May 31, 2023
Inflation is projected to decline to 5.2% from last year's average of 6.7%
A strong financial sector, a healthy corporate sector, and the government's focus on quality expenditure are also contributing to the country’s sustained growth
A moderate current account deficit (CAD) is expected, supported by strong services exports and the positive impact of lower commodity prices on imports
Foreign portfolio investment (FPI) flows may remain volatile due to ongoing global uncertainties
India’s growth momentum is expected to continue in the fiscal year 2023-24 due to sound macroeconomic policies and lower commodity prices, according to the Reserve Bank of India’s annual report.
The report also highlights the easing of inflationary pressures in the country. However, it cautions that global growth slowdown, geopolitical tensions, and potential financial market volatility following new stress events in the global financial system could pose risks to growth. Inflation is projected to decline to 5.2% from last year’s average of 6.7%, assuming a stable exchange rate and a normal monsoon season (unless affected by an El Nino event).
Several factors are contributing to India’s sustained growth, including sound macroeconomic policies, softer commodity prices, a strong financial sector, a healthy corporate sector, and the government’s focus on quality expenditure. Additionally, the realignment of global supply chains presents new growth opportunities for India.
In terms of the external sector, a moderate current account deficit (CAD) is expected, supported by strong services exports and the positive impact of lower commodity prices on imports. However, foreign portfolio investment (FPI) flows may remain volatile due to ongoing global uncertainties.
Regarding monetary policy, the RBI’s focus remains on withdrawing accommodation to align inflation with the target while supporting growth.
Furthermore, the RBI aims to expand its central bank digital currency (CBDC) pilots during the current fiscal year. The pilots in both CBDC-Retail and CBDC-Wholesale will incorporate various use cases and features. The CBDC-Retail pilot is proposed to be expanded to more locations and includes additional participating banks.
Source: Financial Express