The Reserve Bank of India (RBI) paper has said inflation is slowing down personal consumption expenditure, which in turn is moderating corporate sales and holding back private investment in capacity creation. The paper, authored by a team led by RBI Deputy Governor Michael Debabrata Patra, underlined the need for lowering inflation to revive consumer spending and boost corporate revenues and profitability.
The retail inflation based on the consumer price index (CPI), which remained above 5 per cent during 2022-23, is now on the decline and fell to a two-year low of 4.25 per cent in May, following RBI’s monetary policy actions and government measures. Further, it said that bringing down inflation and stabilising inflation expectations will revive consumer spending, and boost corporate revenues and profitability, which is the best incentive for private capex.
Besides, it said global economic activity has sustained its growth momentum in the second quarter of 2023, albeit with two diverging roads. It added while economies like India are rebounding, some others are slowing or contracting.
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