MUMBAI: Amid volatile crude oil prices and supply chain disruptions due to the Russo-Ukraine war, the Reserve Bank on Friday slashed the economic growth forecast for the current fiscal to 7.2 per cent from 7.8 per cent earlier estimated.
However, the central bank said that it will use all available means to protect the Indian economy.
After referring to the pandemic situation and the efforts made by the central bank, RBI Governor Shaktikanta Daso “Now two years later, as we exit the pandemic situation, the global economy has witnessed a tectonic shift, with the outbreak of war in Europe from 24 February, with sanctions and escalating geopolitical tensions,” it said.
“Once again, we at RBI are determined and ready to defend the economy and ride out the current storm,” he added.
Unveiling the first bi-monthly monetary policy review of the current financial year, the governor said external growth during the past two months outweighed downside risks to domestic growth and risks to inflation.
“…real GDP growth for 2022-23 is now projected at 7.2 per cent with Q1: 2022-23 at 16.2 per cent; Q2 at 6.2 per cent; Q3 at 4.1 per cent; and Q4 at 4 per cent, assuming crude oil (Indian basket) at $100 per barrel during 2022-23,” Das said, adding that the Indian economy continues to revive from its pandemic-induced contraction.
Earlier this year, the Economic Survey in January had projected a growth rate of 8-8.5 per cent for the current fiscal.
“We are facing new but enormous challenges – shortages in key commodities; fractures in the international financial architecture; and fears of deglobalisation. Extreme volatility characterizes commodity and financial markets. While the pandemic is quickly turning one of life from a health crisis and livelihoods, conflict in Europe has the potential to derail the global economy,” Das said in his monetary policy statement.
Trapped by several adversities, the Reserve Bank of India’s outlook needs to be cautious but proactive in mitigating the adverse impact on India’s growth, inflation and financial conditions.
The RBI governor said that with the easing of restrictions, domestic air passenger traffic resumed in March.
“According to our surveys, consumer confidence is improving and households’ optimism sentiments for the year ahead strengthened with an uptick in sentiment.”
He said business confidence is in optimistic territory and supports a revival in economic activity.
Going forward, stronger rabi (winter crop) production should support an improvement in rural demand, while a boom in contact-intensive services should help further strengthen urban demand, he said.
The RBI on Friday kept the benchmark interest rate, the repo – at which it lends short-term money to banks – unchanged at 4 per cent.
After deliberations during April 6-8, the six-member Monetary Policy Committee (MPC) headed by Das also unanimously decided to stick with a lenient stance.
Stating that the RBI is not hostage to any rule book, Das said it will use all available means to protect the Indian economy.
He said the RBI will focus on the return of housing to ensure that inflation remains within the target while supporting growth.
Retail inflation has been hovering above the RBI’s upper tolerance level for the past few months. It was 6.07 per cent in February and 6.01 per cent in January, mainly due to the rise in food prices.
“Overall, external growth during the past two months has increased downside risks to the domestic growth outlook and risks to inflation projections presented in the February MPC proposal. Inflation is now projected to be higher and growth lower than assessed. In February,” RBI said.
Das said that even though economic activity is recovering, it is barely above its pre-pandemic level.
Noting that private consumption and fixed investment – key drivers of domestic demand – have remained subdued, with only marginal growth from pre-pandemic levels, the RBI said that on the supply side, contact-intensive services still lag behind. of 2019-20.
“Nevertheless, the Indian economy continues to revive from its pandemic-induced contraction,” the governor said.
However, he also pointed out that due to extreme volatility in global crude oil prices since late February and extreme uncertainty over evolving geopolitical tensions, “any projections of growth and inflation are risky,” and that the future Depends to a large extent on oil. and commodity price development.
“In this context, continuing and deepening supply-side measures can ease food price pressures and also reduce cost-push pressures in manufacturing and services. On our part, I assure all stakeholders that As before, the Reserve Bank will use all its policy measures to maintain macroeconomic stability and enhance the resilience of our economy.”
Das said that the situation is dynamic and changing rapidly and our actions have to be tailored accordingly.
However, the central bank said that it will use all available means to protect the Indian economy.
After referring to the pandemic situation and the efforts made by the central bank, RBI Governor Shaktikanta Daso “Now two years later, as we exit the pandemic situation, the global economy has witnessed a tectonic shift, with the outbreak of war in Europe from 24 February, with sanctions and escalating geopolitical tensions,” it said.
“Once again, we at RBI are determined and ready to defend the economy and ride out the current storm,” he added.
Unveiling the first bi-monthly monetary policy review of the current financial year, the governor said external growth during the past two months outweighed downside risks to domestic growth and risks to inflation.
“…real GDP growth for 2022-23 is now projected at 7.2 per cent with Q1: 2022-23 at 16.2 per cent; Q2 at 6.2 per cent; Q3 at 4.1 per cent; and Q4 at 4 per cent, assuming crude oil (Indian basket) at $100 per barrel during 2022-23,” Das said, adding that the Indian economy continues to revive from its pandemic-induced contraction.
Earlier this year, the Economic Survey in January had projected a growth rate of 8-8.5 per cent for the current fiscal.
“We are facing new but enormous challenges – shortages in key commodities; fractures in the international financial architecture; and fears of deglobalisation. Extreme volatility characterizes commodity and financial markets. While the pandemic is quickly turning one of life from a health crisis and livelihoods, conflict in Europe has the potential to derail the global economy,” Das said in his monetary policy statement.
Trapped by several adversities, the Reserve Bank of India’s outlook needs to be cautious but proactive in mitigating the adverse impact on India’s growth, inflation and financial conditions.
The RBI governor said that with the easing of restrictions, domestic air passenger traffic resumed in March.
“According to our surveys, consumer confidence is improving and households’ optimism sentiments for the year ahead strengthened with an uptick in sentiment.”
He said business confidence is in optimistic territory and supports a revival in economic activity.
Going forward, stronger rabi (winter crop) production should support an improvement in rural demand, while a boom in contact-intensive services should help further strengthen urban demand, he said.
The RBI on Friday kept the benchmark interest rate, the repo – at which it lends short-term money to banks – unchanged at 4 per cent.
After deliberations during April 6-8, the six-member Monetary Policy Committee (MPC) headed by Das also unanimously decided to stick with a lenient stance.
Stating that the RBI is not hostage to any rule book, Das said it will use all available means to protect the Indian economy.
He said the RBI will focus on the return of housing to ensure that inflation remains within the target while supporting growth.
Retail inflation has been hovering above the RBI’s upper tolerance level for the past few months. It was 6.07 per cent in February and 6.01 per cent in January, mainly due to the rise in food prices.
“Overall, external growth during the past two months has increased downside risks to the domestic growth outlook and risks to inflation projections presented in the February MPC proposal. Inflation is now projected to be higher and growth lower than assessed. In February,” RBI said.
Das said that even though economic activity is recovering, it is barely above its pre-pandemic level.
Noting that private consumption and fixed investment – key drivers of domestic demand – have remained subdued, with only marginal growth from pre-pandemic levels, the RBI said that on the supply side, contact-intensive services still lag behind. of 2019-20.
“Nevertheless, the Indian economy continues to revive from its pandemic-induced contraction,” the governor said.
However, he also pointed out that due to extreme volatility in global crude oil prices since late February and extreme uncertainty over evolving geopolitical tensions, “any projections of growth and inflation are risky,” and that the future Depends to a large extent on oil. and commodity price development.
“In this context, continuing and deepening supply-side measures can ease food price pressures and also reduce cost-push pressures in manufacturing and services. On our part, I assure all stakeholders that As before, the Reserve Bank will use all its policy measures to maintain macroeconomic stability and enhance the resilience of our economy.”
Das said that the situation is dynamic and changing rapidly and our actions have to be tailored accordingly.