According to the RBI, leading measures of economic activity indicate to the Indian economy’s continued resilience.
The Indian economy is resilient, as internal inflation expectations continue to relax, but it faces “formidable headwinds” from turbulent international financial markets, according to the Reserve Bank of India’s October state of the economy report.
Lead indicators of corporate growth point to the Indian economy’s sustained resilience in the face of an uncertain and increasingly hostile global environment, according to the RBI.
India, which just surpassed the United Kingdom to become the world’s fifth largest economy, is predicted to post 6.1% GDP growth in the third quarter.
“If this is executed, India’s annual growth will be about 7% by 2022-23.” The report claims that “supply adjustments in the market are gathering speed in Q3.” The views expressed in the paper, however, are those of the researchers led by deputy governor Michael D Patra, according to the RBI.
Recent statistics from the other side of the Atlantic and India indicate a slowing of inflationary pressures. Inflation has moderated across the BRICS nations and in numerous other emerging market economies, owing to decreasing commodity costs, particularly food. This caused a shift in central banks’ thinking, with some slowing rate hikes and indicating that the end of rate hikes is near, according to the research.
Some are providing ’75s’ but assuaging investors with a dovish turn following a 75-bps rise. When previously stated, lags in the transmission of monetary policy increase the danger that they may back off too soon as the outlook darkens.
However, the International Monetary Fund underlined two main threats to global financial stability in its 2017 Global Financial Stability Report: disorderly tightening of financial conditions and debt distress among developing and frontier economies. It has also forecasted that a third of the world economy will decline this year or next as medium-term estimates show a deteriorating global economic picture, raising concerns that a global polycrisis is on the horizon.
“There is a few suggestion today that supply-chain pressures are peaking globally and in India,” the bank says, meaning that “a substantial source with upward inflation expectations could be ebbing.”
Regarding the impact of high global petroleum prices on India’s current account deficit (CAD), the RBI stated that if oil prices average $105 per barrel, the CAD might widen to 2.3 percent of GDP in 2022/23. It would broaden to 2.8 percent if oil averaged $120 per barrel, but it would still be “within the sustainable limit of 3%.”