RBI: According to the Reserve Bank of India’s (RBI) annual report released on Tuesday, India’s growth momentum is projected to be sustained in 2023–24 under conditions of lowering inflationary pressures thanks to prudent macroeconomic policies and declining commodity prices. However, the central bank warned that sluggish global development, ongoing geopolitical unrest, and a potential increase in financial market volatility as a result of fresh stress events in the world financial system might be threats to growth.
RBI Predicts Drop in Inflation Rate, Emphasizes Monetary Policy for Growth
According to the Central Board of Directors’ annual report, which is required by law, “India’s growth momentum is likely to be sustained in 2023–24 in an environment of easing inflationary pressures on the back of sound macroeconomic policies, softer commodity prices, a robust financial sector, a healthy corporate sector, continued fiscal policy thrust on quality of government expenditure, and new growth opportunities stemming from global realignment of supply chains.” According to the RBI, the average annual rate of inflation is predicted to drop to 5.2% this fiscal year from an average of 6.7% last year. The monetary policy is still centred on accommodation withdrawal to keep inflation on target and boost growth.
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Monetary Policy Aims to Balance Growth and Inflation, Highlights Annual Report
The annual report for 2022–2023 also said that the goal of the monetary policy remains to gradually remove accommodation while promoting growth so that inflation gradually converges with the target. The research stated that, “With a steady exchange rate and a regular monsoon, unless an El Nino event strikes, the inflation trajectory is predicted to shift down throughout 2023–24, with headline inflation moving down to 5.2% from the average level of 6.7% reported last year.” The current account deficit (CAD) is predicted to remain modest in the external sector, supported by strong services exports and the positive effects of low import commodities prices. Foreign portfolio investment (FPI) flows “may continue erratic with the persistence of global uncertainty,” the banking regulator said.
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