India's GDP growth may breach 7%-mark in FY23: RBI Governor Das
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India's gross domestic product growth could be above 7% for 2022-23, the Reserve Bank of India Governor Shaktikanta Das said at a CII event on Wednesday. There is also a possibility that GDP growth for the last financial year could be higher, he said.
Das noted that almost all high-frequency indicators monitored by the central bank showed that momentum was sustained in the final quarter of the last financial year and it would not be a surprise if India's economy grows at a rate higher than 7%.
"The agricultural sector has done well and so has the services sector. Capex & infra spending by the government has picked up," Das said. Das noted that there is evidence of a revival of private investment as well, with signs visible in the steel & cement sectors.
"Capacity utilisation in the manufacturing sector as per the RBIs latest survey, is around 75%. But a CII survey shows it to be even higher," he added.
India should log growth close to 6.5% in the ongoing financial year, however, there are downside risks, he said.
The RBI expects the next print of retail inflation to be lower than 4.7 per cent. India's consumer price inflation (CPI) eased to an 18-month low of 4.7% in April, from 5.66% in the previous month, largely due to a moderation in food prices, which accounts for nearly half of the overall consumer price basket.
Inflation data for May is due on June 12. The country's retail inflation was closest to the 4%-mark last in January 2021 at 4.06%.
The RBI's MPC has increased the repo rate by 250 basis points since May last year to quell inflationary pressures. Most economists expect the MPC to hold rates for the second time when it meets next month.
"RBI to ensure adequate availability of liquidity to meet production requirements of the economy," Das said.
Foreign turmoil
Das said that as global central banks raised interest rates rapidly to contain inflation, certain fault lines emerged in banking and non-bank financial intermediaries, hinting at recent events in the United States and Switzerland in March 2023.
"The proximate cause of banking turmoil in Switzerland and the US is a confluence of rising interest rates, unrealised losses in debt portfolio," Das said. And as such, the coexistence of high inflation and banking stress is complicating the responses of central banks as they face a trade-off between either straining the financial markets and having to tolerate longer periods of inflation.
Financial markets remain volatile owing to uncertainty over the future monetary policy path is keeping market sentiments on the edge, said Das.
Amidst all this, the Indian banking sector has remained resilient. "NPA which was a huge challenge for Indian banking has moderated and is showing very good signs of resilience," Das added. He reiterated that the unaudited percentage of gross bad assets of banks up to March 31 is lower than 4.4%.
"Indian banking system remains stable, resilient with strong capital, liquidity position and improving asset quality," Das noted.
Talking about the growth of digital transactions and regulations in India, Das said that fintech and digital lending are something the central bank actively supports.
"India was seeing 2.28 crore digital transactions per day in 2016. Today we are seeing 37.75 crore transactions per day," Das said.
India's gross domestic product growth could be above 7% for 2022-23, the Reserve Bank of India Governor Shaktikanta Das said. There is also a possibility that GDP growth for the last financial year could be higher, he said. Financial markets remain volatile owing to uncertainty over future...
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