RBI Upbeat on India’s Economic Growth

NEW DELHI: The Reserve Bank of India (RBI) on Tuesday maintained that, unlike the slack global economy, India’s economic growth would not slow down. In fact, the RBI said the country would maintain the pace of expansion achieved in FY 2022-23.

The apex bank said in its monthly bulletin that it remains optimistic about the country, in the face of the odds.

RBI ventured to opine in its bulletin that, “Even as global growth is set to slow down or even enter a recession in 2023 as global financial markets wager, India has emerged from the pandemic years stronger than initially thought, with a steady gathering of momentum since the second quarter of the current financial year.”

Commenting on the supply side, it added that agriculture is displaying a seasonal upward trend, industry is emerging out of contraction and services have continued to maintain its momentum. RBI also contended that consumer price inflation remains high and core inflation has continued to defy the distinct softening of input costs.

“Over the financial year ahead (2023- 24), inflation is expected to range tightly between 5% and 5.6% if India survives an El Nino event adversely affecting the south west monsoon, given global uncertainties.”

It was also contained in the report how the collapse of two banks in the US, namely Silicon Valley Bank (SVB)and the Signature Bank, in the first half of March 2023 is causing a rippling effect through the global financial markets. However, while the direct impact of this meltdown on economic activity could be limited as it is appearing at present, markets all around are bracing themselves for tighter financial conditions. This, in turn, could present a trade-off between financial stability concerns and the conduct of disinflationary monetary policy, the RBI report explained.

Keeping to the recent trend in the foreign exchange market, Indian rupee (INR) depreciated against the US dollar by 0.5% in February 2023. The RBI’s assessment of the performance of the rupee was in line with many other EMEs and reserve currencies. Volatility in the movement of rupee was, however, measured to be lower than that of other currencies.

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