Tuesday, August 16, 2022

Reserve Bank of India sees sparks of economy reviving

With the southwest monsoon gaining ground, crop planting has raised hopes that rural demand will pick up with urban spending and bring about an economic recovery, the Reserve Bank of India said in a bulletin. “Knock-on effects of geopolitical spillovers are visible in several sectors, tapering the pace of recovery…In spite of this overwhelming shock, there are sparks in the wind that ignite the innate strength of the economy and set it on course to becoming the fastest growing economy in the world, though besieged it might be by fears of recession,” the RBI bulletin mentioned without providing a time frame when the recovery would start, reported ET.

RBI said that if the commodity price moderation seen in the past few weeks continues along with the easing of supply chain pressures, the worst of the recent hike in inflation will be over. The country’s annual consumer inflation remained above the 7% mark and beyond RBI’s tolerance band for the sixth month in a row, recent data showed.

“External debt remains modest as a proportion to GDP and has actually declined between March 2021 and March 2022.”

— RBI

“There is some evidence now that supply-chain pressures are peaking globally and in India, so that a major source of upward inflation pressures may be ebbing,” the bank said. Highlighting the effect of the high global crude prices on India’s current account deficit (CAD), RBI said the CAD could widen to 2.3% of GDP in 2022/23 if oil prices averaged $105 per barrel. It would widen to 2.8% if oil averaged $120 per barrel but still remained “within the sustainable limit of 3%”. CAD stood at 1.2% of GDP in 2021/22, the June data pointed out.

“External debt remains modest as a proportion to GDP and has actually declined between March 2021 and March 2022,” RBI said.

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