With headline inflation beginning to show signs of easing, the domestic macroeconomic outlook appears to be resilient and on course for about 7% GDP growth in the current fiscal though India is still sensitive to global headwinds, according to an article released by the RBI on Friday.
In the article, the authors – led by RBI Deputy Governor Michael Debabrata Patra – also said the outlook for the global economy remains clouded with downside risks. Global financial conditions have been tightening and deteriorating market liquidity is amplifying financial price movements.
Markets are now pricing in moderate increases in policy rates and risk-on appetite has returned. In India, supply responses in the economy are gaining strength, the authors noted in the article published in the latest RBI bulletin.
“With headline inflation beginning to show signs of easing, the domestic macroeconomic outlook can best be characterised as resilient but sensitive to formidable global headwinds,” they said.
Urban demand appears robust, while rural demand is muted but more recently picking up traction, they added.
The RBI, however, said the opinions expressed in the article were those of the authors and did not represent the views of the central bank.
The authors further said based on high frequency indicators, “our nowcasting and full information models peg” real GDP growth in the July-September quarter between 6.1% and 6.3%.
“If this is realised, India is on course for a growth rate of about 7% in 2022-23,” it said and added that in the third quarter, supply responses in the economy had been gaining strength.
The Gross Domestic Product (GDP) data for the second quarter of 2022-23 will be released by end-November.
It also noted that the cumulative procurement of rice during this kharif marketing season has already crested last year’s collection. Although wheat procurement has declined quite sharply, the good news is that rabi sowing is up year-on-year backed up by good northeast monsoon rainfall and reservoir water storage levels.
In the financial sector, it further said system liquidity is normalising in consonance with the stance of monetary policy but it is still in surplus mode, with the RBI absorbing about ₹1.5 lakh crore on a daily basis, on average.
Also, commercial bank credit growth has been surging, led by services, personal loans, agriculture and industry, in that order.
