RBI Governor Shaktikanta Das made a hard case on why India is still in a strong economic position, despite him cutting the GDP growth forecast to 6.8% for the full fiscal year 2022-23. “The Indian economy remains resilient and the country is seen as a bright spot in a gloomy world,” Das said while reading out the bi-monthly monetary policy outcome. Due to the Russia-Ukraine war and Covid19 pandemic, inflation has remained above RBI’s tolerance range of 2-6% for 10 months in a row. But the Indian economy has continued to grow despite the global headwinds. Recently, World Bank raised its GDP growth forecast for India from 6.5% to 6.9% for FY23, while Fitch Ratings retained its growth forecast at 7%.
“The biggest risks to the outlook continue to be the headwinds emanating from protracted geopolitical tensions, global slowdown and tightening of global financial conditions. Taking all these factors into consideration, real GDP growth for 2022-23 is projected at 6.8 per cent, with Q3 at 4.4 per cent and Q4 at 4.2 per cent. The risks are evenly balanced. Real GDP growth is projected at 7.1 per cent for Q1:2023-24 and at 5.9 per cent for Q2. Even after this revision in our growth projection for 2022- 23, India will still be among the fastest-growing major economies in the world,” said Shaktikanta Das.
RBI has raised the repo rate by 225 basis points since May this year taking it to 6.25%. CPI inflation in October dropped to 6.77% from 7.41% in September. The Indian rupee has touched new lows this year surpassing the 82-mark against the US dollar and the moody monsoon has put pressure on the government to control the rising inflation. Despite the challenges, India’s GDP has performed well compared to its peers and the governor’s comment suggests that the Indian economy is much less likely to fall into recession.