RBI article: India will not slow down, will maintain pace of expansion

“Unlike the global economy which is at risk of recession, India will not slow down and will maintain the pace of expansion achieved in 2022-23,” said the RBI March 2023 bulletin.

“Even as global growth is set to slow down or even enter a recession in 2023 as global financial markets waver, India has emerged from the pandemic years stronger than initially thought, with a steady gathering of momentum since the second quarter of the current financial year,” said an article in the March bulletin of the Reserve Bank.

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“Year-on-year growth rates do not reflect this pick-up of pace because by construction they are saddled with statistical base effects, and instead suggest a sequential slowing down through successive quarters of 2022-23 to an unsuspecting reader,” it said.

“…unlike the global economy, India will not slow down. It will maintain the pace of expansion achieved in 2022-23. We remain optimistic about India, whatever the odds,” said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra.

India better positioned due to resilience, reliance on domestic drivers

They said the National Statistical Office’s end-February data release indicates that the Indian economy is intrinsically better positioned than many parts of the world to head into a challenging year ahead, mainly because of its demonstrated resilience and its reliance on domestic drivers.

Currently available forecasts of India’s real GDP growth for 2023-24, including those of the RBI, settle between 6.0 and 6.5 per cent.

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The article observes that hawkish minutes of the Federal Open Market Committees (FOMC) meeting, a sharp rise in US treasury yields, and fresh geopolitical risks after Russia suspended its participation from the New Strategic Arms Reduction Treaty (START) dented positive sentiment in the Indian equity market during the second half of February 2023.

Consequently, the BSE Sensex reversed its earlier gains and registered a cumulative decline of one per cent during February 2023. The BSE Sensex recovered its losses in early March 2023, aided by optimistic domestic and global economic data.

SVB collapse triggers decline in domestic equities

Domestic equities, however, declined thereafter, tracking the sell-off in global markets as the collapse of US-based Silicon Valley Bank (SVB) and concerns over the financial health of a large European financial services provider dented investors’ sentiments.

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The central bank said that the views expressed in the article were those of the authors and do not represent the views of the Reserve Bank of India.

(With agency inputs)