INDIA’S GROWTH MOMENTUM TO SUSTAIN IN FY24.

According to Reserve Bank of India (RBI) Annual Report 2022-23, India’s growth momentum is likely to be sustained in 2023-24.

Highlights of the RBI annual Report:

According to RBI, in the atmosphere of easing inflationary pressures, Indian economy will be supported by:

  1. Sound macroeconomic policies
  2. Softer commodity prices
  3. A robust financial sector
  4. Continued fiscal policy thrust on quality of government expenditure

New growth opportunities stemming from global realignment of supply chains.

  • However RBI also cautioned that slowing global growth, protracted geopolitical tensions and a possible upsurge in financial market volatility could pose downside risks to growth.
  • Therefore for India it becomes important to sustain structural reforms to improve India’s medium-term growth potential.
  • The central bank emphasised that domestic economic activity does face challenges from an uninspiring global outlook.
  • However the resilient domestic macroeconomic and financial conditions, expected dividends from past reforms and new growth opportunities from global geo-economic shifts place India in an advantageous position.
  • The risks to inflation have moderated with downward corrections in global commodity and food prices and easing of the pass-through from high input cost pressures of last year.
  • The cumulative increase in policy repo rate by 250 bps last year would steer the disinflationary process, along with supply side measures to address transient demand-supply mismatch due to food and energy shocks.
  • With a stable exchange rate and a normal monsoon (unless an El Nino event strikes), the inflation trajectory is expected to move down over 2023-24, with headline inflation edging down to 5.2% from the average level of 6.7% recorded last year.
  • Monetary policy remains focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
  • The realignment of global supply chains, transition to green energy and ongoing technological advancements provide a congenial environment for a pick-up in investment activity and raising productivity.
  • Robust balance sheets of corporates and banks, coupled with high capacity utilisation, would aid in strengthening the momentum in private investment.
  • Robust agriculture production buoyed by expectation of a bountiful rabi harvest and resilience in allied sector activity are also brightening the outlook for rural demand.
  • Traction in construction activity is likely to be sustained as reflected in steady expansion in its proximate indicators: steel consumption and cement production.
  • Port cargo traffic and railway freight traffic movements also point to industrial activity picking up amidst gradual easing of input cost pressures.
  • Amidst strong global headwinds, the Indian economy is expected to have recorded a growth of 7.0% in real GDP in 2022-23.
  • Agriculture and allied activities were resilient in 2022-23, with gross value added (GVA) registering a growth of 3.3%.
  • In the industrial sector, manufacturing activity withstood global spillovers, while electricity generation exhibited robust growth, and mining recorded steady activity.
  • Sustained momentum was seen in construction activity, while infrastructure and capital goods production benefitted from the government-led investment in infrastructure.

SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB

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