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Indian Economy Resilient But Sensitive To Global Headwinds, On Way To Post 7% Growth In FY23: RBI

India’s Q2 GDP Growth Forecast: The Reserve Bank of India (RBI) on Friday said the Indian economy is resilient but also “sensitive to formidable global headwinds”. The central bank pegs the country’s GDP for the July-September 2022 quarter (Q2) between 6.1 per cent and 6.3 per cent based on economic prediction models and high-frequency indicators, like IIP, PMI, core sector data and inflation, among others.

India’s GDP Data for the July-September quarter will be released at the end of this month. In the last quarter ended June, India’s GDP had grown 13.5 per cent in the June 2022 quarter (Q1FY23) as compared with the 20.1 per cent growth registered in Q1 2021-22.

Also Read: India’s GDP Grows At 13.5% During April-June 2022 Quarter; Fastest In A Year

“GDP data for Q2:2022-23 will be available by the end of this month; based on high-frequency indicators, our nowcasting and full information models peg real GDP growth in Q2 between 6.1 and 6.3 per cent. If this is realised, India is on course for a growth rate of about 7 per cent in 2022-23,” the RBI said in its monthly bulletin for November.

Stating that the world is facing a daunting future, the RBI in its latest bulletin said that as per the IMF’s Global Financial Stability Report, there are two major risks to the global financial stability — disorderly tightening of financial conditions, and debt distress among emerging and frontier economies.

“With headline inflation begining to show signs of easing, the domestic macroeconomic outlook can best be characterised as resilient but sensitive to formidable global headwinds. Urban demand appears robust, rural demand is muted but more recently picking up traction,” the RBI said.

It also said consumer price inflation reigns high across economies due to sustained cost push pressures from elevated food and energy prices and lingering pandemic-induced supply chain bottlenecks, although there are signs of inflation easing in a few economies, especially amongst Emerging Market Economies (EMEs).

India’s retail inflation in October eased to a three-month low of 6.77 per cent.

Also Read: India’s Retail Inflation Eases To 3-Month Low Of 6.77% In October; Both Rural, Urban Prices Soften

On the rupee, it said the Indian currency appreciated by 2.2 per cent against the US dollar between October 27 and November 11; by 1.2 per cent against the pound sterling; and by 0.5 per cent against the Euro.

“In the financial sector, system liquidity is normalising in consonance with the stance of monetary policy but it is still in surplus mode, with the Reserve Bank absorbing about Rs 1.5 lakh crore on a daily basis on average. The effective absorption rate rose by 1.75 percentage points between end-April and mid-November in response to monetary policy actions,” the RBI said.

It also said that among high-frequency indicators, the global composite purchasing managers’ index (PMI) signalled a downturn for the third consecutive month in October 2022, the lowest since June 2020, with both manufacturing output and services business activity declining. The global manufacturing PMI remained in contraction zone for the second successive month, as output in the intermediate goods sector fell.

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