‘Bright Spot In Otherwise Gloomy World’: What Shaktikanta Das Said On Domestic, Global Economic Situation

RBI Governor Shaktikanta Das said on Wednesday that in the current hostile global economic environment, Indian economy remains flexible and the country’s financial system remains sound and stable. They said that India Will continue to be one of the world’s fastest growing major economies, drawing strength from its macroeconomic fundamentals.

“…in a hostile international environment, the Indian economy remains resilient, drawing strength from its macroeconomic fundamentals. Our financial system remains strong and stable. Banks and corporates are healthier than they were before the crisis. Bank credit has been growing in double digits for the last eight months. India is widely seen as a bright spot in an otherwise gloomy world,” Das said while presenting the RBI’s bi-monthly report. monetary policy statement on Wednesday.

However, he added that inflation in the country, like in most parts of the world, remains high. Global spillovers continue to provide high volatility and uncertainty.

“In an interconnected world, we cannot remain completely insulated from the adverse spillovers from the global slowdown and its negative impact on our net exports and overall economic activity,” he added.

This is what he said about the global economic situation

– Global economy still grappling with deep shocks and unprecedented uncertainty

The geopolitical situation and financial market volatility are giving mixed signals.

– At the beginning of this year (2022), just as the COVID-19 pandemic was waning, in the war ukraine The Black Swan moment swept the world and fundamentally changed the global economic outlook.

Rising food and energy prices and shortages of key food items have severely affected poorer sections around the world. Although international food, energy and other commodity prices have eased modestly in recent days, inflation remains high and broad-based.

While no country is immune to the aftereffects of such large shocks, emerging market economies (EMEs), particularly those dependent on food, energy and commodity imports, have been worst hit.

— Supply chains are being reworked with geopolitical security in mind, leading to ‘restoration’ and ‘friend-neutrality’. Along with climate change, food and energy security has become the biggest challenge for the world.

This is what he said about India’s domestic economic situation

In this hostile international environment, the Indian economy remains resilient, drawing strength from its macroeconomic fundamentals. India is widely seen as a bright spot in an otherwise gloomy world.

Going into the third quarter of 2022-23, economic activity continued to strengthen in October.

Urban consumption grew further on the back of a sustained recovery in discretionary spending, particularly on services such as travel, tourism and hospitality.

Consumer confidence has further improved.

The biggest risks to the outlook remain headwinds arising from prolonged geopolitical tensions, global recession and tightening of global financial conditions.

— Food inflation is likely to ease with a mild winter and the prospect of a bumper rabi crop, but pressure points remain in the form of prices of cereals, milk and spices in the near term.

Real GDP growth is estimated at 6.8 per cent for 2022-23, 4.4 per cent in Q3 and 4.2 per cent in Q4. The risks are evenly balanced. The real GDP growth rate for the first quarter of 2023-24 is estimated at 7.1 percent and for the second quarter at 5.9 percent. Even after this revision in our growth forecast for 2022-23, India will still remain one of the fastest growing major economies in the world.

– Assuming an average crude oil price (Indian basket) of $100 per barrel, headline inflation is projected at 6.7 per cent in 2022-23, 6.6 per cent in Q3 and 5.9 per cent in Q4. The risks are evenly balanced. CPI inflation for the first quarter of 2023-24 is estimated at 5 per cent and for the second quarter at 5.4 per cent on the assumption of a normal monsoon.

– Keeping an eye on the impact of our past monetary policy actions, we will keep an eye on rising inflation dynamics and stand ready to act as required.

— Liquidity remains in surplus in the overall system. During October-November, the average total absorption under the Liquidity Adjustment Facility (LAF) was Rs 1.4 lakh crore, lower than the average of Rs 2.2 lakh crore during August-September.

In the fifth consecutive hike this year, the RBI’s monetary policy committee on Wednesday raised the repo rate by 35 basis points (bps) to 6.25 per cent with immediate effect, making loans costlier. The policy rate is now at the highest level since August 2018. RBI has maintained the policy stance on ‘withdrawal of accommodation’.

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