India Set On Course To Become World’s Fastest-Growing Economy, Says RBI

India’s economy has remained resilient in the face of global headwinds and with inflation coming off its recent peak is expected to stay on course to become the world’s fastest-growing economy, the Reserve Bank of India said on Saturday.

The recent revival of the southwest monsoon and renewed planting raised expectations that rural demand will soon catch up with urban spending and consolidate a recovery, the RBI said in a bulletin.

“Knock-on effects of geopolitical spillovers are visible in several sectors, tapering the pace of recovery,” the central bank said.

“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.”

It did not give a time frame.

RBI said if the commodity price moderation witnessed in recent weeks endures alongside the easing of supply chain pressures, the worst of the recent surge in inflation will be over.

India’s annual consumer inflation remained painfully above the 7 per cent mark and beyond the central bank’s tolerance band for the sixth month in a row, data last week showed.

“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.

Referring to the impact of high global crude prices on India’s current account deficit (CAD), RBI said the CAD could widen to 2.3 per cent of GDP in 2022/23 if oil prices average $105 per barrel. It would widen to 2.8 per ent if oil averages $120 per barrel but still remain “within the sustainable limit of 3 per cent”.

CAD stood at 1.2 per cent of GDP in 2021/22, data released in June showed.

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