Inflation Dip To Power India's Economic Growth, Says RBI Annual Report

The Reserve Bank of India (RBI), in its annual report released on May 30, stated that India’s growth momentum is expected to continue in 2023-24 due to healthy macroeconomic policies, lower commodity prices, and a decrease in inflation.

However, the RBI warned of potential risks to this growth from slower global economic activity, ongoing geopolitical tensions, and possible increased volatility in financial markets due to new stress events.

The RBI explained that the combination of robust financial and corporate sectors, continued emphasis on the quality of government spending, and new growth opportunities from global supply chain realignments should sustain India’s economic growth.

Policy Focus: In its annual report, the RBI’s Central Board of Directors said that the monetary policy is focusing on withdrawing accommodation to ensure inflation aligns progressively with the target, while also supporting growth.

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The report also predicts a decrease in inflation over 2023-24, with headline inflation dropping to 5.2% from last year’s average of 6.7%, assuming a stable exchange rate and a normal monsoon.

In the external sector, the RBI expects the current account deficit to stay moderate, boosted by robust service exports and the beneficial impact of lower commodity import prices. However, it warned of potential volatility in foreign portfolio investment flows due to global uncertainties.

Read next: India’s Economic Snowball: WEF President Anticipates Highest Growth Among Major Economies

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