7 Office machinery and Equipment 0.006 130.2 130.2 130.2 130.2 130.2

1.3.18.8 Other general-purpose machinery 0.437 145.2 146.7 146.8 149.2 148.3

1.3.18.9 Agricultural and Forestry machinery 0.833 142.5 142.2 143.5 144.3 145.0

1.3.18.10 Metal-forming machinery and Machine tools 0.224 122.5 122.9 122.7 122.8 122.8

1.3.18.11 Machinery for mining, Quarrying and Construction 0.371 88.6 89.6 89.0 88.9 88.9

1.3.18.12 Machinery for food, Beverage and Tobacco processing 0.228 124.4 124.5 126.0 126.2 126.1

1.3.18.13 Machinery for textile, Apparel and Leather production 0.192 137.2 139.3 139.3 141.9 141.1

1.3.18.14 Other special-purpose machinery 0.468 144.7 144.5 145.3 145.1 144.9

1.3.18.15 Renewable electricity generating equipment 0.046 70.8 71.0 69.7 69.1 69.0

1.3.19 MANUFACTURE OF MOTOR VEHICLES, TRAILERS AND SEMI-TRAILERS 4.969 128.4 128.0 130.0 130.0 129.6

1.3.19.1 Motor vehicles 2.600 128.5 128.2 130.8 130.5 130.0

1.3.19.2 Parts and Accessories for motor vehicles 2.368 128.2 127.6 129.2 129.4 129.1

1.3.20 MANUFACTURE OF OTHER TRANSPORT EQUIPMENT 1.648 143.1 144.6 144.6 144.6 144.8

1.3.20.1 Building of ships and Floating structures 0.117 163.7 163.7 177.9 177.9 177.9

1.3.20.2 Railway locomotives and Rolling stock 0.110 107.4 106.6 109.8 110.0 108.2

1.3.20.3 Motor cycles 1.302 144.7 146.6 145.3 145.4 145.9

1.3.20.4 Bicycles and Invalid carriages 0.117 137.9 138.1 136.0 135.2 133.7

1.3.20.5 Other transport equipment 0.002 159.2 159.8 160.2 158.9 162.9

1.3.21 MANUFACTURE OF FURNITURE 0.727 159.6 160.1 158.7 159.1 159.7

1.3.21.1 Furniture 0.727 159.6 160.1 158.7 159.1 159.7

1.3.22 OTHER MANUFACTURING 1.064 158.2 154.8 178.8 174.1 178.9

1.3.22.1 Jewellery and Related articles 0.996 157.9 154.3 180.0 175.0 180.1

1.3.22.2 Musical instruments 0.001 187.0 180.3 200.0 201.4 204.7

1.3.22.3 Sports goods 0.012 155.2 155.9 163.0 163.6 164.4

1.3.22.4 Games and Toys 0.005 159.6 159.9 162.2 164.1 163.2

1.3.22.5 Medical and Dental instruments and Supplies 0.049 163.1 162.7 158.6 159.7 159.7

2 FOOD INDEX 24.378 179.8 178.4 195.5 193.2 195.3

Source: Office of the Economic Adviser, Ministry of Commerce and Industry, Government of India.

302 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 22: Index of Industrial Production (Base:2011-12=100)

Industry Weight 2022-23 2023-24 Apr-Aug Aug

2023-24 2024-25 2023 2024
1 2 3 4 5 6 7

General Index 100.00 138.5 146.7 143.7 149.7 145.8 145.6

1 Sectoral Classification
1.1 Mining 14.37 119.9 128.9 119.4 125.1 111.9 107.1
1.2 Manufacturing 77.63 137.1 144.7 142.0 147.1 144.4 145.9
1.3 Electricity 7.99 185.2 198.3 204.7 219.3 220.5 212.3
2 Use-Based Classification
2.1 Primary Goods 34.05 139.2 147.7 145.2 152.2 145.4 141.6
2.2 Capital Goods 8.22 100.3 106.6 102.4 106.8 107.4 108.1
2.3 Intermediate Goods 17.22 149.4 157.3 154.9 161.0 157.4 162.2
2.4 Infrastructure/ Construction Goods 12.34 160.7 176.3 172.2 182.4 176.8 180.2
2.5 Consumer Durables 12.84 114.5 118.6 116.1 126.6 123.2 129.6
2.6 Consumer Non-Durables 15.33 147.7 153.7 150.6 147.6 148.3 141.6
Source : Central Statistics Office, Ministry of Statistics and Programme Implementation, Government of India.

Government Accounts and Treasury Bills

No. 23: Union Government Accounts at a Glance
(₹ Crore)
Financial Year April – August

2024-25 Percentage to Budget

Item (Budget 2024-25 2023-24 Estimates
Estimates) (Actuals) (Actuals)
2024-25 2023-24

1 2 3 4 5

1 Revenue Receipts 3129200 1208312 1013526 38.6 38.5

1.1 Tax Revenue (Net) 2583499 873845 803944 33.8 34.5

1.2 Non-Tax Revenue 545701 334467 209582 61.3 69.5

2 Non Debt Capital Receipt 78000 8866 15405 11.4 18.3

2.1 Recovery of Loans 28000 8046 9804 28.7 42.6

2.2 Other Receipts 50000 820 5601 1.6 9.2

3 Total Receipts (excluding borrowings) (1+2) 3207200 1217178 1028931 38.0 37.9

4 Revenue Expenditure 3709401 1351367 1297958 36.4 37.1

of which :

4.1 Interest Payments 1162940 400160 367539 34.4 34.0

5 Capital Expenditure 1111111 300987 373799 27.1 37.3

6 Total Expenditure (4+5) 4820512 1652354 1671757 34.3 37.1

7 Revenue Deficit (4-1) 580201 143055 284432 24.7 32.7

8 Fiscal Deficit (6-3) 1613312 435176 642826 27.0 36.0

9 Gross Primary Deficit (8-4.1) 450372 35016 275287 7.8 38.9

Source: Controller General of Accounts (CGA), Ministry of Finance, Government of India and Interim Union Budget 2024-25.

RBI Bulletin October 2024 303

CURRENT STATISTICS

No. 24: Treasury Bills – Ownership Pattern

(₹ Crore)
2023-24 2023 2024
Item
Sep. 1 Jul. 26 Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30
1 2 3 4 5 6 7 8
1 91-day
1.1 Banks 18054 27168 2466 1874 2002 2128 3715 2796
1.2 Primary Dealers 22676 20746 9749 8305 6419 5694 7947 9371
1.3 State Governments 5701 32801 46140 46840 53840 59087 61087 66587
1.4 Others 88670 104286 95885 92021 90779 87779 86638 90133
2 182-day
2.1 Banks 84913 73493 51248 51588 55151 53899 55945 55481
2.2 Primary Dealers 87779 116497 57730 50971 50994 49915 46735 44716
2.3 State Governments 4070 22413 14922 14947 14947 15947 15947 16093
2.4 Others 102311 108010 119522 122541 115955 114286 106420 99903
3 364-day
3.1 Banks 91819 88017 90700 89256 87320 84064 86463 82259
3.2 Primary Dealers 159085 165244 137182 137276 117206 117872 120165 123440
3.3 State Governments 41487 46238 38525 38623 36122 37094 38128 37845
3.4 Others 165095 152739 164118 165468 187474 190064 185373 186301
4 14-day Intermediate
4.1 Banks
4.2 Primary Dealers
4.3 State Governments 318736 118211 175531 139334 107480 159041 182562 180908
4.4 Others 442 804 1008 2076 819 366 1298 1073
Total Treasury Bills
(Excluding 14 day 871662 957652 828188 819711 818209 817829 814562 814924
Intermediate T Bills) #
# 14D intermediate T-Bills are non-marketable unlike 91D, 182D and 364D T-Bills. These bills are ‘intermediate’ by nature as these are liquidated to
replenish shortfall in the daily minimum cash balances of State Governments.
Note: Primary Dealers (PDs) include banks undertaking PD business.

No. 25: Auctions of Treasury Bills

(Amount in ₹ Crore)
Date of Notified Bids Received Bids Accepted Total Cutoff Implicit Yield
Auction Amount Total Face Value Total Face Value Issue Price at Cut-off Price
Number Number (6+7) (₹) (per cent)
Competitive Non- Competitive Non-
Competitive Competitive
1 2 3 4 5 6 7 8 9 10
91-day Treasury Bills
2024-25
Jul. 31 8000 95 19776 748 47 7952 748 8700 98.36 6.6736
Aug. 7 8000 94 24049 9057 45 7943 9057 17000 98.37 6.6351
Aug. 14 8000 91 19852 6085 57 7962 6085 14047 98.38 6.6152
Aug. 21 8000 91 20717 9094 42 7906 9094 17000 98.37 6.6388
Aug. 28 8000 82 20488 7044 41 7956 7044 15000 98.37 6.6342
182-day Treasury Bills
2024-25
Jul. 31 6000 99 17547 1661 53 5964 1661 7625 96.73 6.7885
Aug. 7 6000 132 24362 1524 49 5976 1524 7500 96.75 6.7284
Aug. 14 6000 81 16569 1022 33 5978 1022 7000 96.75 6.7282
Aug. 21 6000 119 23019 1029 41 5971 1029 7000 96.76 6.7239
Aug. 28 6000 90 19914 168 38 5978 168 6145 96.76 6.7210
364-day Treasury Bills

2024-25
Jul. 31 6000 124 25880 361 49 5984 361 6345 93.65 6.7985
Aug. 7 6000 127 37186 278 13 5969 278 6247 93.71 6.7300
Aug. 14 6000 111 26286 2777 30 5987 2777 8764 93.72 6.7240
Aug. 21 6000 106 25730 2033 33 5985 2033 8019 93.71 6.7284
Aug. 28 6000 107 27850 1127 21 5985 1127 7112 93.72 6.7175

304 RBI Bulletin October 2024

 CURRENT STATISTICS

Financial Markets
No. 26: Daily Call Money Rates
(Per cent per annum)
Range of Rates Weighted Average Rates
As on
Borrowings/ Lendings Borrowings/ Lendings
1 2
August 01 ,2024 5.10-6.55 6.47
August 02 ,2024 5.10-6.55 6.45
August 03 ,2024 5.50-6.50 6.08
August 05 ,2024 5.10-6.55 6.45
August 06 ,2024 5.10-6.50 6.41
August 07 ,2024 5.10-6.75 6.47
August 08 ,2024 5.10-6.80 6.65
August 09 ,2024 5.10-6.65 6.53
August 12 ,2024 5.10-6.55 6.47
August 13 ,2024 5.10-6.55 6.48
August 14 ,2024 5.10-6.60 6.48
August 16 ,2024 5.10-6.55 6.47
August 17 ,2024 5.50-6.40 6.16
August 19 ,2024 5.70-6.55 6.49
August 20 ,2024 5.10-6.60 6.50
August 21 ,2024 5.10-6.60 6.53
August 22 ,2024 5.10-6.65 6.52
August 23 ,2024 5.10-6.60 6.51
August 26 ,2024 5.75-6.60 6.52
August 27 ,2024 5.10-6.60 6.51
August 28 ,2024 5.10-6.75 6.56
August 29 ,2024 5.10-7.00 6.66
August 30 ,2024 5.10-6.85 6.67
August 31 ,2024 5.75-6.40 6.13
September 02 ,2024 5.10-6.60 6.49
September 03 ,2024 5.10-6.55 6.47
September 04 ,2024 5.10-6.55 6.46
September 05 ,2024 5.10-6.65 6.49
September 06 ,2024 5.10-6.60 6.48
September 09 ,2024 5.10-6.60 6.52
September 10 ,2024 5.10-6.60 6.50
September 11 ,2024 5.10-6.65 6.54
September 12 ,2024 5.10-6.60 6.52
September 13 ,2024 5.10-6.75 6.62
Note: Includes Notice Money.

RBI Bulletin October 2024 305

CURRENT STATISTICS

No. 27: Certificates of Deposit

Item 2023 2024

Aug. 25 Jul. 12 Jul. 26 Aug. 9 Aug. 23
1 2 3 4 5
1 Amount Outstanding (₹ Crore) 301277.83 424835.55 424747.21 435778.32 446580.44
1.1 Issued during the fortnight (₹ Crore) 34741.11 34710.85 23643.34 26212.32 46185.89

2 Rate of Interest (per cent) 6.88-7.67 6.95-7.24 7.02-7.26 6.96-7.56 7.03-7.68

No. 28: Commercial Paper

Item 2023 2024
Aug. 31 Jul. 15 Jul. 31 Aug. 15 Aug. 31
1 2 3 4 5
1 Amount Outstanding (₹ Crore) 450064.05 440818.85 458911.05 473153.85 471121.50
1.1 Reported during the fortnight (₹ Crore) 73816.05 37452.10 67966.95 63925.50 78270.05

2 Rate of Interest (per cent) 6.93-16.55 6.93-11.69 6.89-12.07 6.97-11.69 6.90-13.77

No. 29: Average Daily Turnover in Select Financial Markets

(₹ Crore)

Item 2023-24 2023 2024

Sep. 1 Jul. 26 Aug. 2 Aug. 9 Aug. 16 Aug. 23 Aug. 30

1 2 3 4 5 6 7 8
1 Call Money 17761 12380 17812 18360 17702 16728 16016 17258
2 Notice Money 2550 5006 228 4315 669 4576 750 4045
3 Term Money 871 553 618 1147 454 1180 1024 958
4 Triparty Repo 601363 738384 693314 704592 561910 705300 644906 791363
5 Market Repo 574534 608900 566606 624795 520926 615520 503684 601046
6 Repo in Corporate Bond 1817 3438 3283 2792 3606 6329 4666 4270
7 Forex (US $ million) 95115 98764 103577 110210 118541 100547 103856 127583
8 Govt. of India Dated Securities 90992 86297 139737 181718 153648 97768 125631 82172
9 State Govt. Securities 6102 3268 6747 8676 12077 6598 7229 2572
10 Treasury Bills
10.1 91-Day 5378 5628 3301 4325 4632 3550 4528 3373
10.2 182-Day 6079 6870 4933 5911 6073 6089 5603 2703
10.3 364-Day 4307 1831 4467 4346 4005 3152 5403 2703
10.4 Cash Management Bills 0 0 0 0 0 0
11 Total Govt. Securities (8+9+10) 112858 103893 159184 204975 180434 117157 148394 93522
11.1 RBI 492 434 2077 440 1440 909 1310 648

306 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 30: New Capital Issues by Non-Government Public Limited Companies

(Amount in ₹ Crore)

Security & Type of Issue 2023-24 2023-24 (Apr.-Aug.) 2024-25 (Apr.-Aug.) * Aug. 2023 Aug. 2024 *
No. of Amount No. of Amount No. of Amount No. of Amount No. of Amount
Issues Issues Issues Issues Issues

1 2 3 4 5 6 7 8 9 10
1 Equity Shares 339 80942 112 21593 196 69091 31 6467 42 18810
1A Premium 328 76319 104 19941 186 50014 29 5945 42 17764
1.1 Public 272 65832 78 15615 138 58055 21 5124 32 15464
1.1.1 Premium 272 62791 78 14882 138 40035 21 4842 32 14508
1.2 Rights 67 15110 34 5978 58 11036 10 1342 10 3346
1.2.1 Premium 56 13527 26 5060 48 9978 8 1103 10 3257
2 Preference Shares - - - - - - - - - -
2.1 Public - - - - - - - - - -
2.2 Rights - - - - - - - - - -
3 Bonds & Debentures 44 16342 14 5364 16 3161 2 1948 4 445
3.1 Convertible - - - - - - - - - -
3.1.1 Public - - - - - - - - - -
3.1.2 Rights - - - - - - - - - -
3.2 Non-Convertible 44 16342 14 5364 16 3161 2 1948 4 445
3.2.1 Public 44 16342 14 5364 16 3161 2 1948 4 445
3.2.2 Rights - - - - - - - - - -
4 Total (1+2+3) 383 97284 126 26957 212 72252 33 8415 46 19255
4.1 Public 316 82174 92 20979 154 61216 23 7072 36 15909
4.2 Rights 67 15110 34 5978 58 11036 10 1342 10 3346
Note : 1. Since April 2020, monthly data on equity issues is compiled on the basis of their listing date.
2. Figures in the columns might not add up to the total due to rounding off numbers.
Source : Securities and Exchange Board of India.
* : Data is Provisional

RBI Bulletin October 2024 307

CURRENT STATISTICS

External Sector
No. 31: Foreign Trade
2023 2024
2023-24
Item Unit Aug. Mar. Apr. May Jun. Jul. Aug.
1 2 3 4 5 6 7 8
1 Exports ₹ Crore 3618952 316942 346040 294495 330267 293508 283020 291193
US $ Million 437072 38285 41693 35309 39604 35163 33856 34709
1.1 Oil ₹ Crore 696850 78986 44950 58803 67645 45824 43468 49929
US $ Million 84157 9541 5416 7050 8112 5490 5200 5951
1.2 Non-oil ₹ Crore 2922102 237956 301089 235693 262621 247684 239552 241264
US $ Million 352915 28744 36277 28258 31492 29673 28656 28757
2 Imports ₹ Crore 5616042 515738 473312 456075 518026 473159 480421 539817
US $ Million 678215 62298 57027 54681 62119 56686 57470 64343
2.1 Oil ₹ Crore 1480232 134882 135638 137615 166312 125589 115946 92431
US $ Million 178733 16293 16342 16499 19943 15046 13870 11017
2.2 Non-oil ₹ Crore 4135810 380855 337674 318460 351714 347570 364475 447386
US $ Million 499482 46005 40685 38182 42176 41640 43600 53326
3 Trade Balance ₹ Crore -1997090 -198796 -127272 -161579 -187759 -179651 -197401 -248624
US $ Million -241143 -24013 -15334 -19373 -22515 -21523 -23614 -29635
3.1 Oil ₹ Crore -783382 -55896 -90687 -78812 -98667 -79766 -72478 -42501
US $ Million -94576 -6752 -10927 -9449 -11832 -9556 -8670 -5066
3.2 Non-oil ₹ Crore -1213708 -142900 -36584 -82767 -89093 -99885 -124923 -206123
US $ Million -146567 -17261 -4408 -9923 -10683 -11967 -14944 -24569

Note: Data in the table are provisional.

Source: Directorate General of Commercial Intelligence and Statistics.
No. 32: Foreign Exchange Reserves
2023 2024
Item Unit
Oct. 06 Aug. 23 Aug. 30 Sep. 06 Sep. 13 Sep. 20 Sep. 27
1 2 3 4 5 6 7
1 Total Reserves ₹ Crore 4867956 5719971 5736861 5785515 5784739 5785706 5900138
US $ Million 584742 681688 683987 689235 689458 692296 704885
1.1 Foreign Currency Assets ₹ Crore 4325067 5014012 5024359 5071259 5064604 5061914 5157443
US $ Million 519529 597552 599037 604144 603629 605686 616154
1.2 Gold ₹ Crore 352200 511818 518835 520331 527636 531633 550741
US $ Million 42306 60997 61859 61988 62887 63613 65796
Volume (Metric Tonnes) 803.58 848.98 848.98 853.64 853.64 853.64 853.64
1.3 SDRs SDRs Million 13681 13702 13702 13702 13702 13702 13702
₹ Crore 149212 154888 154901 155056 154540 154941 155249
US $ Million 17923 18459 18468 18472 18419 18540 18547
1.4 Reserve Tranche Position in IMF ₹ Crore 41477 39253 38766 38869 37960 37218 36706
US $ Million 4983 4680 4622 4631 4523 4458 4387
* Difference, if any, is due to rounding off.
Note: Exclude investment in foreign currency denominated bonds issued by IIFC (UK), SDRs transferred by Government of India to RBI and foreign currency
received under SAARC and ACU currency swap arrangements. Foreign currency assets in US dollar take into account appreciation/depreciation of non-US
currencies (such as Euro, Sterling, Yen and Australian Dollar) held in reserves. Foreign exchange holdings are converted into rupees at rupee-US dollar RBI
holding rates.
No. 33: Non-Resident Deposits (US $ Million)

Scheme
Outstanding Flows

2023 2024 2023-24 2024-25

2023-24
Aug. Jul. Aug. (P) Apr.-Aug. Apr.-Aug.(P)
1 2 3 4 5 6
1 NRI Deposits 151879 141987 157157 158945 3743 7828
1.1 FCNR(B) 25733 20915 28572 29204 1552 3471
1.2 NR(E)RA 98624 96179 99981 100543 868 2512
1.3 NRO 27522 24892 28603 29198 1323 1845
P: Provisional.

308 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 34: Foreign Investment Inflows

(US $ Million)
2023-24 2024-25 (P) 2023 2024 (P)
Item 2023-24
Apr.-Aug. Apr.-Aug. Aug. Jul. Aug.
1 2 3 4 5 6

1.1 Net Foreign Direct Investment (1.1.1-1.1.2) 10129 3263 6626 -540 -1439 1751

1.1.1 Direct Investment to India (1.1.1.1-1.1.1.2) 26807 8478 15351 739 1285 3950

1.1.1.1 Gross Inflows/Gross Investments 71279 27363 36118 4968 5217 8614

1.1.1.1.1 Equity 45817 16942 26232 3019 3325 6504

1.1.1.1.1.1 Government (SIA/FIPB) 585 176 377 78 112 56

1.1.1.1.1.2 RBI 31826 12590 18137 1605 2099 4273

1.1.1.1.1.3 Acquisition of shares 12013 3634 7271 1225 1002 2064

1.1.1.1.1.4 Equity capital of unincorporated bodies 1394 543 447 111 111 111

1.1.1.1.2 Reinvested earnings 19768 7701 8056 1580 1580 1580

1.1.1.1.3 Other capital 5694 2720 1830 368 312 530

1.1.1.2 Repatriation/Disinvestment 44472 18885 20768 4229 3932 4665

1.1.1.2.1 Equity 41334 17536 19755 4093 3555 4527

1.1.1.2.2 Other capital 3137 1349 1013 136 377 138

1.1.2 Foreign Direct Investment by India
16678 5215 8724 1279 2724 2199
(1.1.2.1+1.1.2.2+1.1.2.3-1.1.2.4)
1.1.2.1 Equity capital 9111 2940 5655 616 2230 1078

1.1.2.2 Reinvested Earnings 5786 2411 2464 482 482 482

1.1.2.3 Other Capital 5406 1929 2121 468 278 741

1.1.2.4 Repatriation/Disinvestment 3624 2064 1516 288 266 103

1.2 Net Portfolio Investment (1.2.1+1.2.2+1.2.3-1.2.4) 44081 22904 10378 2880 5108 4325

1.2.1 GDRs/ADRs - - - - - -

1.2.2 FIIs 44626 23488 10359 2993 5192 4270

1.2.3 Offshore funds and others - - - - - -

1.2.4 Portfolio investment by India 544 585 -18 113 84 -55

1 Foreign Investment Inflows 54210 26166 17004 2340 3669 6076

P: Provisional

No. 35: Outward Remittances under the Liberalised Remittance Scheme (LRS) for Resident Individuals
(US $ Million)

Item 2023 2024

2023-24
Aug. Jun. Jul. Aug.
1 2 3 4 5
1 Outward Remittances under the LRS 31735.74 3379.54 2181.85 2754.05 3211.54
1.1 Deposit 916.45 60.74 39.02 41.68 45.56
1.2 Purchase of immovable property 242.51 16.29 18.77 24.54 22.49
1.3 Investment in equity/debt 1510.89 94.08 120.22 120.86 125.30
1.4 Gift 3580.27 268.89 228.81 275.26 244.41
1.5 Donations 11.31 0.63 2.01 0.68 0.67
1.6 Travel 17006.27 2039.72 1275.63 1662.13 2013.30
1.7 Maintenance of close relatives 4611.53 378.41 270.72 337.40 315.40
1.8 Medical Treatment 79.62 4.41 6.42 8.62 7.65
1.9 Studies Abroad 3478.65 483.29 177.07 272.16 416.39
1.10 Others 298.24 33.10 43.19 10.72 20.36

RBI Bulletin October 2024 309

CURRENT STATISTICS

No. 36: Indices of Nominal Effective Exchange Rate (NEER) and

Real Effective Exchange Rate (REER) of the Indian Rupee

2023 2024
2022-23 2023-24
Sep Aug Sep
Item 1 2 3 4 5

40-Currency Basket (Base: 2015-16=100)

1 Trade-Weighted

1.1 NEER 91.20 90.73 91.29 90.81 90.40

1.2 REER 102.78 103.69 104.11 105.44 105.17

2 Export-Weighted

2.1 NEER 93.01 93.11 93.55 93.45 93.08

2.2 REER 101.10 101.21 101.41 102.80 102.52

6-Currency Basket (Trade-weighted)

1 Base : 2015-16 =100

1.1 NEER 85.93 83.62 84.24 82.04 81.54

1.2 REER 101.80 101.66 102.20 102.53 102.56

2 Base : 2022-23 =100

2.1 NEER 100.00 97.31 98.04 95.47 94.89

2.2 REER 100.00 99.86 100.39 100.71 100.74

310 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 37: External Commercial Borrowings (ECBs) – Registrations

(Amount in US $ Million)

Item 2023-24 2023 2024

Aug. Jul. Aug.
1 2 3 4
1 Automatic Route
1.1 Number 1188 92 119 99

1.2 Amount 29461 1498 3581 5460

2 Approval Route
2.1 Number 33 2 0 3
2.2 Amount 19748 1270 0 449
3 Total (1+2)
3.1 Number 1221 94 119 102
3.2 Amount 49209 2768 3581 5909
4 Weighted Average Maturity (in years) 5.60 4.90 5.20 4.50
5 Interest Rate (per cent)
5.1 Weighted Average Margin over alternative reference rate (ARR) for Floating Rate Loans@ 1.66 1.30 1.45 1.49
5.2 Interest rate range for Fixed Rate Loans 0.00-27.00 0.00-11.60 0.00-10.00 0.01-10.00
Borrower Category
I. Corporate Manufacturing 15836 988 626 1452
II. Corporate-Infrastructure 15916 713 1393 1042
a.) Transport 1505 182 0 0
b.) Energy 3513 3 559 983
c.) Water and Sanitation 33 6 0 0
d.) Communication 6309 0 0 0
e.) Social and Commercial Infrastructure 115 61 0 0
f.) Exploration,Mining and Refinery 2480 460 800 0
g.) Other Sub-Sectors 1961 1 34 59
III. Corporate Service-Sector 1526 64 349 372
IV. Other Entities 1728 0 4 0
a.) units in SEZ 1 0 4 0
b.) SIDBI 0 0 0 0
c.) Exim Bank 1727 0 0 0
V. Banks 0 0 0 0
VI. Financial Institution (Other than NBFC ) 20 0 0 0
VII. NBFCs 13361 795 1195 3009
a). NBFC- IFC/AFC 7734 712 0 773
b). NBFC-MFI 531 44 16 18
c). NBFC-Others 5096 39 1179 2218
VIII. Non-Government Organization (NGO) 0 0 0 0
IX. Micro Finance Institution (MFI) 0 0 0 0
X. Others 822 208 14 34

Note: Based on applications for ECB/Foreign Currency Convertible Bonds (FCCBs) which have been allotted loan registration number during the period.
@ With effect from July 01, 2023, the benchmark rate is changed to Alternative Reference Rate (ARR)

RBI Bulletin October 2024 311

CURRENT STATISTICS

No. 38: India’s Overall Balance of Payments

(US$ Million)

Apr-Jun 2023 Apr-Jun 2024 (P)

Credit Debit Net Credit Debit Net

Item 1 2 3 4 5 6
Overall Balance Of Payments (1+2+3) 403470 379039 24432 506715 501489 5226
1 Current Account (1.1+ 1.2) 221636 230603 -8967 241638 251403 -9765
1.1 Merchandise 104936 161637 -56701 111175 176297 -65122
1.2 Invisibles (1.2.1+1.2.2+1.2.3) 116700 68967 47734 130463 75106 55357
1.2.1 Services 80569 45449 35121 88466 48740 39725
1.2.1.1 Travel 6412 9489 -3077 7352 9171 -1819
1.2.1.2 Transportation 7408 7693 -285 8507 8609 -102
1.2.1.3 Insurance 761 591 170 903 593 310
1.2.1.4 G.n.i.e. 159 250 -91 161 309 -147
1.2.1.5 Miscellaneous 65830 27427 38404 71542 30058 41484
1.2.1.5.1 Software Services 38172 4243 33928 41926 4479 37447
1.2.1.5.2 Business Services 21831 15203 6627 23000 16625 6375
1.2.1.5.3 Financial Services 1891 1152 739 2215 1267 948
1.2.1.5.4 Communication Services 831 324 507 519 444 75
1.2.2 Transfers 27117 4279 22838 29519 3169 26350
1.2.2.1 Official 20 255 -235 18 266 -248
1.2.2.2 Private 27097 4024 23073 29502 2904 26598
1.2.3 Income 9014 19239 -10225 12478 23196 -10718
1.2.3.1 Investment Income 7187 18372 -11185 10341 22218 -11878
1.2.3.2 Compensation of Employees 1827 868 959 2137 978 1159
2 Capital Account (2.1+2.2+2.3+2.4+2.5) 181834 148018 33816 264492 250086 14406
2.1 Foreign Investment (2.1.1+2.1.2) 109054 88595 20459 183279 176019 7259
2.1.1 Foreign Direct Investment 19278 14551 4728 23435 17120 6315
2.1.1.1 In India 17790 10427 7362 22287 12171 10116
2.1.1.1.1 Equity 11266 9351 1915 16402 11673 4729
2.1.1.1.2 Reinvested Earnings 4541 0 4541 4897 4897
2.1.1.1.3 Other Capital 1983 1077 906 988 498 490
2.1.1.2 Abroad 1489 4123 -2634 1147 4949 -3801
2.1.1.2.1 Equity 1489 1864 -375 1147 2346 -1199
2.1.1.2.2 Reinvested Earnings 0 1446 -1446 0 1500 -1500
2.1.1.2.3 Other Capital 0 813 -813 0 1102 -1102
2.1.2 Portfolio Investment 89775 74045 15731 159844 158899 945
2.1.2.1 In India 88743 72654 16089 159240 158343 897
2.1.2.1.1 FIIs 88743 72654 16089 159240 158343 897
2.1.2.1.1.1 Equity 77174 63525 13649 139824 140833 -1009
2.1.2.1.1.2 Debt 11569 9129 2440 19416 17510 1906
2.1.2.1.2 ADR/GDRs 0 0 0 0 0 0
2.1.2.2 Abroad 1032 1391 -358 604 556 48
2.2 Loans (2.2.1+2.2.2+2.2.3) 30359 28188 2171 31905 25940 5965
2.2.1 External Assistance 3032 1603 1429 3641 2271 1371
2.2.1.1 By India 9 49 -40 8 30 -22
2.2.1.2 To India 3023 1553 1470 3634 2241 1393
2.2.2 Commercial Borrowings 15452 9721 5731 12618 10951 1667
2.2.2.1 By India 2212 2071 140 4138 4255 -117
2.2.2.2 To India 13241 7650 5591 8481 6696 1785
2.2.3 Short Term to India 11875 16864 -4989 15645 12718 2927
2.2.3.1 Buyers' credit & Suppliers' Credit >180 days 11875 14352 -2477 13572 12718 854
2.2.3.2 Suppliers' Credit up to 180 days 0 2512 -2512 2073 0 2073
2.3 Banking Capital (2.3.1+2.3.2) 33279 20339 12940 36380 33511 2870
2.3.1 Commercial Banks 33107 20339 12769 36259 33511 2749
2.3.1.1 Assets 13315 3382 9934 10705 13570 -2865
2.3.1.2 Liabilities 19792 16957 2835 25554 19941 5614
2.3.1.2.1 Non-Resident Deposits 18896 16688 2208 23426 19401 4025
2.3.2 Others 172 0 172 121 0 121
2.4 Rupee Debt Service 0 62 -62 0 61 -61
2.5 Other Capital 9143 10834 -1691 12928 14556 -1627
3 Errors & Omissions 0 418 -418 585 0 585
4 Monetary Movements (4.1+ 4.2) 0 24432 -24432 0 5226 -5226
4.1 I.M.F. 0 0 0 0 0 0
4.2 Foreign Exchange Reserves (Increase - / Decrease +) 0 24432 -24432 5226 -5226
Note: P: Preliminary.

312 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 39: India’s Overall Balance of Payments

(₹ Crore)

Apr-Jun 2023 Apr-Jun 2024 (P)

Credit Debit Net Credit Debit Net

Item
1 2 3 4 5 6
Overall Balance Of Payments (1+2+3) 3316497 3115671 200826 4227182 4183585 43597
1 Current Account (1.1+ 1.2) 1821831 1895540 -73709 2015823 2097284 -81461
1.1 Merchandise 862564 1328641 -466077 927458 1470724 -543266
1.2 Invisibles (1.2.1+1.2.2+1.2.3) 959267 566900 392367 1088365 626560 461805
1.2.1 Services 662275 373584 288691 738010 406609 331401
1.2.1.1 Travel 52702 77997 -25295 61335 76511 -15177
1.2.1.2 Transportation 60895 63237 -2342 70965 71816 -851
1.2.1.3 Insurance 6251 4854 1398 7535 4950 2585
1.2.1.4 G.n.i.e. 1305 2051 -746 1346 2575 -1229
1.2.1.5 Miscellaneous 541121 225445 315676 596830 250757 346073
1.2.1.5.1 Software Services 313769 34880 278889 349760 37363 312397
1.2.1.5.2 Business Services 179448 124971 54477 191873 138694 53178
1.2.1.5.3 Financial Services 15546 9473 6073 18478 10572 7906
1.2.1.5.4 Communication Services 6827 2663 4165 4331 3702 629
1.2.2 Transfers 222898 35170 187728 246261 26440 219821
1.2.2.1 Official 160 2094 -1934 150 2216 -2066
1.2.2.2 Private 222738 33076 189662 246112 24225 221887
1.2.3 Income 74093 158146 -84052 104093 193510 -89417
1.2.3.1 Investment Income 59076 151014 -91938 86265 185352 -99087
1.2.3.2 Compensation of Employees 15018 7132 7886 17829 8158 9670
2 Capital Account (2.1+2.2+2.3+2.4+2.5) 1494666 1216698 277968 2206479 2086302 120178
2.1 Foreign Investment (2.1.1+2.1.2) 896414 728246 168169 1528971 1468411 60560
2.1.1 Foreign Direct Investment 158467 119605 38862 195500 142821 52679
2.1.1.1 In India 146230 85713 60517 185930 101538 84392
2.1.1.1.1 Equity 92604 76861 15743 136835 97382 39453
2.1.1.1.2 Reinvested Earnings 37323 0 37323 40849 0 40849
2.1.1.1.3 Other Capital 16303 8853 7450 8246 4156 4090
2.1.1.2 Abroad 12237 33892 -21654 9570 41283 -31713
2.1.1.2.1 Equity 12237 15322 -3085 9570 19574 -10004
2.1.1.2.2 Reinvested Earnings 0 11889 -11889 0 12515 -12515
2.1.1.2.3 Other Capital 0 6681 -6681 0 9194 -9194
2.1.2 Portfolio Investment 737947 608641 129306 1333471 1325590 7881
2.1.2.1 In India 729461 597209 132252 1328434 1320949 7485
2.1.2.1.1 FIIs 729461 597209 132252 1328434 1320949 7485
2.1.2.1.1.1 Equity 634364 522169 112195 1166461 1174878 -8416
2.1.2.1.1.2 Debt 95097 75040 20058 161973 146071 15901
2.1.2.1.2 ADR/GDRs 0 0 0 0 0 0
2.1.2.2 Abroad 8486 11432 -2946 5037 4641 396
2.2 Loans (2.2.1+2.2.2+2.2.3) 249550 231703 17847 266160 216400 49760
2.2.1 External Assistance 24921 13173 11749 30377 18943 11433
2.2.1.1 By India 72 404 -331 64 247 -184
2.2.1.2 To India 24849 12769 12080 30313 18696 11617
2.2.2 Commercial Borrowings 127016 79909 47107 105264 91357 13907
2.2.2.1 By India 18179 17027 1153 34517 35497 -980
2.2.2.2 To India 108837 62882 45955 70747 55860 14887
2.2.3 Short Term to India 97612 138621 -41009 130519 106100 24420
2.2.3.1 Buyers' credit & Suppliers' Credit >180 days 97612 117969 -20357 113225 106100 7125
2.2.3.2 Suppliers' Credit up to 180 days 0 20652 -20652 17295 0 17295
2.3 Banking Capital (2.3.1+2.3.2) 273549 167181 106367 303498 279556 23942
2.3.1 Commercial Banks 272138 167181 104957 302487 279556 22931
2.3.1.1 Assets 109451 27797 81653 89303 113205 -23902
2.3.1.2 Liabilities 162687 139384 23304 213184 166351 46833
2.3.1.2.1 Non-Resident Deposits 155328 137175 18153 195426 161851 33575
2.3.2 Others 1410 0 1410 1011 0 1011
2.4 Rupee Debt Service 0 512 -512 0 508 -508
2.5 Other Capital 75153 89057 -13904 107850 121427 -13577
3 Errors & Omissions 0 3432 -3432 4880 0 4880
4 Monetary Movements (4.1+ 4.2) 0 200826 -200826 0 43597 -43597
4.1 I.M.F. 0 0 0 0 0 0
4.2 Foreign Exchange Reserves (Increase - / Decrease +) 0 200826 -200826 0 43597 -43597
Note: P: Preliminary.

RBI Bulletin October 2024 313

CURRENT STATISTICS

No. 40: Standard Presentation of BoP in India as per BPM6

(US$ Million)
Item Apr-Jun 2023 Apr-Jun 2024 (P)
Credit Debit Net Credit Debit Net
1 2 3 4 5 6
1 Current Account (1.A+1.B+1.C) 221635 230581 -8945 241638 251377 -9739
1.A Goods and Services (1.A.a+1.A.b) 185505 207085 -21580 199641 225037 -25396
1.A.a Goods (1.A.a.1 to 1.A.a.3) 104936 161637 -56701 111175 176297 -65122
1.A.a.1 General merchandise on a BOP basis 104497 151939 -47442 111136 166784 -55648
1.A.a.2 Net exports of goods under merchanting 438 0 438 39 0 39
1.A.a.3 Nonmonetary gold 0 9698 -9698 9512 -9512
1.A.b Services (1.A.b.1 to 1.A.b.13) 80569 45449 35121 88466 48740 39725
1.A.b.1 Manufacturing services on physical inputs owned by others 481 42 439 268 22 246
1.A.b.2 Maintenance and repair services n.i.e. 47 431 -385 81 238 -157
1.A.b.3 Transport 7408 7693 -285 8507 8609 -102
1.A.b.4 Travel 6412 9489 -3077 7352 9171 -1819
1.A.b.5 Construction 870 697 174 1478 563 915
1.A.b.6 Insurance and pension services 761 591 170 903 593 310
1.A.b.7 Financial services 1891 1152 739 2215 1267 948
1.A.b.8 Charges for the use of intellectual property n.i.e. 381 3647 -3266 341 4448 -4107
1.A.b.9 Telecommunications, computer, and information services 39091 4859 34231 42541 5215 37326
1.A.b.10 Other business services 21831 15203 6627 23000 16625 6375
1.A.b.11 Personal, cultural, and recreational services 968 1279 -312 1175 1249 -74
1.A.b.12 Government goods and services n.i.e. 159 250 -91 161 309 -147
1.A.b.13 Others n.i.e. 272 116 156 444 432 12
1.B Primary Income (1.B.1 to 1.B.3) 9014 19239 -10225 12478 23196 -10718
1.B.1 Compensation of employees 1827 868 959 2137 978 1159
1.B.2 Investment income 5777 17935 -12158 8448 21594 -13146
1.B.2.1 Direct investment 2355 9950 -7595 3173 12343 -9170
1.B.2.2 Portfolio investment 208 2250 -2042 70 2411 -2341
1.B.2.3 Other investment 517 5546 -5029 1110 6620 -5510
1.B.2.4 Reserve assets 2697 189 2508 4095 220 3876
1.B.3 Other primary income 1410 436 973 1892 624 1268
1.C Secondary Income (1.C.1+1.C.2) 27116 4256 22860 29519 3144 26376
1.C.1 Financial corporations, nonfinancial corporations, households, and NPISHs 27097 4024 23073 29502 2904 26598
1.C.1.1 Personal transfers (Current transfers between resident and/non-resident households) 26325 2680 23645 28644 1989 26655
1.C.1.2 Other current transfers 772 1343 -571 857 914 -57
1.C.2 General government 19 232 -214 18 240 -222
2 Capital Account (2.1+2.2) 150 145 5 185 146 40
2.1 Gross acquisitions (DR.)/disposals (CR.) of non-produced nonfinancial assets 12 51 -39 4 45 -41
2.2 Capital transfers 138 94 44 182 101 81
3 Financial Account (3.1 to 3.5) 181685 172328 9358 264307 255192 9114
3.1 Direct Investment (3.1A+3.1B) 19278 14551 4728 23435 17120 6315
3.1.A Direct Investment in India 17790 10427 7362 22287 12171 10116
3.1.A.1 Equity and investment fund shares 15806 9351 6456 21299 11673 9626
3.1.A.1.1 Equity other than reinvestment of earnings 11266 9351 1915 16402 11673 4729
3.1.A.1.2 Reinvestment of earnings 4541 0 4541 4897 4897
3.1.A.2 Debt instruments 1983 1077 906 988 498 490
3.1.A.2.1 Direct investor in direct investment enterprises 1983 1077 906 988 498 490
3.1.B Direct Investment by India 1489 4123 -2634 1147 4949 -3801
3.1.B.1 Equity and investment fund shares 1489 3310 -1822 1147 3847 -2699
3.1.B.1.1 Equity other than reinvestment of earnings 1489 1864 -375 1147 2346 -1199
3.1.B.1.2 Reinvestment of earnings 0 1446 -1446 1500 -1500
3.1.B.2 Debt instruments 0 813 -813 0 1102 -1102
3.1.B.2.1 Direct investor in direct investment enterprises 0 813 -813 1102 -1102
3.2 Portfolio Investment 89775 74045 15731 159844 158899 945
3.2.A Portfolio Investment in India 88743 72654 16089 159240 158343 897
3.2.1 Equity and investment fund shares 77174 63525 13649 139824 140833 -1009
3.2.2 Debt securities 11569 9129 2440 19416 17510 1906
3.2.B Portfolio Investment by India 1032 1391 -358 604 556 48
3.3 Financial derivatives (other than reserves) and employee stock options 5013 5736 -723 6053 9666 -3613
3.4 Other investment 67619 53565 14053 74976 64281 10694
3.4.1 Other equity (ADRs/GDRs) 0 0 0 0 0 0
3.4.2 Currency and deposits 19068 16688 2380 23547 19401 4146
3.4.2.1 Central bank (Rupee Debt Movements; NRG) 172 0 172 121 0 121
3.4.2.2 Deposit-taking corporations, except the central bank (NRI Deposits) 18896 16688 2208 23426 19401 4025
3.4.2.3 General government 0 0 0 0
3.4.2.4 Other sectors 0 0 0 0
3.4.3 Loans (External Assistance, ECBs and Banking Capital) 32695 14974 17720 29093 27331 1762
3.4.3.A Loans to India 30474 12854 17621 24948 23046 1901
3.4.3.B Loans by India 2220 2120 100 4145 4285 -139
3.4.4 Insurance, pension, and standardized guarantee schemes 38 168 -130 47 133 -86
3.4.5 Trade credit and advances 11875 16864 -4989 15645 12718 2927
3.4.6 Other accounts receivable/payable - other 3943 4871 -928 6643 4698 1945
3.4.7 Special drawing rights 0 0 0 0
3.5 Reserve assets 0 24432 -24432 0 5226 -5226
3.5.1 Monetary gold 0 0 0 0
3.5.2 Special drawing rights n.a. 0 0 0 0
3.5.3 Reserve position in the IMF n.a. 0 0 0 0
3.5.4 Other reserve assets (Foreign Currency Assets) 0 24432 -24432 0 5226 -5226
4 Total assets/liabilities 181685 172328 9358 264307 255192 9114
4.1 Equity and investment fund shares 100552 83480 17072 168975 166708 2266
4.2 Debt instruments 77190 59545 17645 88689 78560 10129
4.3 Other financial assets and liabilities 3943 29302 -25359 6643 9924 -3281
5 Net errors and omissions 0 418 -418 585 0 585
Note: P: Preliminary.

314 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 41: Standard Presentation of BoP in India as per BPM6

(₹ Crore)
Apr-Jun 2023 Apr-Jun 2024 (P)
Item
Credit Debit Net Credit Debit Net

1 2 3 4 5 6
1 Current Account (1.A+1.B+1.C) 1821825 1895356 -73531 2015820 2097068 -81248
1.A Goods and Services (1.A.a+1.A.b) 1524839 1702225 -177386 1665468 1877333 -211865
1.A.a Goods (1.A.a.1 to 1.A.a.3) 862564 1328641 -466077 927458 1470724 -543266
1.A.a.1 General merchandise on a BOP basis 858960 1248927 -389967 927134 1391370 -464235
1.A.a.2 Net exports of goods under merchanting 3604 0 3604 324 0 324
1.A.a.3 Nonmonetary gold 0 79714 -79714 0 79355 -79355
1.A.b Services (1.A.b.1 to 1.A.b.13) 662275 373584 288691 738010 406609 331401
1.A.b.1 Manufacturing services on physical inputs owned by others 3955 345 3610 2234 183 2051
1.A.b.2 Maintenance and repair services n.i.e. 382 3546 -3164 676 1983 -1307
1.A.b.3 Transport 60895 63237 -2342 70965 71816 -851
1.A.b.4 Travel 52702 77997 -25295 61335 76511 -15177
1.A.b.5 Construction 7153 5726 1427 12327 4693 7635
1.A.b.6 Insurance and pension services 6251 4854 1398 7535 4950 2585
1.A.b.7 Financial services 15546 9473 6073 18478 10572 7906
1.A.b.8 Charges for the use of intellectual property n.i.e. 3128 29977 -26849 2843 37103 -34261
1.A.b.9 Telecommunications, computer, and information services 321321 39942 281380 354891 43507 311384
1.A.b.10 Other business services 179448 124971 54477 191873 138694 53178
1.A.b.11 Personal, cultural, and recreational services 7953 10515 -2562 9803 10418 -615
1.A.b.12 Government goods and services n.i.e. 1305 2051 -746 1346 2575 -1229
1.A.b.13 Others n.i.e. 2235 950 1285 3706 3604 102
1.B Primary Income (1.B.1 to 1.B.3) 74093 158146 -84052 104093 193510 -89417
1.B.1 Compensation of employees 15018 7132 7886 17829 8158 9670
1.B.2 Investment income 47486 147426 -99940 70478 180146 -109668
1.B.2.1 Direct investment 19356 81790 -62434 26468 102971 -76503
1.B.2.2 Portfolio investment 1710 18491 -16781 582 20112 -19530
1.B.2.3 Other investment 4252 45590 -41337 9262 55229 -45968
1.B.2.4 Reserve assets 22167 1555 20612 34166 1833 32333
1.B.3 Other primary income 11590 3588 8002 15787 5206 10581
1.C Secondary Income (1.C.1+1.C.2) 222893 34986 187907 246259 26225 220034
1.C.1 Financial corporations, nonfinancial corporations, households, and NPISHs 222738 33076 189662 246112 24225 221887
1.C.1.1 Personal transfers (Current transfers between resident and/non-resident households) 216392 22033 194358 238960 16597 222364
1.C.1.2 Other current transfers 6346 11042 -4696 7151 7628 -477
1.C.2 General government 155 1910 -1755 147 2000 -1852
2 Capital Account (2.1+2.2) 1232 1188 44 1547 1214 333
2.1 Gross acquisitions (DR.)/disposals (CR.) of non-produced nonfinancial assets 100 418 -319 32 375 -343
2.2 Capital transfers 1132 770 362 1515 839 675
3 Financial Account (3.1 to 3.5) 1493440 1416520 76920 2204934 2128900 76035
3.1 Direct Investment (3.1A+3.1B) 158467 119605 38862 195500 142821 52679
3.1.A Direct Investment in India 146230 85713 60517 185930 101538 84392
3.1.A.1 Equity and investment fund shares 129927 76861 53067 177683 97382 80301
3.1.A.1.1 Equity other than reinvestment of earnings 92604 76861 15743 136835 97382 39453
3.1.A.1.2 Reinvestment of earnings 37323 0 37323 40849 0 40849
3.1.A.2 Debt instruments 16303 8853 7450 8246 4156 4090
3.1.A.2.1 Direct investor in direct investment enterprises 16303 8853 7450 8246 4156 4090
3.1.B Direct Investment by India 12237 33892 -21654 9570 41283 -31713
3.1.B.1 Equity and investment fund shares 12237 27211 -14974 9570 32089 -22519
3.1.B.1.1 Equity other than reinvestment of earnings 12237 15322 -3085 9570 19574 -10004
3.1.B.1.2 Reinvestment of earnings 0 11889 -11889 0 12515 -12515
3.1.B.2 Debt instruments 0 6681 -6681 0 9194 -9194
3.1.B.2.1 Direct investor in direct investment enterprises 0 6681 -6681 0 9194 -9194
3.2 Portfolio Investment 737947 608641 129306 1333471 1325590 7881
3.2.A Portfolio Investment in India 729461 597209 132252 1328434 1320949 7485
3.2.1 Equity and investment fund shares 634364 522169 112195 1166461 1174878 -8416
3.2.2 Debt securities 95097 75040 20058 161973 146071 15901
3.2.B Portfolio Investment by India 8486 11432 -2946 5037 4641 396
3.3 Financial derivatives (other than reserves) and employee stock options 41207 47148 -5941 50493 80637 -30144
3.4 Other investment 555819 440301 115518 625470 536255 89216
3.4.1 Other equity (ADRs/GDRs) 0 0 0 0 0 0
3.4.2 Currency and deposits 156738 137175 19563 196437 161851 34586
3.4.2.1 Central bank (Rupee Debt Movements; NRG) 1410 0 1410 1011 0 1011
3.4.2.2 Deposit-taking corporations, except the central bank (NRI Deposits) 155328 137175 18153 195426 161851 33575
3.4.2.3 General government 0 0 0 0 0 0
3.4.2.4 Other sectors 0 0 0 0 0 0
3.4.3 Loans (External Assistance, ECBs and Banking Capital) 268748 123088 145661 242702 228005 14697
3.4.3.A Loans to India 250497 105658 144839 208121 192261 15861
3.4.3.B Loans by India 18252 17430 821 34581 35744 -1164
3.4.4 Insurance, pension, and standardized guarantee schemes 308 1380 -1072 396 1109 -714
3.4.5 Trade credit and advances 97612 138621 -41009 130519 106100 24420
3.4.6 Other accounts receivable/payable - other 32413 40037 -7624 55416 39189 16227
3.4.7 Special drawing rights 0 0 0 0 0 0
3.5 Reserve assets 0 200826 -200826 0 43597 -43597
3.5.1 Monetary gold 0 0 0 0 0 0
3.5.2 Special drawing rights n.a. 0 0 0 0 0 0
3.5.3 Reserve position in the IMF n.a. 0 0 0 0 0 0
3.5.4 Other reserve assets (Foreign Currency Assets) 0 200826 -200826 0 43597 -43597
4 Total assets/liabilities 1493440 1416520 76920 2204934 2128900 76035
4.1 Equity and investment fund shares 826529 686201 140328 1409641 1390737 18904
4.2 Debt instruments 634499 489457 145042 739877 655377 84500
4.3 Other financial assets and liabilities 32413 240863 -208450 55416 82786 -27370
5 Net errors and omissions 0 3432 -3432 4880 0 4880
Note: P: Preliminary.

RBI Bulletin October 2024 315

CURRENT STATISTICS

No. 42: India’s International Investment Position

(US$ Million)

Item As on Financial Year/Quarter End

2023-24 2023 2024

Jun. Mar. Jun.

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

1 2 3 4 5 6 7 8
1. Direct investment Abroad/in India 242271 542777 228227 532278 242271 542777 246072 552178

1.1 Equity Capital* 153343 511142 143893 501412 153343 511142 156042 520277

1.2 Other Capital 88927 31635 84334 30866 88927 31635 90029 31900

2. Portfolio investment 12162 277118 14511 258539 12162 277118 12103 277272

2.1 Equity 10644 162061 12567 152928 10644 162061 10367 160898

2.2 Debt 1517 115057 1944 105611 1517 115057 1736 116374

3. Other investment 128450 571045 105256 531184 128450 571045 141261 590312

3.1 Trade credit 33450 123659 29658 119317 33450 123659 32874 126577

3.2 Loan 13578 221886 13037 206940 13578 221886 16837 225023

3.3 Currency and Deposits 52803 154787 33117 144069 52803 154787 57032 160628

3.4 Other Assets/Liabilities 28619 48804 29443 38848 28619 48804 34518 56319

4. Reserves 646419 595051 646419 651997

5. Total Assets/ Liabilities 1029301 1390940 943044 1322001 1029301 1390940 1051433 1419761

6. Net IIP (Assets - Liabilities) -361639 -378956 -361639 -368329

Note: * Equity capital includes share of investment funds and reinvested earnings.

316 RBI Bulletin October 2024

 CURRENT STATISTICS

Payment and Settlement Systems

No.43: Payment System Indicators

PART I - Payment System Indicators - Payment & Settlement System Statistics

System Volume (Lakh) Value (₹ Crore)

FY 2023-24 2023 2024 FY 2023-24 2023 2024

Aug. Jul. Aug. Aug. Jul. Aug.
1 -2 -1 0 5 2 3 4
A. Settlement Systems

Financial Market Infrastructures (FMIs)

1 CCIL Operated Systems (1.1 to 1.3) 43.04 3.83 4.54 3.88 259206893 21796085 25280807 23205978
1.1 Govt. Securities Clearing (1.1.1 to 1.1.3) 16.80 1.46 1.71 1.62 170464587 14374901 17139102 15544033
1.1.1 Outright 9.51 0.82 1.03 0.99 13463848 1075273 1524120 1468219
1.1.2 Repo 4.94 0.44 0.44 0.41 76718788 6265271 7150905 6391039
1.1.3 Tri-party Repo 2.35 0.20 0.23 0.22 80281951 7034358 8464077 7684775
1.2 Forex Clearing 24.92 2.23 2.71 2.13 80984671 6636448 7417106 6911072
1.3 Rupee Derivatives @ 1.31 0.14 0.12 0.13 7757636 784735 724598 750873
B. Payment Systems

I Financial Market Infrastructures (FMIs) - - - - - - - -

1 Credit Transfers - RTGS (1.1 to 1.2) 2700.16 218.08 246.68 237.53 170886670 13742007 15970680 15910436
1.1 Customer Transactions 2686.04 216.88 245.48 236.33 152406168 12202747 14531533 14385410
1.2 Interbank Transactions 14.12 1.20 1.19 1.19 18480503 1539260 1439147 1525025

II Retail
2 Credit Transfers - Retail (2.1 to 2.6) 1486106.89 119823.49 161225.51 166465.50 67542859 5374181 6480748 6408703
2.1 AePS (Fund Transfers) @ 3.92 0.34 0.31 0.31 261 22 13 13
2.2 APBS $ 25888.17 1791.92 2481.39 2783.25 390743 20129 28605 35283
2.3 IMPS 60053.35 4891.65 4902.84 4533.37 6495652 514280 593177 577888
2.4 NACH Cr $ 16227.27 1627.49 1479.29 1534.87 1525104 128612 132397 144196
2.5 NEFT 72639.50 5651.92 8006.14 7983.23 39136014 3134602 3662264 3590588
2.6 UPI @ 1311294.68 105860.16 144355.54 149630.47 19995086 1576537 2064292 2060736
2.6.1 of which USSD @ 26.19 2.60 1.40 1.45 352 41 15 15
3 Debit Transfers and Direct Debits (3.1 to 3.3) 18249.53 1522.83 1734.76 1774.78 1687658 135193 175789 177162
3.1 BHIM Aadhaar Pay @ 193.59 13.96 19.25 19.06 6112 416 575 576
3.2 NACH Dr $ 16426.49 1374.16 1588.11 1621.10 1678769 134543 175014 176386
3.3 NETC (linked to bank account) @ 1629.45 134.72 127.40 134.62 2777 234 200 199
4 Card Payments (4.1 to 4.2) 58469.79 4981.72 5294.35 5323.13 2423563 201282 217435 211744
4.1 Credit Cards (4.1.1 to 4.1.2) 35610.15 2905.78 3837.80 3900.68 1831134 148602 172670 168202
4.1.1 PoS based $ 18614.08 1520.79 1970.94 2023.83 651911 52961 62284 63208
4.1.2 Others $ 16996.08 1384.99 1866.86 1876.85 1179223 95641 110386 104994
4.2 Debit Cards (4.2.1 to 4.2.1 ) 22859.64 2075.94 1456.56 1422.45 592429 52680 44765 43542
4.2.1 PoS based $ 16477.95 1495.72 1068.60 1061.41 393589 34605 28600 29346
4.2.2 Others $ 6381.69 580.22 387.96 361.04 198840 18075 16165 14196
5 Prepaid Payment Instruments (5.1 to 5.2) 78775.40 6366.80 5356.71 5466.90 283048 23669 16327 16555
5.1 Wallets 63256.69 5067.34 4009.69 4092.83 234353 20002 11386 11599
5.2 Cards (5.2.1 to 5.2.2) 15518.71 1299.47 1347.01 1374.07 48695 3667 4941 4956
5.2.1 PoS based $ 8429.87 729.39 713.97 710.24 11247 855 940 908
5.2.2 Others $ 7088.84 570.08 633.05 663.82 37447 2812 4001 4048
6 Paper-based Instruments (6.1 to 6.2) 6632.10 565.42 531.00 508.49 7212333 593323 610685 568848
6.1 CTS (NPCI Managed) 6632.10 565.42 531.00 508.49 7212333 593323 610685 568848
6.2 Others 0.00 – – – – – – –
Total - Retail Payments (2+3+4+5+6) 1648233.71 133260.26 174142.33 179538.79 79149461 6327649 7500984 7383012
Total Payments (1+2+3+4+5+6) 1650933.88 133478.34 174389.01 179776.32 250036131 20069656 23471665 23293447
Total Digital Payments (1+2+3+4+5) 1644301.78 132912.92 173858.01 179267.83 242823799 19476333 22860979 22724600

RBI Bulletin October 2024 317

CURRENT STATISTICS

PART II - Payment Modes and Channels

System Volume (Lakh) Value (₹ Crore)

FY 2023-24 2023 2024 FY 2023-24 2023 2024

Aug. Jul. Aug. Aug. Jul. Aug.
1 2 3 4 5 6 7 8
A. Other Payment Channels

1 Mobile Payments (mobile app based) (1.1 to 1.2) 1252599.21 101423.21 139896.66 143776.73 30687088 2423257 3175688 3190071

1.1 Intra-bank $ 83000.56 6553.02 9299.87 9197.29 5676805 439916 599279 605042

1.2 Inter-bank $ 1169598.65 94870.20 130596.79 134579.45 25010283 1983340 2576409 2585028

2 Internet Payments (Netbanking / Internet Browser Based) @ (2.1 to 2.2) 45034.98 3790.98 4237.05 3971.96 102117736 8295085 9894532 9528184

2.1 Intra-bank @ 12033.28 1033.68 1225.09 1157.09 53247042 4490488 5064291 4883018

2.2 Inter-bank @ 33001.71 2757.30 3011.95 2814.87 48870694 3804596 4830241 4645167

B. ATMs

3 Cash Withdrawal at ATMs $ (3.1 to 3.3) 66440.72 5723.31 5069.38 5157.20 3259388 273107 250318 255021

3.1 Using Credit Cards $ 95.80 8.09 8.54 8.46 4648 383 433 434

3.2 Using Debit Cards $ 66001.01 5685.10 5040.14 5128.53 3241538 271612 248968 253703

3.3 Using Pre-paid Cards $ 343.90 30.12 20.70 20.20 13202 1112 917 883

4 Cash Withdrawal at PoS $ (4.1 to 4.2) 15.18 1.26 0.29 0.30 148 12 3 3

4.1 Using Debit Cards $ 15.06 1.25 0.27 0.28 147 12 3 3

4.2 Using Pre-paid Cards $ 0.12 0.01 0.02 0.02 1 0 0 0

5 Cash Withrawal at Micro ATMs @ 11754.95 1055.42 944.29 972.97 314003 27023 23498 23935

5.1 AePS @ 11754.95 1055.42 944.29 972.97 314003 27023 23498 23935

PART III - Payment Infrastructures (Lakh)

System As on March 2023 2024

2024 Aug. Jul. Aug.
1 2 3 4

Payment System Infrastructures

1 Number of Cards (1.1 to 1.2) 10667.22 10693.35 10850.30 10912.03

1.1 Credit Cards 1018.03 912.78 1045.68 1054.92

1.2 Debit Cards 9649.19 9780.57 9804.62 9857.10

2 Number of PPIs @ (2.1 to 2.2) 16743.63 16625.74 15211.55 15182.14

2.1 Wallets @ 13381.80 13483.91 11419.62 11322.72

2.2 Cards @ 3361.82 3141.84 3791.93 3859.42

3 Number of ATMs (3.1 to 3.2) 2.58 2.58 2.55 2.55

3.1 Bank owned ATMs $ 2.23 2.23 2.21 2.20

3.2 White Label ATMs $ 0.35 0.35 0.34 0.35

4 Number of Micro ATMs @ 17.55 15.29 14.71 14.42

5 Number of PoS Terminals 89.03 82.47 89.72 93.01

6 Bharat QR @ 62.50 58.99 61.87 63.97

7 UPI QR * 3434.93 2881.64 3286.40 3412.10

@: New inclusion w.e.f. November 2019

#: Data reported by Co-operative Banks, LABs and RRBs included with effect from December 2021.
$ : Inclusion separately initiated from November 2019 - would have been part of other items hitherto.
*: New inclusion w.e.f. September 2020; Includes only static UPI QR Code
Note : 1. Data is provisional.
2. ECS (Debit and Credit) has been merged with NACH with effect from January 31, 2020.
3. The data from November 2019 onwards for card payments (Debit/Credit cards) and Prepaid Payment Instruments (PPIs) may not be comparable with earlier months/ periods, as more granular data is
being published along with revision in data definitions.
4. Only domestic financial transactions are considered. The new format captures e-commerce transactions; transactions using FASTags, digital bill payments and card-to-card transfer through ATMs, etc..
Also, failed transactions, chargebacks, reversals, expired cards/ wallets, are excluded.
Part I-A. Settlement systems
1.1.3: Tri- party Repo under the securities segment has been operationalised from November 05, 2018.
Part I-B. Payments systems
4.1.2: ‘Others’ includes e-commerce transactions and digital bill payments through ATMs, etc.
4.2.2: ‘Others’ includes e-commerce transactions, card to card transfers and digital bill payments through ATMs, etc.
5: Available from December 2010.
5.1: includes purchase of goods and services and fund transfer through wallets.
5.2.2: includes usage of PPI Cards for online transactions and other transactions.
6.1: Pertain to three grids – Mumbai, New Delhi and Chennai.
6.2: ‘Others’ comprises of Non-MICR transactions which pertains to clearing houses managed by 21 banks.
Part II-A. Other payment channels
1: Mobile Payments –
o Include transactions done through mobile apps of banks and UPI apps.
o The data from July 2017 includes only individual payments and corporate payments initiated, processed, and authorised using mobile device. Other corporate payments which are not initiated,
processed, and authorised using mobile device are excluded.
2: Internet Payments – includes only e-commerce transactions through ‘netbanking’ and any financial transaction using internet banking website of the bank.
Part II-B. ATMs
3.3 and 4.2: only relates to transactions using bank issued PPIs.
Part III. Payment systems infrastructure
3: Includes ATMs deployed by Scheduled Commercial Banks (SCBs) and White Label ATM Operators (WLAOs). WLAs are included from April 2014 onwards.

318 RBI Bulletin October 2024

 CURRENT STATISTICS

Occasional Series
No. 44: Small Savings
(₹ Crore)
Scheme 2023-24 2023 2024
Mar. Jan. Feb. Mar.

1 2 3 4 5

1 Small Savings Receipts 232460 38052 16076 14570 46460

Outstanding 1865029 1636935 1805716 1819758 1865029

1.1 Total Deposits Receipts 161344 24221 11340 10025 29876

Outstanding 1298795 1137451 1258895 1268920 1298795
1.1.1 Post Office Saving Bank Deposits Receipts 17229 8856 3014 1520 7844

Outstanding 191692 209112 216978 218498 191692

1.1.2 Sukanya Samriddhi Yojna Receipts 35174 10316 2130 2233 13740

Outstanding 157611 87787 106989 109222 157611

1.1.3 National Saving Scheme, 1987 Receipts 0 0 0

Outstanding 0 0 0

1.1.4 National Saving Scheme, 1992 Receipts 0 0 0

Outstanding 0 0 0

1.1.5 Monthly Income Scheme Receipts 26696 114 1895 1927 1802

Outstanding 269007 242313 265278 267205 269007

1.1.6 Senior Citizen Scheme 2004 Receipts 38167 1318 2290 2153 1996

Outstanding 175472 137304 171323 173476 175472

1.1.7 Post Office Time Deposits Receipts 25341 1497 2379 2632 2776

Outstanding 305776 280436 300368 303000 305776

1.1.7.1 1 year Time Deposits Outstanding 140423 125951 136762 138552 140423

1.1.7.2 2 year Time Deposits Outstanding 11967 9497 11483 11730 11967

1.1.7.3 3 year Time Deposits Outstanding 8932 7543 8628 8782 8932

1.1.7.4 5 year Time Deposits Outstanding 144454 137445 143495 143936 144454

1.1.8 Post Office Recurring Deposits Receipts 18713 1585 -344 -420 1407

Outstanding 197134 178422 196147 195727 197134

1.1.9 Post Office Cumulative Time Deposits Receipts 0 0 0

Outstanding 0 0 0

1.1.10 Other Deposits Receipts 8 306 -24 -20 310

Outstanding 1754 1745 1464 1444 1754

1.1.11 PM Care for children Receipts 16 229 0 0 1

Outstanding 349 332 348 348 349

1.2 Saving Certificates Receipts 56069 3064 4247 3940 4612

Outstanding 418021 366317 411185 414597 418021
1.2.1 National Savings Certificate VIII issue Receipts 16853 1086 1581 1446 2508

Outstanding 183905 165836 178735 180181 183905

1.2.2 Indira Vikas Patras Receipts 0 0 0

Outstanding 0 0 0

1.2.3 Kisan Vikas Patras Receipts 0 0 0

Outstanding 0 0 0

1.2.4 Kisan Vikas Patras - 2014 Receipts 20939 1978 1561 1428 1062

Outstanding 220560 199624 218070 219498 220560

1.2.5 National Saving Certificate VI issue Receipts 0 0 0

Outstanding 0 0 0

1.2.6 National Saving Certificate VII issue Receipts 0 0 0

Outstanding 0 0 0

1.2.7 M.S. Certificates Receipts 18277 0 1105 1066 1042

Outstanding 18277 0 16169 17235 18277

1.2.8 Other Certificates Outstanding -4721 857 -1789 -2317 -4721

1.3 Public Provident Fund Receipts 15047 10767 489 605 11972

Outstanding 148213 133167 135636 136241 148213

Note : Data on receipts from April 2017 are net receipts, i.e., gross receipt minus gross payment.
Source: Accountant General, Post and Telegraphs.

RBI Bulletin October 2024 319

CURRENT STATISTICS

No. 45 : Ownership Pattern of Central and State Governments Securities

(Per cent)
Central Government Dated Securities
2023 2024
Category
Jun. Sep. Dec. Mar. Jun.
1 2 3 4 5
(A) Total (in ₹. Crore) 9898751 10383607 10538792 10740389 10946860
1 Commercial Banks 36.58 37.96 37.55 37.66 37.52
2 Co-operative Banks 1.56 1.52 1.49 1.47 1.42
3 Non-Bank PDs 0.73 0.66 0.67 0.66 0.70
4 Insurance Companies 26.21 26.05 26.16 25.98 26.11
5 Mutual Funds 2.69 3.02 3.03 2.90 2.87
6 Provident Funds 4.59 4.42 4.57 4.47 4.41
7 Pension Funds 4.18 4.32 4.44 4.52 4.74
8 Financial Institutions 1.20 0.54 0.55 0.55 0.57
9 Corporates 1.22 1.21 1.33 1.35 1.44
10 Foreign Portfolio Investors 1.59 1.61 1.92 2.34 2.34
11 RBI 13.78 13.06 12.54 12.31 11.92
12 Others 5.67 5.64 5.74 5.79 5.97
12.1 State Governments 2.03 2.04 2.07 2.04 2.13

State Governments Securities

2023 2024
Category
Jun. Sep. Dec. Mar. Jun.
1 2 3 4 5
(B) Total (in ₹. Crore) 5050874 5161642 5338587 5646219 5727482
1 Commercial Banks 34.13 33.87 33.90 34.14 33.85
2 Co-operative Banks 3.68 3.60 3.53 3.39 3.38
3 Non-Bank PDs 0.50 0.61 0.63 0.60 0.59
4 Insurance Companies 26.73 26.97 26.64 26.14 25.85
5 Mutual Funds 2.08 1.86 2.00 2.09 2.08
6 Provident Funds 21.19 21.70 22.00 22.35 22.94
7 Pension Funds 4.84 4.82 4.56 4.76 4.87
8 Financial Institutions 1.82 1.65 1.63 1.59 1.58
9 Corporates 1.92 1.87 2.03 2.02 2.03
10 Foreign Portfolio Investors 0.02 0.02 0.03 0.07 0.05
11 RBI 0.70 0.69 0.66 0.63 0.62
12 Others 2.39 2.34 2.37 2.20 2.17
12.1 State Governments 0.27 0.27 0.27 0.25 0.26

Treasury Bills
2023 2024
Category
Jun. Sep. Dec. Mar. Jun.
1 2 3 4 5
(C) Total (in ₹. Crore) 1012301 925317 849151 871662 858193
1 Commercial Banks 47.64 56.35 57.18 58.53 47.79
2 Co-operative Banks 1.20 1.20 1.28 1.67 1.49
3 Non-Bank PDs 1.99 0.54 1.70 1.66 2.69
4 Insurance Companies 4.93 5.26 5.50 5.06 5.78
5 Mutual Funds 17.04 12.74 11.21 11.89 14.50
6 Provident Funds 1.46 1.52 0.08 0.15 0.60
7 Pension Funds 0.01 0.01 0.00 0.01 0.00
8 Financial Institutions 7.96 4.10 5.34 7.16 6.56
9 Corporates 4.42 4.00 4.58 4.50 4.79
10 Foreign Portfolio Investors 0.12 0.10 0.07 0.01 0.20
11 RBI 0.00 0.00 0.00 0.00 0.00
12 Others 13.23 14.17 13.06 9.36 15.59
12.1 State Governments 10.33 11.36 9.26 5.88 11.55
Note: (-) represents nil or negligible
The Table format is revised since Monthly Bulletin for the month of June 2023.
State Government Securities include special bonds issued under Ujwal DISCOM Assurance Yojana (UDAY).
Bank PDs are clubbed under Commercial Banks. However, they form a small fraction of total outstanding securities.
The category ‘Others’ comprises State Governments, DICGC, PSUs, Trusts, Foreign Central Banks, HUF/Individuals etc.
Data since September 2023 includes the impact of the merger of a non-bank with a bank.

320 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 46: Combined Receipts and Disbursements of the Central and State Governments

(₹ Crore)
Item 2018-19 2019-20 2020-21 2021-22 2022-23 RE 2023-24 BE

1 2 3 4 5 6
1 Total Disbursements 5040747 5410887 6353359 7098451 8376972 9045119
1.1 Developmental 2882758 3074492 3823423 4189146 5073367 5426440
1.1.1 Revenue 2224367 2446605 3150221 3255207 3838714 3836447
1.1.2 Capital 596774 588233 550358 861777 1146013 1471534
1.1.3 Loans 61617 39654 122844 72163 88639 118460
1.2 Non-Developmental 2078276 2253027 2442941 2810388 3188699 3490946
1.2.1 Revenue 1965907 2109629 2271637 2602750 2988556 3277722
1.2.1.1 Interest Payments 894520 955801 1060602 1226672 1403183 1589435
1.2.2 Capital 111029 141457 169155 175519 196688 208268
1.2.3 Loans 1340 1941 2148 32119 3455 4957
1.3 Others 79713 83368 86995 98916 114906 127733
2 Total Receipts 5023352 5734166 6397162 7156342 8258187 9149787
2.1 Revenue Receipts 3797731 3851563 3688030 4823821 5706246 6337126
2.1.1 Tax Receipts 3278947 3231582 3193390 4160414 4837048 5477428
2.1.1.1 Taxes on commodities and services 2030050 2012578 2076013 2626553 2967610 3372525
2.1.1.2 Taxes on Income and Property 1246083 1216203 1114805 1530636 1865298 2100430
2.1.1.3 Taxes of Union Territories (Without Legislature) 2814 2800 2572 3225 4140 4473
2.1.2 Non-Tax Receipts 518783 619981 494640 663407 869198 859698
2.1.2.1 Interest Receipts 36273 31137 33448 35250 37974 45199
2.2 Non-debt Capital Receipts 140287 110094 64994 44077 88273 119373
2.2.1 Recovery of Loans & Advances 44667 59515 16951 27665 25661 34501
2.2.2 Disinvestment proceeds 95621 50578 48044 16412 62611 84872
3 Gross Fiscal Deficit [ 1 - ( 2.1 + 2.2 ) ] 1102729 1449230 2600335 2230553 2582453 2588620
3A Sources of Financing: Institution-wise
3A.1 Domestic Financing 1097210 1440548 2530155 2194406 2558579 2566503
3A.1.1 Net Bank Credit to Government 387091 571872 890012 627255 687904 ...
3A.1.1.1 Net RBI Credit to Government 325987 190241 107493 350911 529 ...
3A.1.2 Non-Bank Credit to Government 710119 868676 1640143 1567151 1870675 ...
3A.2 External Financing 5519 8682 70180 36147 23874 22118
3B Sources of Financing: Instrument-wise
3B.1 Domestic Financing 1097210 1440548 2530155 2194406 2558579 2566503
3B.1.1 Market Borrowings (net) 795845 971378 1696012 1213169 1776747 1902862
3B.1.2 Small Savings (net) 88961 209232 458801 526693 403838 441189
3B.1.3 State Provident Funds (net) 51004 38280 41273 28100 36454 37114
3B.1.4 Reserve Funds -18298 10411 4545 42153 3524 24429
3B.1.5 Deposits and Advances 66289 -14227 25682 42203 82485 58404
3B.1.6 Cash Balances 17395 -323279 -43802 -57891 118784 -104667
3B.1.7 Others 96014 548753 347643 399980 136748 207172
3B.2 External Financing 5519 8682 70180 36147 23874 22118
4 Total Disbursements as per cent of GDP 26.7 26.9 32.0 30.1 31.1 30.0
5 Total Receipts as per cent of GDP 26.6 28.5 32.2 30.3 30.6 30.3
6 Revenue Receipts as per cent of GDP 20.1 19.2 18.6 20.4 21.2 21.0
7 Tax Receipts as per cent of GDP 17.3 16.1 16.1 17.6 17.9 18.2
8 Gross Fiscal Deficit as per cent of GDP 5.8 7.2 13.1 9.5 9.6 8.6

… : Not available; RE: Revised Estimates; BE: Budget Estimates

Source : Budget Documents of Central and State Governments.
Note: GDP data is based on 2011-12 base. GDP for 2023-24 is from Union Budget 2023-24.
Data pertains to all States and Union Territories.
1 & 2: Data are net of repayments of the Central Government (including repayments to the NSSF) and State Governments.
1.3: Represents compensation and assignments by States to local bodies and Panchayati Raj institutions.
2: Data are net of variation in cash balances of the Central and State Governments and includes borrowing receipts of the Central and State Governments.
3A.1.1: Data as per RBI records.
3B.1.1: Borrowings through dated securities.
3B.1.2: Represent net investment in Central and State Governments’ special securities by the National Small Savings Fund (NSSF).
This data may vary from previous publications due to adjustments across components with availability of new data.
3B.1.6: Include Ways and Means Advances by the Centre to the State Governments.
3B.1.7: Include Treasury Bills, loans from financial institutions, insurance and pension funds, remittances, cash balance investment account.

RBI Bulletin October 2024 321

CURRENT STATISTICS

No. 47: Financial Accommodation Availed by State Governments under various Facilities
(₹ Crore)

During August-2024

Sr. State/Union Territory Special Drawing Ways and Means

Overdraft (OD)
No Facility (SDF) Advances (WMA)

Average Number Average Number Average Number

amount of days amount of days amount of days
availed availed availed availed availed availed
1 2 3 4 5 6 7
1 Andhra Pradesh 5714.85 31 2094.74 20 2022.88 5
2 Arunachal Pradesh - - - - - -
3 Assam 826.34 20 - - - -
4 Bihar - - - - - -
5 Chhattisgarh - - - - - -
6 Goa - - - - - -
7 Gujarat - - - - - -
8 Haryana 873.30 8 - - - -
9 Himachal Pradesh - - 448.88 10 160.06 3
10 Jammu & Kashmir UT - - 721.62 23 - -
11 Jharkhand - - - - - -
12 Karnataka - - - - - -
13 Kerala 1358.99 31 1150.33 23 1243.02 5
14 Madhya Pradesh - - - - - -
15 Maharashtra - - - - - -
16 Manipur 102.66 29 273.16 29 154.65 21
17 Meghalaya 419.35 31 81.14 11 - -
18 Mizoram 139.60 10 - - - -
19 Nagaland 10.92 3 - - - -
20 Odisha - - - - - -
21 Puducherry - - - - - -
22 Punjab 3772.69 31 351.22 10 - -
23 Rajasthan 3837.79 27 884.32 18 - -
24 Tamil Nadu - - - - - -
25 Telangana 4543.75 31 1901.27 25 746.92 11
26 Tripura - - - - - -
27 Uttar Pradesh - - - - - -
28 Uttarakhand 546.48 15 - - - -
29 West Bengal - - - - - -
Notes: 1. SDF is availed by State Governments against the collateral of Consolidated Sinking Fund (CSF), Guarantee Redemption Fund (GRF) & Auction
Treasury Bills (ATBs) balances and other investments in government securities.
2. WMA is advance by Reserve Bank of India to State Governments for meeting temporary cash mismatches.
3. OD is advanced to State Governments beyond their WMA limits.
4. Average Availed is the total accommodation (SDF/WMA/OD) availed divided by number of days for which accommodation
was extended during the month.
5.- : Nil.
Source: Reserve Bank of India.

322 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 48: Investments by State Governments

(₹ Crore)

As on end of August 2024

Consolidated Guarantee
Sr. State/Union Government Auction Treasury
Sinking Redemption
No Territory Securities Bills (ATBs)
Fund (CSF) Fund (GRF)
1 2 3 4 5
1 Andhra Pradesh 11222 1108 0 0
2 Arunachal Pradesh 2572 6 0 2850
3 Assam 7541 87 0 0
4 Bihar 12128 - 0 11700
5 Chhattisgarh 7573 477 0 8005
6 Goa 1019 444 0 0
7 Gujarat 13948 649 0 6000
8 Haryana 2270 1655 0 0
9 Himachal Pradesh - - 0 0
10 Jammu & Kashmir UT 19 18 0 0
11 Jharkhand 2347 - 0 750
12 Karnataka 19708 727 0 55612
13 Kerala 3021 - 0 0
14 Madhya Pradesh - 1237 0 0
15 Maharashtra 69705 1696 0 0
16 Manipur 67 136 0 0
17 Meghalaya 1237 105 0 0
18 Mizoram 446 61 0 0
19 Nagaland 1830 45 0 0
20 Odisha 17631 1986 114 7401
21 Puducherry 563 - 0 1300
22 Punjab 8891 0 0 0
23 Rajasthan 1142 - 129 8100
24 Tamil Nadu 3331 - 0 3481
25 Telangana 7673 1683 0 0
26 Tripura 1189 26 0 325
27 Uttarakhand 4862 204 0 0
28 Uttar Pradesh 10363 - 89 15000
29 West Bengal 12798 1002 239 0
Total 225096 13352 571 120524
Notes: 1. CSF and GRF are reserve funds maintained by some State Governments with the Reserve Bank of India.
2. ATBs include Treasury bills of 91 days, 182 days and 364 days invested by State Governments in the primary market.
3. - : Not Applicable (not a member of the scheme).

RBI Bulletin October 2024 323

CURRENT STATISTICS

No. 49: Market Borrowings of State Governments

(₹ Crore)

2024-25 Total amount

2022-23 2023-24 raised, so far in
June July August 2024-25
Sr. No. State
Gross Net Gross Net Gross Net Gross Net Gross Net
Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun Amoun Gross Net
t Raised t Raised t Raised t Raised t Raised t Raised t Raised t Raised t Raised t Raised

1 2 3 4 5 6 7 8 9 10 11 12 13
1 Andhra Pradesh 57478 45814 68400 55330 6000 4000 10000 10000 3000 2000 40000 31918
2 Arunachal Pradesh 559 389 902 672 - - - - - - - -146
3 Assam 17100 16105 18500 16000 - -450 1000 1000 2000 1500 6000 5050
4 Bihar 36800 27467 47612 29910 - - - - 6000 6000 6000 6000
5 Chhattisgarh 2000 -2287 32000 26213 - -250 - - 1500 -550 1500 -1300
6 Goa 1350 500 2550 1560 - -200 200 100 150 -50 350 -250
7 Gujarat 43000 28300 30500 11947 2000 -1000 - - 2500 2500 4500 1500
8 Haryana 45158 28638 47500 28364 5500 3925 3500 3345 4500 3500 16500 12770
9 Himachal Pradesh 14000 11941 8072 5856 1200 1000 500 350 500 350 3900 2650
10 Jammu & Kashmir UT 8473 5969 16337 13904 2300 2150 3000 2700 1550 1550 9350 8450
11 Jharkhand 4000 -155 1000 -2505 - - - - - - - -
12 Karnataka 36000 26000 81000 63003 - -1000 - -2000 - - - -4500
13 Kerala 30839 15620 42438 26638 3500 2500 4500 3000 6000 4300 20500 12600
14 Madhya Pradesh 40158 26849 38500 26264 - -350 - -2200 10000 10000 10000 6450
15 Maharashtra 72000 42815 110000 79738 - -2200 6000 3800 24000 21600 40000 29900
16 Manipur 1422 1147 1426 1076 - -60 200 200 200 200 600 540
17 Meghalaya 1753 1356 1364 912 200 120 400 400 - - 900 820
18 Mizoram 1315 1129 901 641 71 51 90 90 90 90 451 391
19 Nagaland 1854 1199 2551 2016 300 300 - - - - 300 100
20 Odisha 0 -7500 0 -4658 - - - -500 - - - -1000
21 Puducherry 1200 698 1100 475 250 150 - - - - 250 150
22 Punjab 45500 33660 42386 29517 5500 3658 4993 4993 3200 3200 24893 20551
23 Rajasthan 46057 30110 73624 49718 8000 3688 7000 5500 5000 3750 30500 20938
24 Sikkim 1414 1320 1916 1701 - - - - - -130 - -130
25 Tamil Nadu 87000 65722 113001 75970 8000 4750 12000 9500 8000 6000 41000 26750
26 Telangana 40150 30922 49618 39385 5000 5000 8000 8000 6000 6000 27000 23082
27 Tripura 0 -645 0 -550 - - - - - - - -
28 Uttar Pradesh 55612 41797 97650 85335 - -1233 - - - - - -4233
29 Uttarakhand 3200 1450 6300 3800 500 500 - - - - 1400 1400
30 West Bengal 63000 42500 69910 48910 3500 2500 7000 5500 5000 3500 17500 9900
Grand Total 758392 518829 1007058 717140 51821 27549 68383 53778 89190 75310 303394 210351

- : Nil.
Note: The State of J&K has ceased to exist constitutionally from October 31, 2019 and the liabilities of the State continue to remain as liabilities of
the new UT of Jammu and Kashmir.
Source: Reserve Bank of India.

324 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 50 (a): Flow of Financial Assets and Liabilities of Households - Instrument-wise

(Amount in ` Crore)
2020-21
Item
Q1 Q2 Q3 Q4 Annual
Net Financial Assets (I-II) 583412.7 554437.6 463583.5 679174.4 2280608.2
Per cent of GDP 15.0 11.7 8.5 11.8 11.5
I. Financial Assets 788786.3 592945.3 633317.9 1047276.1 3062325.6
Per cent of GDP 20.3 12.5 11.6 18.2 15.4
of which:
1.Total Deposits (a+b) 297412.4 278631.7 158172.2 506213.3 1240429.7
(a) Bank Deposits 281191.3 264565.3 147096.0 507719.3 1200571.8
i. Commercial Banks 279010.5 262033.7 143558.6 462689.8 1147292.5
ii. Co-operative Banks 2180.8 2531.6 3537.3 45029.5 53279.3
(b) Non-Bank Deposits 16221.1 14066.4 11076.3 -1506.0 39857.9
of which:
Other Financial Institutions (i+ii) 11040.9 8886.2 5896.0 -6686.2 19137.0
i. Non-Banking Financial Companies 1441.0 3763.0 3514.8 3521.2 12240.0
ii. Housing Finance Companies 9599.9 5123.2 2381.3 -10207.3 6897.0
2. Life Insurance Funds 124387.9 143462.2 157535.1 142216.5 567601.8
3. Provident and Pension Funds (including PPF) 114496.3 107087.9 105344.6 175769.3 502698.2
4. Currency 202432.7 21286.9 91456.0 66800.5 381976.1
5. Investments 6249.8 -12956.4 67659.3 63624.0 124576.7
of which:
(a) Mutual Funds -16021.0 -28837.7 57675.4 51267.0 64083.8
(b) Equity 18599.4 8291.5 5307.1 6333.3 38531.2
6. Small Savings (excluding PPF) 42751.6 54377.4 52095.1 91597.0 240821.1
II. Financial Liabilities 205373.6 38507.7 169734.4 368101.7 781717.4
Per cent of GDP 5.3 0.8 3.1 6.4 3.9
Loans/Borrowings
1. Financial Corporations (a+b) 205490.3 38624.3 169851.0 368219.1 782184.7
(a) Banking Sector 211058.8 13213.0 139622.0 276579.8 640473.6
of which:
i. Commercial Banks 211259.3 13213.8 140514.3 240050.4 605037.9
(b) Other Financial Institutions -5568.6 25411.3 30229.0 91639.4 141711.1
i. Non-Banking Financial Companies -15450.4 21627.1 15921.2 64881.1 86979.0
ii. Housing Finance Companies 10516.6 2875.1 13048.5 25336.1 51776.2
iii. Insurance Corporations -634.8 909.2 1259.3 1422.2 2955.9
2. Non-Financial Corporations (Private Corporate Business) 33.8 33.8 33.8 33.0 134.4
3. General Government -150.4 -150.4 -150.4 -150.4 -601.7

RBI Bulletin October 2024 325

CURRENT STATISTICS

No. 50 (a): Flow of Financial Assets and Liabilities of Households - Instrument-wise (Contd.)
(Amount in ` Crore)
2021-22
Item
Q1 Q2 Q3 Q4 Annual
Net Financial Assets (I-II) 370115.8 334234.9 489774.4 503089.0 1696155.6
Per cent of GDP 7.2 6.0 7.9 7.7 7.2
I. Financial Assets 364661.7 527896.1 818355.4 887657.3 2597511.9
Per cent of GDP 7.1 9.4 13.1 13.6 11.1
of which:
1.Total Deposits (a+b) -82726.1 204033.6 426977.3 277625.7 824852.1
(a) Bank Deposits -106428.9 197105.1 422392.9 264882.9 777952.1
i. Commercial Banks -107940.7 195441.8 418267.0 262326.1 768094.3
ii. Co-operative Banks 1511.8 1663.4 4125.9 2556.8 9857.8
(b) Non-Bank Deposits 23702.8 6928.5 4584.5 12742.8 46900.0
of which:
Other Financial Institutions (i+ii) 16950.0 170.7 -2178.3 5960.0 20902.3
i. Non-Banking Financial Companies 4972.6 -765.5 73.3 4211.8 8492.2
ii. Housing Finance Companies 11977.3 936.2 -2251.6 1748.2 12410.1
2. Life Insurance Funds 114711.5 127449.8 103248.6 121541.6 466951.5
3. Provident and Pension Funds (including PPF) 127624.0 115463.1 98146.0 221372.4 562605.5
4. Currency 128660.2 -68631.2 62793.3 146845.0 269667.4
5. Investments 24929.6 82305.4 69760.9 50972.1 227967.9
of which:
(a) Mutual Funds 14573.0 63151.3 37912.2 44963.7 160600.1
(b) Equity 4502.5 13218.5 27808.2 3084.1 48613.3
6. Small Savings (excluding PPF) 50405.2 66218.1 56372.0 68243.2 241238.4
II. Financial Liabilities -5454.1 193661.2 328581.0 384568.3 901356.3
Per cent of GDP -0.1 3.5 5.3 5.9 3.8
Loans/Borrowings
1. Financial Corporations (a+b) -5562.3 193553.0 328472.8 384460.1 900923.7
(a) Banking Sector 21436.5 138722.6 267950.7 348360.4 776470.2
of which:
i. Commercial Banks 26978.6 140268.7 265271.5 337009.8 769528.5
(b) Other Financial Institutions -26998.8 54830.4 60522.2 36099.7 124453.5
i. Non-Banking Financial Companies -34757.9 28876.8 29476.5 -2163.2 21432.2
ii. Housing Finance Companies 7132.0 24403.8 29494.8 37436.2 98466.8
iii. Insurance Corporations 627.1 1549.8 1550.9 826.7 4554.5
2. Non-Financial Corporations (Private Corporate Business) 33.8 33.8 33.8 33.8 135.1
3. General Government 74.4 74.4 74.4 74.4 297.4

326 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 50 (a): Flow of Financial Assets and Liabilities of Households - Instrument-wise (Concld.)
(Amount in ` Crore)
2022-23
Item
Q1 Q2 Q3 Q4 Annual
Net Financial Assets (I-II) 297770.4 293705.1 279460.1 505937.8 1376873.5
Per cent of GDP 4.6 4.5 4.0 7.0 5.1
I. Financial Assets 586920.5 646714.8 750856.7 974558.5 2959050.5
Per cent of GDP 9.0 9.8 10.8 13.6 10.9
of which:
1.Total Deposits (a+b) 183072.0 315216.2 276593.9 324746.6 1099628.6
(a) Bank Deposits 163162.9 299545.0 256363.7 307491.6 1026563.1
i. Commercial Banks 158613.3 300565.0 248459.8 284968.0 992606.2
ii. Co-operative Banks 4549.6 -1020.1 7903.8 22523.6 33956.9
(b) Non-Bank Deposits 19909.1 15671.3 20230.2 17255.0 73065.5
of which:
Other Financial Institutions (i+ii) 6314.4 2076.7 6635.6 3660.4 18687.1
i. Non-Banking Financial Companies 4040.2 3267.2 1800.9 5372.2 14480.5
ii. Housing Finance Companies 2274.2 -1190.5 4834.7 -1711.8 4206.6
2. Life Insurance Funds 73669.9 152049.5 167894.1 141206.6 534820.1
3. Provident and Pension Funds (including PPF) 155604.2 132126.0 140204.4 235093.2 663027.7
4. Currency 66438.9 -54579.3 76760.1 148990.2 237609.8
5. Investments 51603.2 48630.6 49879.2 64168.5 214281.5
of which:
(a) Mutual Funds 35443.5 44484.0 40205.9 58954.5 179087.8
(b) Equity 13560.9 1378.2 6434.1 1664.9 23038.1
6. Small Savings (excluding PPF) 54375.1 51114.5 37367.7 58196.2 201053.5
II. Financial Liabilities 289150.0 353009.7 471396.5 468620.7 1582177.0
Per cent of GDP 4.4 5.4 6.8 6.5 5.8
Loans/Borrowings
1. Financial Corporations (a+b) 289141.6 353001.2 471388.1 468612.3 1582143.3
(a) Banking Sector 234845.3 263782.5 368167.4 349555.0 1216350.1
of which:
i. Commercial Banks 230283.8 261265.3 365304.6 331292.5 1188146.3
(b) Other Financial Institutions 54296.3 89218.8 103220.8 119057.3 365793.1
i. Non-Banking Financial Companies 29281.6 54439.6 75878.8 80295.9 239895.9
ii. Housing Finance Companies 22336.7 33031.2 24903.3 36745.8 117017.0
iii. Insurance Corporations 2678.0 1747.9 2438.7 2015.6 8880.3
2. Non-Financial Corporations (Private Corporate Business) 33.7 33.7 33.7 33.7 135.0
3. General Government -25.3 -25.3 -25.3 -25.3 -101.3

Notes :1. Net Financial Savings of households refer to the net financial assets, which are measured as difference of financial asset and
liabilities flows.
2. Preliminary estimates for 2022-23 and revised estimates for 2020-21 and 2021-22.
3. The preliminary estimates for 2022-23 will undergo revision with the release of first revised estimates of national income,
consumption expenditure, savings, and capital formation, 2022-23 by the NSO.
4. Non-bank deposits apart from other financial institutions, comprises state power utilities, co-operative non credit societies etc.
5. Figures in the columns may not add up to the total due to rounding off.

RBI Bulletin October 2024 327

CURRENT STATISTICS

No. 50 (b): Stocks of Financial Assets and Liabilities of Households- Select Indicators
(Amount in ` Crore)

Item Jun-2020 Sep-2020 Dec-2020 Mar-2021

Financial Assets (a+b+c+d+e+f+g+h) 20405824.2 21066027.8 21906338.5 22874301.5

Per cent of GDP 107.2 111.5 114.0 115.4

(a) Bank Deposits (i+ii) 9977865.6 10242430.9 10389526.9 10897246.1

i. Commercial Banks 9192702.5 9454736.2 9598294.8 10060984.6

ii. Co-operative Banks 785163.1 787694.7 791232.1 836261.6

(b) Non-Bank Deposits

of which:

Other Financial Institutions 180857.4 189743.6 195639.6 188953.5

i. Non-Banking Financial Companies 51463.0 55226.1 58740.8 62262.0

ii. Housing Finance Companies 129394.4 134517.6 136898.8 126691.5

(c) Life Insurance Funds 4102000.7 4274424.9 4551882.0 4752932.3

(d) Currency 2434693.7 2455980.6 2547436.6 2614237.0

(e) Mutual funds 1343752.0 1443784.4 1648999.0 1730461.0

(f) Public Provident Fund (PPF) 663478.0 671884.3 678997.2 742189.5

(g) Pension Funds 464705.0 494930.0 548913.0 578025.0

(h) Small Savings (excluding PPF) 1238471.7 1292849.1 1344944.2 1370257.1

Financial Liabilities (a+b) 7190710.8 7229335.1 7399186.1 7767405.3

Per cent of GDP 37.8 38.3 38.5 39.2

Loans/Borrowings

(a) Banking Sector 5728735.3 5741948.3 5881570.2 6158150.0

of which:

i. Commercial Banks 5226482.2 5239696.0 5380210.4 5620260.7

ii. Co-operative Banks 500870.2 500865.3 499968.8 536494.1

(b) Other Financial Institutions 1461975.5 1487386.9 1517615.9 1609255.3

of which:

i. Non-Banking Financial Companies 687643.6 709270.7 725191.9 790073.0

ii. Housing Finance Companies 673118.3 675993.4 689041.8 714377.9

iii. Insurance Corporations 101213.7 102122.8 103382.2 104804.4

328 RBI Bulletin October 2024

 CURRENT STATISTICS

No. 50 (b): Stocks of Financial Assets and Liabilities of Households- Select Indicators (Contd.)
(Amount in ` Crore)

Item Jun-2021 Sep-2021 Dec-2021 Mar-2022

Financial Assets (a+b+c+d+e+f+g+h) 23318920.4 23991428.3 24700622.2 25435684.2

Per cent of GDP 110.7 109.3 108.7 108.4

(a) Bank Deposits (i+ii) 10790817.3 10987922.4 11410315.3 11675198.2

i. Commercial Banks 9953043.9 10148485.7 10566752.7 10829078.8

ii. Co-operative Banks 837773.4 839436.7 843562.6 846119.4

(b) Non-Bank Deposits

of which:

Other Financial Institutions 205903.4 206074.1 203895.8 209855.7

i. Non-Banking Financial Companies 67234.6 66469.1 66542.3 70754.2

ii. Housing Finance Companies 138668.8 139605.0 137353.4 139101.6

(c) Life Insurance Funds 4929725.2 5142278.8 5213527.2 5357350.2

(d) Currency 2742897.3 2674266.1 2737059.4 2883904.4

(e) Mutual funds 1855000.1 2064363.5 2126112.0 2152140.5

(f) Public Provident Fund (PPF) 757397.8 762264.0 767287.3 834147.6

(g) Pension Funds 616517.0 667379.0 699173.0 736592.0

(h) Small Savings (excluding PPF) 1420662.3 1486880.4 1543252.3 1586495.5

Financial Liabilities (a+b) 7755119.8 7868215.0 8256715.7 8668329.0

Per cent of GDP 36.8 35.9 36.3 36.9

Loans/Borrowings

(a) Banking Sector 6172863.3 6231128.1 6559106.7 6934620.2

of which:

i. Commercial Banks 5640516.1 5700327.0 6025626.4 6389789.3

ii. Co-operative Banks 530937.1 529376.2 532040.6 543376.3

(b) Other Financial Institutions 1582256.5 1637086.9 1697609.1 1733708.8

of which:

i. Non-Banking Financial Companies 755315.1 784191.9 813668.4 811505.2

ii. Housing Finance Companies 721510.0 745913.7 775408.5 812844.7

iii. Insurance Corporations 105431.4 106981.2 108532.1 109358.8

RBI Bulletin October 2024 329

CURRENT STATISTICS

No. 50 (b): Stocks of Financial Assets and Liabilities of Households- Select Indicators (Concld.)
(Amount in ` Crore)

Item Jun-2022 Sep-2022 Dec-2022 Mar-2023

Financial Assets (a+b+c+d+e+f+g+h) 25689017.4 26240728.5 27208717.9 28083947.0

Per cent of GDP 103.2 101.5 102.4 103.1

(a) Bank Deposits (i+ii) 11911196.2 11956360.9 12421907.5 12701761.3

i. Commercial Banks 11060527.2 11106712.0 11564354.7 11821685.0

ii. Co-operative Banks 850669.0 849648.9 857552.8 880076.4

(b) Non-Bank Deposits

of which:

Other Financial Institutions 216170.2 218246.9 224882.5 228542.9

i. Non-Banking Financial Companies 74794.4 78061.6 79862.5 85234.7

ii. Housing Finance Companies 141375.8 140185.3 145020.0 143308.2

(c) Life Insurance Funds 5325967.3 5559681.9 5786592.6 6038630.4

(d) Currency 2950343.2 2895763.9 2972524.0 3121514.2

(e) Mutual funds 2048097.3 2260209.7 2355315.8 2367792.5

(f) Public Provident Fund (PPF) 851913.4 858591.1 864730.6 939814.6

(g) Pension Funds 744459.2 799889.0 853412.0 898342.0

(h) Small Savings (excluding PPF) 1640870.6 1691985.1 1729352.9 1787549.1

Financial Liabilities (a+b) 8957470.6 9310471.8 9781859.9 10253472.2

Per cent of GDP 36.0 36.0 36.8 37.6

Loans/Borrowings

(a) Banking Sector 7169465.5 7433248.0 7801415.3 8153970.3

of which:

i. Commercial Banks 6620073.1 6881338.5 7246643.0 7580935.6

ii. Co-operative Banks 547894.8 550354.8 553201.4 571339.8

(b) Other Financial Institutions 1788005.1 1877223.8 1980444.6 2099501.9

of which:

i. Non-Banking Financial Companies 840786.9 895226.5 971105.3 1051401.1

ii. Housing Finance Companies 835181.3 868212.5 893115.8 929861.7

iii. Insurance Corporations 112036.9 113784.8 116223.5 118239.1

Note : 1. Data as ratios to GDP have been calculated based on the Provisional Estimates of National Income 2022-23, released by
NSO on May 31, 2023.
2. Pension funds comprises funds with the National Pension Scheme.
3. Outstanding deposits with Small Savings are sourced from the Controller General of Accounts, Government of India.
4. Non-bank deposits apart from other financial institutions, comprises state power utilities, co-operative non credit
societies etc. Data for outstanding deposits are available only for other financial institutions.
5. Figures in the columns may not add up to the total due to rounding off.

330 RBI Bulletin October 2024

 CURRENT STATISTICS

Explanatory Notes to the Current Statistics

Table No. 1
1.2& 6: Annual data are average of months.
3.5 & 3.7: Relate to ratios of increments over financial year so far.
4.1 to 4.4, 4.8,4.9 &5: Relate to the last friday of the month/financial year.
4.5, 4.6 & 4.7: Relate to five major banks on the last Friday of the month/financial year.
4.10 to 4.12: Relate to the last auction day of the month/financial year.
4.13: Relate to last day of the month/ financial year
7.1&7.2: Relate to Foreign trade in US Dollar.

Table No. 2
2.1.2: Include paid-up capital, reserve fund and Long-Term Operations Funds.
2.2.2: Include cash, fixed deposits and short-term securities/bonds, e.g., issued by IIFC (UK).

Table No. 4
Maturity-wise position of outstanding forward contracts is available at http://nsdp.rbi.org.in under
‘‘Reserves Template’’.

Table No. 5
Special refinance facility to Others, i.e. to the EXIM Bank, is closed since March 31, 2013.

Table No. 6
For scheduled banks, March-end data pertain to the last reporting Friday.
2.2: Exclude balances held in IMF Account No.1, RBI employees’ provident fund, pension fund, gratuity and
superannuation fund.

Table Nos. 7 & 11

3.1 in Table 7 and 2.4 in Table 11: Include foreign currency denominated bonds issued by IIFC (UK).

Table No. 8
NM2 and NM3 do not include FCNR (B) deposits.
2.4: Consist of paid-up capital and reserves.
2.5: includes other demand and time liabilities of the banking system.

Table No. 9
Financial institutions comprise EXIM Bank, SIDBI, NABARD and NHB.
L1 and L2 are compiled monthly and L3 quarterly.
Wherever data are not available, the last available data have been repeated.

Table No. 13
Data against column Nos. (1), (2) & (3) are Final and for column Nos. (4) & (5) data are Provisional.

RBI Bulletin October 2024 331

CURRENT STATISTICS

Table No. 14
Data in column Nos. (4) & (8) are Provisional.

Table No. 17
2.1.1: Exclude reserve fund maintained by co-operative societies with State Co-operative Banks
2.1.2: Exclude borrowings from RBI, SBI, IDBI, NABARD, notified banks and State Governments.
4: Include borrowings from IDBI and NABARD.

Table No. 24
Primary Dealers (PDs) include banks undertaking PD business.

Table No. 30
Exclude private placement and offer for sale.
1: Exclude bonus shares.
2: Include cumulative convertible preference shares and equi-preference shares.

Table No. 32
Exclude investment in foreign currency denominated bonds issued by IIFC (UK), SDRs transferred by Government
of India to RBI and foreign currency received under SAARC and ACU currency swap arrangements. Foreign
currency assets in US dollar take into account appreciation/depreciation of non-US currencies (such as Euro,
Sterling, Yen and Australian Dollar) held in reserves. Foreign exchange holdings are converted into rupees at
rupee-US dollar RBI holding rates.

Table No. 34
1.1.1.1.2 & 1.1.1.1.1.4: Estimates.
1.1.1.2: Estimates for latest months.
‘Other capital’ pertains to debt transactions between parent and subsidiaries/branches of FDI enterprises.
Data may not tally with the BoP data due to lag in reporting.

Table No. 35
1.10: Include items such as subscription to journals, maintenance of investment abroad, student loan repayments
and credit card payments.

Table No. 36
Increase in indices indicates appreciation of rupee and vice versa. For 6-Currency index, base year 2021-22 is a
moving one, which gets updated every year. REER figures are based on Consumer Price Index (combined). The
details on methodology used for compilation of NEER/REER indices are available in December 2005, April 2014
and January 2021 issues of the RBI Bulletin.

Table No. 37
Based on applications for ECB/Foreign Currency Convertible Bonds (FCCBs) which have been allotted loan
registration number during the period.

332 RBI Bulletin October 2024

 CURRENT STATISTICS

Table Nos. 38, 39, 40 & 41

Explanatory notes on these tables are available in December issue of RBI Bulletin, 2012.

Table No. 43
Part I-A. Settlement systems
1.1.3: Tri- party Repo under the securities segment has been operationalised from November 05, 2018.
Part I-B. Payments systems
4.1.2: ‘Others’ includes e-commerce transactions and digital bill payments through ATMs, etc.
4.2.2: ‘Others’ includes e-commerce transactions, card to card transfers and digital bill payments through
ATMs, etc.
5: Available from December 2010.
5.1: includes purchase of goods and services and fund transfer through wallets.
5.2.2: includes usage of PPI Cards for online transactions and other transactions.
6.1: Pertain to three grids – Mumbai, New Delhi and Chennai.
6.2: ‘Others’ comprises of Non-MICR transactions which pertains to clearing houses managed by 21 banks.
Part II-A. Other payment channels
1: Mobile Payments –
o Include transactions done through mobile apps of banks and UPI apps.
o The data from July 2017 includes only individual payments and corporate payments initiated,
processed, and authorised using mobile device. Other corporate payments which are not initiated,
processed, and authorised using mobile device are excluded.
2: Internet Payments – includes only e-commerce transactions through ‘netbanking’ and any financial
transaction using internet banking website of the bank.
Part II-B. ATMs
3.3 and 4.2: only relates to transactions using bank issued PPIs.
Part III. Payment systems infrastructure
3: Includes ATMs deployed by Scheduled Commercial Banks (SCBs) and White Label ATM Operators
(WLAOs). WLAs are included from April 2014 onwards.

Table No. 45
(-) represents nil or negligible
The table format is revised since June 2023 issue of the bulletin.
State Government Securities include special bonds issued under Ujjwal DISCOM Assurance Yojana (UDAY).
Bank PDs are clubbed under Commercial Banks. However, they form very small fraction of total outstanding
securities.
The category ‘Others’ comprises State Governments, DICGC, PSUs, Trusts, Foreign Central Banks, HUF/
Individuals etc.
Data since September 2023 includes the impact of the merger of a non-bank with a bank.

RBI Bulletin October 2024 333

CURRENT STATISTICS

Table No. 46
GDP data is based on 2011-12 base. GDP for 2023-24 is from Union Budget 2023-24.
Data pertains to all States and Union Territories.
1 & 2: Data are net of repayments of the Central Government (including repayments to the NSSF) and State
Governments.
1.3: Represents compensation and assignments by States to local bodies and Panchayati Raj institutions.
2: Data are net of variation in cash balances of the Central and State Governments and includes borrowing
receipts of the Central and State Governments.
3A.1.1: Data as per RBI records.
3B.1.1: Borrowings through dated securities.
3B.1.2: Represent net investment in Central and State Governments’ special securities by the National Small
Savings Fund (NSSF).
This data may vary from previous publications due to adjustments across components with availability of new
data.
3B.1.6: Include Ways and Means Advances by the Centre to the State Governments.
3B.1.7: Include Treasury Bills, loans from financial institutions, insurance and pension funds, remittances, cash
balance investment account.

Table No. 47
SDF is availed by State Governments against the collateral of Consolidated Sinking Fund (CSF), Guarantee
Redemption Fund (GRF) & Auction Treasury Bills (ATBs) balances and other investments in government
securities.
WMA is advance by Reserve Bank of India to State Governments for meeting temporary cash mismatches.
OD is advanced to State Governments beyond their WMA limits.
Average amount Availed is the total accommodation (SDF/WMA/OD) availed divided by number of days for
which accommodation was extended during the month.
- : Nil.

Table No. 48
CSF and GRF are reserve funds maintained by some State Governments with the Reserve Bank of India.
ATBs include Treasury bills of 91 days, 182 days and 364 days invested by State Governments in the primary
market.
--: Not Applicable (not a member of the scheme).

The concepts and methodologies for Current Statistics are available in Comprehensive Guide for Current
Statistics of the RBI Monthly Bulletin (https://rbi.org.in/Scripts/PublicationsView.aspx?id=17618)

Time series data of ‘Current Statistics’ is available at https://data.rbi.org.in.

Detailed explanatory notes are available in the relevant press releases issued by RBI and other publications/releases
of the Bank such as Handbook of Statistics on the Indian Economy.

334 RBI Bulletin October 2024

 RECENT PUBLICATIONS

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Notes
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RBI Bulletin October 2024 335

RECENT PUBLICATIONS

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336 RBI Bulletin October 2024