INDIA’S GROWTH MOMENTUM TO SUSTAIN IN FY24.

ChinmayaIAS Academy - Current Affairs June 1, 2023 GS3, Indian Economy Leave a comment 159 Views

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:

Sound macroeconomic policies
Softer commodity prices
A robust financial sector
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.