edited by: Mohammad Haris
Last Update: February 18, 2023, 11:34 IST
As per the RBI report, the real GDP growth for 2023-24 was projected at 6.4 per cent.
Domestic consumption and investment will benefit from strong prospects for agriculture and allied activities in India, says Reserve Bank of India
According to the RBI Bulletin – February 2023, the year 2023 will probably be characterized by a milder global recession than earlier, but the trajectory remains unpredictable. It added that in India, domestic consumption and investment will benefit from strong prospects for agriculture and allied sectors. activities, strengthening business and consumer confidence, and strong credit growth.
“Supply response and cost conditions are likely to improve in January even as inflation moderates. The RBI report said that the emphasis on capital expenditure in the Union Budget 2023-24 is expected to increase private investment, create jobs and strengthen demand and enhance India’s potential growth.
It added that global inflation could be much lower — from 8.8 percent in 2022 to 6.6 percent in 2023, according to the IMF, as reopenings, lower commodity prices and restoration of supply chains boost demand — but still Its relative target may remain high at 4.3 per cent in 2024. Risks are tilted to the downside, but a turning point has been passed, and central banks know it.
Asserting that central banks are aware that inflation is coming down, the RBI said they are on guard that the markets’ irrational exuberance in bidding up financial prices actually leads to a resurgence of demand and inflation. Could
“Real GDP growth for 2023-24 was projected at 6.4 per cent. On the inflation outlook, the MPC cited improving crop prospects while recognizing risks from adverse weather events, uncertainties around the global commodity price outlook, and output, especially in services, to project CPI inflation. The ongoing pass-through of input costs to prices at 5.3 per cent for 2023-24, down from 6.5 per cent in 2022-23,” the RBI said in the report.
Among high-frequency indicators, the global composite Purchasing Managers’ Index (PMI) rose to 49.8 in January 2023 but remained in contraction territory for the sixth consecutive month.
“Global commodity prices turned volatile as a still weak global economic outlook continued to weigh on demand,” the central bank said.
It also said that fiscal consolidation has led to an environment of macroeconomic stability and hence debt reduction is expected to reduce inflation over the medium term, resulting in reduction of macroeconomic volatility and country risk premium, ushering in a virtuous cycle. Will be Estimates suggest that on a standalone basis, i.e., without taking into account other factors that affect the pace of inflation, this could reduce inflation by an average of 26 basis points per year over the next five years, which is a potential increase by another 10 basis points.
“Taking all these factors into account, potential growth is expected to rise to 6.8 per cent from 6.0 per cent (projected by the IMF in 2022-2034). With the increase in India’s potential growth due to the measures announced in the Budget, there is a rapid consolidation of central government debt to 54.3 per cent of GDP by 2027-28,” the RBI said in the report.
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