According to the minutes of latest RBI monetary policy, the RBI governor Shaktikanta Das stated that Indian economy presents a picture of resilience with macroeconomic and financial stability. The balance sheet of key stakeholders like corporates and banks remain strong. In an interconnected world, however, the Indian economy is obviously impacted by the unsettled global environment. There are pronounced consequences not only for domestic inflation and growth dynamics, but also financial markets.
On the growth front, economic activity is steadily improving. There are, however, mixed signals. While high frequency indicators are showing continued momentum in activity, global factors are putting pressure on external demand. The growth projection of 7.0 per cent for 2022-23, therefore, carries risks which are broadly balanced. Whatever be the unfolding scenario, India is expected to be among the fastest growing major economies in the world.
Headline inflation, on the other hand, remains elevated and above the upper tolerance band of the target. As per current projections, headline CPI is expected to moderate to 5.8 per cent in Q4 of 2022-23 and further to 5.0 per cent in Q1 of 2023-24. The future trajectory remains clouded with uncertainties arising from continuing geopolitical conflicts, possibility of further supply disruptions, volatile financial market conditions and domestic weather related factors.
Das said that he remains optimistic about the future prospects of the Indian economy, its resilience and capacity to deal with the current and emerging challenges. The central bank needs to do whatever is necessary and under our control to restrain broadening of price pressures, anchor inflation expectations and contain second round effects. The need of the hour is calibrated monetary policy action, with a clear understanding that it is required for sustaining our medium-term growth prospects.
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