Despite geopolitical tensions re-escalating in West Asia and rising energy prices, Indian economy continues to be resilient, the Reserve Bank of India (RBI) staff said in the monthly Bulletin. India’s financial and external sectors are drawing strength from the real economy, although geopolitical tensions and weather-related uncertainties are acting as key downside risks, the RBI staff said.
The Indian economy demonstrated resilience not only through the April-June quarter, where it grew 7.8%, but also in August as evident from high frequency indicators such e-way bills, and Goods and Services Tax (GST) collections, the RBI staff said.
“High-frequency indicators through August reflected sustained demand with segments of industry and services sectors displaying resilience,” the RBI staff said.
While industry and services displayed resilience, the agriculture sector progressed well marked by kharif sowing nearing completion amidst a weak progress in monsoon, the RBI staff said.
“Although the sowing in the kharif season is nearing its end, soil moisture remains critical for ensuring the overall crop growth. A good harvest in the previous year has, however, resulted in robust procurement of rice and wheat, leading to comfortable public foodgrain stocks,” the staff said.
Banking system liquidity remains in surplus, following strong FCNR(B) deposit flows, even as liquidity moderated amidst tax related outflows and RBI’s durable liquidity measures during the second half of September.
“The resultant deposit growth could support ongoing credit growth,” the RBI staff said.