FY23 GDP projection maintained at 7.2%; Das says economic recovery remains firm


The Reserve Bank of India (RBI) on Wednesday maintained its real GDP forecast at 7.2% for the current financial year 2021-22. Speaking to the media, RBI Governor Shaktikanta Das said that in these tough and difficult times, the Indian economy has remained resilient, supported by strong macroeconomic fundamentals and buffers.

“Real GDP growth for 2022-2023 is maintained at 7.2%, with Q1 at 16.2%; Q2 at 6.2%; T3 at 4.1%; and the fourth quarter at 4.0%, with broadly balanced risks,” Das said.

He added that capacity utilization improved to 74.5% in the March 2022 quarter, from 72.4% in the previous quarter, and is expected to increase further. He also said that an increase in non-oil and non-gold imports indicates a recovery. “Available information for April and May 2022 indicates that the recovery in domestic economic activity remains firm, with increasingly broad growth impulses.”

The RBI governor said the manufacturing and services purchasing managers’ indices (PMIs) for May pointed to further expansion in activity. This is also corroborated by movements in rail freight and port traffic, domestic air traffic, GST collections, steel consumption, cement production and bank credit. While urban demand is recovering, rural demand is gradually improving.

“Investment activity is expected to… strengthen, driven by rising capacity utilization, the surge in government capital spending and deleveraging from corporate balance sheets. The improvement in investment activity is also reflected in a recovery in demand for bank credit and continued growth in imports of capital goods. Merchandise exports remained buoyant with double-digit growth for the fifteenth consecutive month in May, while strong growth in non-oil and non-gold imports is indicative of a recovery in domestic demand conditions, Das said. .

He added that a good monsoon should support rural consumption. The RBI survey also suggests an improvement in consumer confidence in the coming year. He also said that going forward, real GDP is expected to broadly move in the direction of the April 2022 MPC resolution. The forecast of a normal southwest monsoon is expected to boost kharif plantings and production. agricultural. This will support rural consumption. The rebound in contact-intensive services should support urban consumption.

According to provisional estimates released by the National Statistical Office (NSO) on May 31, 2022, India’s real gross domestic product (GDP) growth in 2021-2022 is estimated at 8.7%. The level of real GDP in 2021-22 exceeded the pre-pandemic level (2019-20). On the supply side, major categories also exceeded 2019-20 levels.

Regarding the banking sector, Das said that the Indian banking system remains resilient and sound. “Our supervision has deepened considerably over the past three years. Each bank is closely monitored by RBI; we have real-time data available.
The preoccupations

Das said: “Nevertheless, the negative fallout from geopolitical tensions; high international commodity prices; rising input costs; tightening of global financial conditions; and the slowing global economy continue to weigh on the outlook.

He added that the ongoing war between Russia and Ukraine is also proving to be a drag on global trade and growth. The accelerating pace of monetary policy normalization undertaken by Systemic Advanced Economies (AS) is leading to increased volatility in global financial markets.

“This translates into sharp corrections in major equity markets, large swings in sovereign bond yields, US dollar appreciation, capital outflows from EMEs and even some EAs. EMEs (emerging market economies) are witnessing also to a depreciation of their currencies,” the RBI Governor said.

He also said food and commodity prices remain high, the Russian-Ukrainian war has led to the globalization of inflation, and central banks around the world are reorienting their policies.

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