‘Indian economy likely to keep pace of expansion’: We’re optimistic about India, whatever the odds, says RBI

“Unlike the global economy, India would not slow down – it would maintain the pace of expansion achieved in 2022-23. We remain optimistic about India, whatever the odds,” RBI said in its ‘State of Economy’ report released in the Monthly Bulletin for March.

Currently available forecasts of the country’s real GDP growth for 2023-24, including those of the RBI, settle between 6 and 6.5 per cent.

The report comes at a time when global banking has been in crisis following the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US and failure of Credit Suisse in Europe. Credit Suisse, which is Switzerland’s second largest lender, was taken over by the country’s largest bank, UBS. The failure of the global banking system has raised concerns over macroeconomic stability across the markets.

The report has been authored by various other central bank officials, including Deputy Governor Michael Patra. The RBI said the views in the article are those of the authors and do not represent the institution’s views.

The report said bank collapses in the US in the first half of March 2023 are rippling through the global financial markets. “While the direct impact of this meltdown on economic activity could be limited as it would appear at present, markets are bracing up for tighter financial conditions which could present a trade-off between financial stability concerns and the conduct of dis inflationary monetary policy. Fear is creeping back; after remaining tepid for months,” the authors wrote.

The RBI further said the National Statistical Office’s (NSO) end-February data release indicates that the Indian economy is intrinsically better positioned than many parts of the world to head into a challenging year ahead, mainly because of its demonstrated resilience and its reliance on domestic drivers.

“India’s real GDP can go up from Rs 159.7 lakh crore in 2022-23 to not just Rs 169.7 lakh crore in 2023- 24 as is currently being projected but to Rs 170.9 lakh crore,” the report said.

The authors expect the Indian economy to grow at 4.4 per cent during Q3 FY2022-23. The real GDP growth for the fourth quarter of the current fiscal is expected to be at 5.3 per cent. The RBI said the Indian economy has remained resilient amidst high tides of uncertainty.

The second advance estimates (SAE) of national income released by the National Statistical Office (NSO) on February 28, 2023 indicate that the recovery from the pandemic was stronger than earlier believed, led by private consumption and supported by a rebound in government consumption during 2021-22.

The pickup in export growth and a large easing of import growth reduced the drag from net exports. On the supply side, the improvement was more broad-based, led by services and followed by industry, it said.