PR1345202425

�ेस �काशनी PRESS RELEASE
भारतीय �रज़वर् ब�क

RESERVE BANK OF INDIA
0 वेबसाइट : www.rbi.org.in/hindi संचार िवभाग, क� �ीय कायार्लय, शहीद भगत �संह मागर्, फोटर्, मुब
ं ई - 400 001
Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मेल/email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502
October 21, 2024
RBI Bulletin – October 2024
Today, the Reserve Bank released the October 2024 issue of its monthly Bulletin.
The Bulletin includes Monetary Policy Statement (October 7-9) 2024-2025, six
speeches, seven articles, and current statistics.
The seven articles are: I. State of the Economy; II. Monetary Policy Transmission
in India: The Recent Experience; III. Nowcasting Food Inflation in India: Leveraging
Price and Non-Price Signals through Machine Learning; IV. How Indian Banks are
Adopting Artificial Intelligence?; V. COVID-19 and Performance of MSME Clusters in
India; VI. Cash Usage Indicator for India; and VII. New Digital Economy and the
Paradox of Productivity.
I. State of the Economys
The global economy remained resilient in H1:2024, with declining inflation

supporting household spending. Stable growth momentum amidst monetary policy
easing is becoming the prevailing theme across most economies. In spite of
geopolitical tensions, India’s growth outlook is supported by robust domestic engines.
Some high frequency indicators have, however, shown a slackening of momentum in
the second quarter of 2024-25 partly attributable to idiosyncratic factors like unusually
heavy rains in August and September. Looking ahead, private investment is showing
some encouraging signs in terms of lead indicators while consumption spending is
shaping up for a festival season revival. After remaining below target for two
consecutive months, inflation surged in September, as an adverse statistical base
effect was compounded by a resurgence in food price momentum.
II. Monetary Policy Transmission in India: The Recent Experience
By Michael Debabrata Patra, Indranil Bhattacharyya, Joice John, and Avnish Kumar
This article examines the impact of the monetary policy tightening that was
undertaken since May 2022 in India, propagating through the spectrum of financial
markets to the real economy.
Highlights:
• Monetary policy shocks significantly affected money, government

securities, and corporate bond market segments with relatively smaller effects
on the forex and stock market.
• Policy rate tightening could anchor inflation expectations – reducing

aggregate demand and headline inflation by 160 bps each till Q2:2024-25.
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III. Nowcasting Food Inflation in India: Leveraging Price and Non-Price Signals
through Machine Learning
By Nishant Singh and Abhiruchi Rathi
The high share of food items in India’s Consumer Price Index (CPI) and the
associated large price volatility makes accurate forecasting of food inflation crucial for
headline inflation projections. A valuable input for precise forecasts is nowcast – the
current-period inflation projection. Leveraging the increasing availability of granular
data, this study investigates predictive power of high frequency price and non-price
indicators for nowcasting food inflation in India. The study further explores utility of
machine learning (ML) techniques over traditional linear benchmarks.
Highlights:
• The empirical findings demonstrate that expanding the input information
set and going beyond conventional univariate modelling to include high
frequency retail and wholesale food prices, as well as non-price information
including rainfall, wages and mandi crop arrivals, among others, improves
nowcast accuracy.
• Nowcast accuracy is further enhanced by employing regularisation

(shrinkage) methods and Deep Learning ML models which are known to excel
in processing high-dimensional data and capturing non-linearities.
• Combining diverse models through combination nowcasts further

boosts accuracy, advocating for the adoption of an ensemble approach in
predictive modelling exercises.
IV. How Indian Banks are Adopting Artificial Intelligence?
By Shobhit Goel, Dirghau K. Raut, Madhuresh Kumar, and Manu Sharma
Artificial Intelligence (AI) and related technologies have witnessed rapid evolution
and adoption across different sectors of the economy. The banking sector is also
exploring potential use cases of AI to improve the service efficiency and quality. This
article provides empirical reflections on AI adoption for major public and private
sector banks in India, using text mining techniques on the banks’ annual reports from
2015-16 to 2022-23. It also examines the relationship between financial indicators
and AI exploration by the banks.
Highlights:
• Banks are exploring AI and related technologies for use cases such as
customer service chatbots, predictive analysis, customer segmentation, risk
assessment and fraud detection.
• The focus towards AI-related technologies by Indian banks has

increased steadily in recent years, exploring newer technologies like Robotic
Process Automation (RPA), Internet of Things (IoT) and Natural Language
Processing (NLP).
• While private sector banks were initially more proactive towards AI and
related technologies, there is increased frequency of AI-related technologies in
the annual reports of public sector banks, which suggests their increased
3
focus on AI in recent years, with many public-sector banks now appearing to

be broadly at par with their private sector peers.
• The size of total assets and capital to risk-weighted assets ratio (CRAR)
of banks are found to be positively associated with AI adoption, reflecting the
role of economies of scale and financial health in influencing technological
adoption.
V. COVID-19 and Performance of MSME Clusters in India
By Rajib Das, Dhanya V, Amarendra Acharya, Ramesh Golait, Silu Muduli, and Arjit
Shivhare
This article evaluates the performance of Micro, Small, and Medium Enterprises
(MSMEs) in the post-COVID scenario, using data from a primary survey conducted
among select MSME clusters in India. It also examines the state of formalisation of
MSMEs across various clusters.
Highlights:
• A substantial portion of the MSMEs in the surveyed clusters have

formalised their operations through registration.
• Based on the survey, the majority of MSME firms are found to be bank-
linked with nearly 70 per cent of MSME units disbursing employee salaries
through their bank accounts. About 98 per cent of medium enterprises made
direct salary deposits into employees’ bank accounts; this proportion was
around 67 per cent for micro enterprises.
• The surveyed MSME firms mostly used personal savings, trade credit
and retained earnings to manage their enterprises' expenses. Nearly 80 per
cent of loans are taken from institutional sources, with 96 per cent of the
quantum coming from institutional sources.
• The challenges faced by MSMEs are predominantly structural.

Expenses related to electricity, rent, and debt service emerge as the key
factors influencing the net profit margin of MSMEs.
• Liquidity and regulatory measures by the Reserve Bank and

Government schemes such as the Emergency Credit Line Guarantee Scheme
(ECLGS) supported these enterprises in the aftermath of the pandemic.
VI. Cash Usage Indicator for India
By Pradip Bhuyan
The anonymity of cash payments hinders the direct measurement of use of cash
as a payment mode. This article explores various approaches to measure cash
usage and develops a quarterly cash usage indicator (CUI) to measure the use of
cash as a mode of payment in India.
Highlights
• Values of CUI reveal that cash usage in India is significant but steadily
declining.
4
• The indicator proposed in the paper may be a useful tool to monitor the
usage of cash in the country.
• The indicator could provide valuable insights to enhance policies on
currency management in the country.
VII. New Digital Economy and the Paradox of Productivity
By Sadhan Kumar Chattopadhyay, Sreerupa Sengupta, and Shruti Joshi
Digital technologies are transforming economies and have the potential to

substantially enhance the overall productivity of firms in many sectors of the
economy. Ironically, the emergence of new digital technologies surrounding cloud
computing, big data, and robotics coincided with a productivity decline in OECD
countries – a phenomenon often known as the ‘Solow productivity paradox’. Against
this background, this article estimates the contribution of digitalisation to productivity
growth and examines the Solow productivity paradox for India.
Highlights:
• The contribution of Information and Communication Technology (ICT) to

output growth increased from 5.0 per cent in 1981-1990 to 13.2 per cent
during 1992-2023.
• On average, the ICT sector's productivity fared better than the non-ICT sector
for the whole sample period.
• The productivity impact of ICT was the highest from 1980 to 2000, refuting
Solow’s productivity paradox for India. During the post-global financial crisis
(GFC) period, Solow’s productivity paradox in India is observed in consonance
with the global trend.
The views expressed in the Bulletin articles are of the authors and do not
represent the views of the Reserve Bank of India.
(Puneet Pancholy)
Press Release: 2024-2025/1345 Chief General Manager

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�ेस �काशनी PRESS RELEASE

भारतीय �रज़वर् ब�क

October 21, 2024

RBI Bulletin – October 2024

I. State of the Economys

The global economy remained resilient in H1:2024, with declining inflation

II. Monetary Policy Transmission in India: The Recent Experience

• Monetary policy shocks significantly affected money, government

• Policy rate tightening could anchor inflation expectations – reducing

By Nishant Singh and Abhiruchi Rathi

• Nowcast accuracy is further enhanced by employing regularisation

• Combining diverse models through combination nowcasts further

IV. How Indian Banks are Adopting Artificial Intelligence?

By Shobhit Goel, Dirghau K. Raut, Madhuresh Kumar, and Manu Sharma

• The focus towards AI-related technologies by Indian banks has

focus on AI in recent years, with many public-sector banks now appearing to

V. COVID-19 and Performance of MSME Clusters in India

• A substantial portion of the MSMEs in the surveyed clusters have

• The challenges faced by MSMEs are predominantly structural.

• Liquidity and regulatory measures by the Reserve Bank and

VI. Cash Usage Indicator for India

VII. New Digital Economy and the Paradox of Productivity

By Sadhan Kumar Chattopadhyay, Sreerupa Sengupta, and Shruti Joshi

Digital technologies are transforming economies and have the potential to

• The contribution of Information and Communication Technology (ICT) to

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