India’s economy has remained resilient in the face of global headwinds and inflation, which recently peaked, is expected to remain on track to become the world’s fastest growing economy, India’s central bank said on Saturday. A recent revival in the southwest monsoon and renewed planting have raised expectations that rural demand will soon catch up with urban spending and consolidate the recovery, the RBI said in a bulletin. The knock-on effects of geopolitical spillovers are visible in several sectors and are slowing the pace of recovery,” the central bank said. on track to become the world’s fastest-growing economy, although it may be besieged by recession fears.”
It did not provide a time frame. The RBI said if the easing of commodity prices seen in recent weeks holds together with the easing of supply chain pressures, the worst of the recent rise in inflation will be behind us. India’s annual consumer inflation remained painfully above the 7% mark and below the central bank’s tolerance band for the sixth straight month, data showed last week. There is now some evidence that supply chain pressures are peaking globally and in India, so the main source of inflationary pressures may be waning,” the bank said.
Referring to the impact of high global oil prices on India’s current account deficit (CAD), the RBI said the CAD could widen to 2.3 percent of GDP in 2022/23 if oil prices average $105 per barrel. It would rise to 2.8 percent if oil averaged $120 a barrel, but would still remain “within a sustainable limit of 3 percent. “CAD was 1.2 percent of GDP in 2021/22, according to data released in June. “External debt remains modest relative to GDP and actually declined between March 2021 and March 2022,” the RBI said.
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