The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.
| Photo Credit: REUTERS

Indian economy is likely to grow at 7% in the current fiscal year starting April, the Reserve Bank of India (RBI) said in its annual report released on May 30.

The Indian economy, it said, expanded at a robust pace in 2023-24 (April 2023 to March 2024 financial year), with real GDP growth accelerating to 7.6% from 7.0% in the previous year – the third successive year of 7% or above growth.

“The real GDP growth for 2024-25 is projected at 7.0% with risks evenly balanced,” it said.

India’s GDP growth is robust on the back of solid investment demand which is supported by healthy balance sheets of banks and corporates, the government’s focus on capital expenditure and prudent monetary, regulatory and fiscal policies, the RBI said. The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.

Indian economy, the report said, is well-placed to step up growth trajectory over the next decade in an environment of macroeconomic and financial stability.

“As headline inflation eases towards the target, it will spur consumption demand especially in rural areas,” it said.

It further said the external sector’s strength and buffers in the form of foreign exchange reserves will insulate domestic economic activity from global spillovers.

The report, however, added that geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.

The RBI also emphasised that the Indian economy would have to navigate challenges posed by rapid adoption of AI/ML (artificial intelligence/machine learning) technologies as well as recurrent climate shocks.

The annual report is a statutory report of RBI’s central board of directors. The report covers the working and functions of the Reserve Bank of India for the April 2023-March 2024 period.

Representational file image.
| Photo Credit: B. Jothi Ramalingam

Extreme weather conditions may pose a risk to inflation, along with prolonged geopolitical tensions that could keep crude oil prices volatile, the Reserve Bank’s April Bulletin said on April 23.

The retail based on the Consumer Price Index (CPI) has eased to 4.9% in March after averaging 5.1% in the preceding two months.

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The Reserve Bank, which mainly factors in CPI while arriving at its bi-monthly monetary policy, has kept the key interest rate unchanged at 6.5% since February 2023, citing concerns on the inflation front.

An article on ‘State of the Economy’ published in the Bulletin further said global growth momentum has been sustained in the first quarter of 2024, and the outlook for world trade is turning positive.

Treasury yields and mortgage rates are ticking up in major economies as expectations of interest rate cuts are being pared.

“In India, conditions are shaping up for an extension of a trend upshift in real GDP growth, backed by strong investment demand and upbeat business and consumer sentiments,” the article said.

The RBI, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.

Union Minister of Commerce and Industry Piyush Goyal. File.
| Photo Credit: ANI

Commerce and Industry Minister Piyush Goyal on February 19 exuded confidence that the Reserve Bank will cut interest rates as inflation is under control.

The RBI has been maintaining the benchmark interest rate at an elevated level of 6.5% since February 2023.

Mr. Goyal said that the economic fundamentals of the country are strong and inflation is under check.

He said that the average inflation of 10 years in India is about 5 to 5.5%.

It was the best-performing decade and because of that, the interest rate came down “dramatically” and the central bank was strengthened and had the ability to bring down the interest rate.

“Of-course in the last year and a half, post Ukraine-crisis, interest rates have again gone up by 250 basis points. But now that inflation is pretty much in control, I suspect we will soon see the reversal of the rate hikes starting in India, whether it happens in the next or the second monetary policy from now. I think it’s only a matter of time,” Mr. Goyal said.

In case the Reserve Bank goes for a reduction in the key short-term lending rate (repo), the cost of borrowings both for corporate as well as individuals, will go down, and hence EMIs.

The RBI on February 8, for the sixth time in a row, left the key policy rate unchanged at 6.5%, which may keep the cost of borrowings for both individuals as well as corporates largely stable, and lowered the retail inflation projection to 4.5 per cent for next fiscal.

The next bi-monthly monetary policy will be announced on April 5.

The consumer price index was 5.1% in January, down from 6.525 in January 2023.

The wholesale price index (WPI)-based inflation eased to a three-month low of 0.27% in January, mainly due to moderation of food prices, including vegetables.

The minister was addressing 35 journalists from 19 Latin American and Caribbean countries here.

He also said that the government’s ambition is to increase the current $3.7 trillion economy to be a $30-35 trillion economy by 2047.