A recent bulletin from the Reserve Bank of India has reported that retail inflation has decreased thanks to monetary policy interventions and supply side measures, but cautioned that there is still progress to be made. The November bulletin also highlighted the global economic slowdown, particularly in manufacturing, while services sector expansion may have peaked post-pandemic.
The report expressed concern about the potential impact of tightening financial conditions on the global outlook. In India, GDP growth is expected to be higher in the third quarter of the 2023-24 fiscal year, driven festival demand and resilient investment. The authors of the article, led RBI Deputy Governor Michael Debabrata Patra, emphasized the positive impact of government infrastructure spending, private capex, automation, digitalization, and indigenization on investment demand.
The bulletin noted that inflation, based on the Consumer Price Index, has decreased due to monetary policy measures and supply side interventions, bringing it back into the RBI’s tolerance band of 2-6 percent. However, the RBI clarified that the views expressed in the article were those of the authors and not the central bank.
The report also highlighted the viability of India’s external sector, with a modest Current Account Deficit financed resilient capital flows, a stable currency, and healthy foreign exchange reserves. It also acknowledged India’s economic growth, surpassing pre-pandemic levels to become the fifth largest economy in the world, stating that steadfast policy actions have contributed to the financial sector’s strength and support for the credit needs of a resurgent economy.
Finally, the 37th edition of the State of the Economy article signals the third year of its revival after a 25-year hiatus.