Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said that the next print of retail inflation in India is expected to be lower than 4.7 per cent. Das, who was addressing a CII annual session, said the global economy is facing headwinds from the lingering geo-political conflict, elevated inflationary pressures across countries, and tighter financial conditions.
However, he added for FY23, India’s GDP growth is seen at 7 per cent. "But there is a possibility that it could be even more. It will not be a surprise if FY23 GDP growth comes slightly higher than 7 per cent,” the governor said.
On Tuesday, global ratings agency Moody's said India's GDP has crossed $3.5 trillion in 2022 and will be the fastest-growing G-20 economy over the next few years, but reform and policy barriers could hamper investment. He said that the co-existence of high inflation and banking stress is complicating the response of central banks.
“Amidst the global uncertainties, the Indian banking system remains stable and resilient, with strong capital and liquidity positions, improving asset quality, better provisioning coverage, and improved profitability,” the governor said in his speech.
“Agriculture has done well, services sector doing well, capex has picked up. There is evidence of revival of private investment in certain sectors. I am told capacity utilisation in manufacturing sector as per CII survey is higher than what the RBI's survey shows and is much more than 75 per cent. Credit offtake is resilient,” he said, while cautioning about the downside risks to the FY24 GDP growth forecast of 6.5 per cent. “Geopolitical uncertainties, drag from goods exports, and El Nino. We have to see whether El Nino actually happens and if it does, how intense it is,” the governor pointed out.
On May 19, the RBI announced the withdrawal of Rs 2,000 currency notes from circulation and said existing notes in circulation can either be deposited in bank accounts or exchanged by September 30. However, the banknotes will continue to be legal tender.
On this issue, Das said that the central bank will remain proactive and prudent, will do its best to support the economy to maintain financial stability and its endeavour is to ensure stability of exchange rate. The regulator will ensure adequate availability of liquidity to meet production requirements of the economy, the governor assured.