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Global headwinds pose challenges, inflation risks more accentuated: RBI

The increase in international commodity prices also imparts a net term of trade shock that is widening the trade and current account deficits,” the RBI said in its ‘State of the Economy’ report.

By: ENS Economic Bureau | Mumbai |
Updated: May 18, 2022 8:20:42 am
The report said the global growth outlook appears grim as geopolitical tensions linger, commodity prices remain elevated and withdrawal of monetary accommodation gathers speed.

The Reserve Bank of India (RBI) has said risks stemming from global developments have thwarted recovery momentum, and inflation risks have become more accentuated in recent months. “The Indian economy’s recovery remains resilient. The increase in international commodity prices also imparts a net term of trade shock that is widening the trade and current account deficits,” the RBI said in its ‘State of the Economy’ report.

“Heightened global risks stemming from weakening growth, elevated inflation, supply disruptions on account of geopolitical spill overs and financial market volatility stemming from synchronised monetary tightening pose near-term challenges,” the RBI report said. Headline CPI inflation (year-on-year) rose to 7.8 per cent in April from 7.0 per cent in March on account of an acceleration across all major groups.

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High inflation rate

Headline CPI inflation (year-on-year) rose to 7.8 per cent in April from 7 per cent in March on account of an acceleration across all major groups.

It said India faces challenges in building from the scars of the pandemic through larger investments in health and productivity of the human capital. With an acceleration in the pace of digitalisation, the footprint of the unicorn ecosystem in India is expanding, reflecting a rapidly changing economy, the report said.

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The report said the global growth outlook appears grim as geopolitical tensions linger, commodity prices remain elevated and withdrawal of monetary accommodation gathers speed. “Emerging economies face risks of capital outflows and higher commodity prices feeding into inflation prints. Meanwhile, the pandemic continues to impinge on near-term economic prospects,” it said. “In order to achieve a higher growth path on a sustainable basis, private investment needs to be encouraged through higher capital expenditure by the government which crowds in private investment. Improving infrastructure, ensuring low and stable inflation and maintaining macroeconomic stability are critical for reviving animal spirits and spurring growth,” the report said. The Indian economy consolidated its recovery, with most constituents surpassing pre-pandemic levels of activity. The global economic outlook is overcast with downside risks due to the ongoing geopolitical upheaval and its impact on trade, output and prices, the report said.

Six applicants for ‘on tap’ bank licences rejected

Mumbai: The Reserve Bank of India (RBI) has rejected six out of 11 applications received by the central bank to set up bank under the guidelines for ‘on tap’ licensing of universal banks and small finance banks.

The examination of six applications has now been completed as per the procedure laid down under these guidelines. Based on the assessment of the applications, six applicants were not found suitable for granting of in-principle approval to set up banks, the RBI said.

The applicants not found suitable under ‘on tap’ licensing of universal banks include UAE Exchange and Financial Services Ltd, Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank), Chaitanya India Fin Credit Private Ltd and Pankaj Vaish and others.

The applicants not found suitable under ‘on tap’ licensing of small finance banks are: VSoft Technologies Private Ltd and Calicut City Service Co-operative Bank Ltd. “The remaining applications are under examination,” the RBI said.

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