A girl walks previous the Reserve Bank of India (RBI) brand inside its headquarters in Mumbai, India, on April 6, 2023. India’s growth momentum is likely to be sustained in 2023-24 in an environment of easing inflationary pressures, the Reserve Bank of India (RBI) stated in its Annual Report 2022-23. Image for representational functions solely.
| Photo Credit: Reuters
India’s growth momentum is likely to be sustained in 2023-24 in an environment of easing inflationary pressures, the Reserve Bank of India (RBI) stated in its Annual Report 2022-23. The central financial institution added that the financial system will be supported by sound macroeconomic insurance policies, softer commodity costs, a strong monetary sector, continued fiscal coverage thrust on high quality of presidency expenditure, and new growth alternatives stemming from international realignment of provide chains.
However, it stated that slowing international growth, protracted geopolitical tensions and a potential upsurge in monetary market volatility following new stress occasions in the worldwide monetary system may pose draw back dangers to growth.
“It is important, therefore, to sustain structural reforms to improve India’s medium-term growth potential,” the central financial institution stated in a chapter.
While emphasising that home financial exercise does face challenges from an uninspiring international outlook going ahead, it nonetheless stated that resilient home macroeconomic and monetary circumstances, anticipated dividends from previous reforms and new growth alternatives from international geo-economic shifts place India in an advantageous place.
Stating that dangers to inflation have moderated with downward corrections in international commodity and meals costs and easing of the pass-through from excessive enter price pressures of final yr, it stated the cumulative enhance in coverage repo charge by 250 bps final yr would steer the disinflationary course of, together with provide aspect measures to handle transient demand-supply mismatch due to meals and power shocks.
“With a stable exchange rate and a normal monsoon – unless an El Nino event strikes – the inflation trajectory is expected to move down over 2023-24, with headline inflation edging down to 5.2% from the average level of 6.7% recorded last year,” it stated.
“Monetary policy remains focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth,” it added.
As per the Annual Report the realignment of world provide chains, transition to inexperienced power and ongoing technological developments present a congenial surroundings for a pick-up in funding exercise and elevating productiveness.
“Robust balance sheets of corporates and banks, coupled with high capacity utilisation, would aid in strengthening the momentum in private investment,” it stated.
“Burgeoning credit growth, especially housing and personal loans, reflects steady domestic household demand. This is also mirrored in several high frequency indicators of rural and urban demand,” it added.
Robust agriculture manufacturing buoyed by expectation of a bountiful rabi harvest and resilience in allied sector exercise are additionally brightening the outlook for rural demand, the RBI stated in the annual report.
“Traction in construction activity is likely to be sustained as reflected in steady expansion in its proximate indicators: steel consumption and cement production,” it stated.
“Port cargo traffic and railway freight traffic movements also point to industrial activity picking up amidst gradual easing of input cost pressures,” it added.
Amidst sturdy international headwinds, the Indian financial system is predicted to have recorded a growth of seven.0% in actual GDP in 2022-23, the central financial institution stated.
Agriculture and allied actions had been resilient in 2022-23, with gross worth added (GVA) registering a growth of three.3%, it stated.
In the commercial sector, manufacturing exercise withstood international spillovers, whereas electrical energy technology exhibited sturdy growth, and mining recorded regular exercise. Sustained momentum was seen in development exercise, whereas infrastructure and capital items manufacturing benefitted from the government-led funding in infrastructure, it added.
