The Reserve Bank of India (RBI) on Thursday said although September and October inflation prints are welcome, we are not out of the woods yet and have miles to go. It also said festival demand remains ebullient, according to the latest RBI Bulletin – November 2023.
“In India, the momentum of the change in GDP is sequentially expected to be higher in Q3:2023-24, with festival demand remaining ebullient. Investment demand appears to be resilient with the government’s infrastructure spending, an uptick in private capex, automation, digitalisation, and indigenisation providing a boost,” according to the RBI report.
On the global economy, the central bank said the global economy shows signs of slowing down in the final quarter of 2023 as manufacturing languishes while services sector activity appears to have reached the end of its post-pandemic expansion. “Going forward, tightening financial conditions is a significant risk to the global outlook.”
On the overall inflation’s downwards trend from the past two months, the central bank in the Bulletin said a combination of monetary policy
action and supply-side interventions guided inflation down from the high reaches to which it had climbed through the first seven months of 2022-23.
“We are not out of the woods yet and have miles to go, but readings of
around 5 per cent and 4.9 per cent in September and October, respectively, are a welcome relief from the average of 6.7 per cent in 2022-23 and 7.1 per cent in July-August 2023,” according to the latest RBI Bulletin.
On other macroeconomic factors, it said India’s external sector has remained viable, with a modest current account deficit (CAD) financed by resilient capital flows, one of the least volatile currencies in the world and a healthy level of foreign exchange reserves.
“The momentum of growth has picked up, taking GDP well above pre-pandemic levels to becoming the fifth largest economy in the world at market exchange rates,” the RBI said, in the article titled ‘State of the Economy’.
It also said steadfast policy initiatives are showing results, with the financial sector exhibiting soundness and supporting the credit needs of a resurgent economy. In the payments space, India has made significant strides while offering its digital public infrastructure to the world.
Meanwhile, S&P Global Ratings on Thursday said India’s economic growth prospects should remain strong over the medium term, with GDP expanding 6-7.1 per cent annually in fiscal years 2024-2026.
In a report titled ‘Global Banks Country-By-Country Outlook 2024’, S&P said the banking sector’s weak loans will decline to 3-3.5 per cent of gross advances by March 31, 2025, on the back of structural improvement, including healthy corporate balance sheets, tighter underwriting standards and improved risk-management practices.
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