India’s economic growth expected to exceed 7% in FY23: RBI Governor Shaktikanta Das

New Delhi:

Reserve Bank of India Governor Shaktikanta Das today said growth for 2022-23 is expected to be above the prior estimate of 7% thanks to sustained economic momentum in the third and fourth quarters of the last exercise.

According to the second advance estimate released by the Office for National Statistics (ONS) in February, the economy is expected to grow by 7% in 2022-23 from 8.7% in the previous financial year.

“It’s possible it could be even more…it won’t be a surprise if last year’s GDP growth is just over 7%,” he said at a CII event in Delhi.

The preliminary annual estimates for the year 2022-2023 will be published on May 31, 2023.

“It initially appeared in the third quarter that there was pent-up demand supporting economic activity, but all economic indicators from the fourth quarter of last year show that economic activities have maintained their momentum.

“In fact, all of the high frequency indicators, about 70 of them, that we’ve been tracking at the Reserve Bank of India, almost all of these high frequency indicators, the momentum has continued into the fourth quarter. So we shouldn’t be surprised if the growth is just over 7%,” he said.

For the current financial year, he said the RBI forecast a growth rate of 6.5%.

On the global scenario, he said the coexistence of high inflation and banking strains complicates central bank responses as they face or arbitrate between the risk of straining financial markets or having to tolerate a longer period. high inflation.

“Amid these global uncertainties, the Indian banking system remains stable and resilient with strong capital and liquidity positions, improving asset quality, better provisioning coverage and improved profitability,” he said.

Das said the decision to change policy rates is not in his hands as he himself is driven by the situation on the ground.

In April, the Reserve Bank, in a surprise move, pressed the pause button and decided to keep the benchmark policy rate at 6.5%.

Previously, the Reserve Bank of India (RBI) was in the midst of a rate hike, increasing the repo rate by 250 basis points since May 2022.

Speaking at an event hosted by industry chamber CII, Mr Das said it was suggested that RBI take a break from upcoming monetary policy meetings.

“It’s not in my hands. It all depends on the situation on the ground. I’m motivated by what’s happening on the ground. What’s the outlook on the ground? What are the trends? How is inflation going? does it accumulate or decrease?So, it’s all there.

“So it’s not a decision that’s entirely in my hands, because I’m driven by what’s happening at ground level. So to that extent, you know, I think I’m going to leave it at that.” , said the governor.

The latest move to hold rates should be viewed as a pause, not a pivot, he said.

Citing one example, Das said Canada, after a pause, raised rates to keep up with inflation.

On global growth, he said the global economy is mired by geopolitical uncertainty, high inflation, financial market volatility – including strains on the banking sector – food insecurity and over-indebtedness, among others.

On the positive side, there has been a slow recovery in global growth, easing of supply chains, moderation in inflation, normalization of financial markets and the reopening of Chinese markets, all of which have improved sentiment. but uncertainty remains, he said.

Against a backdrop of global churn, the Indian economy has shown resilience and created the necessary buffers to meet geopolitical and domestic challenges.

He assured that the country has sufficient foreign exchange reserves and that the central bank has maintained the rupee exchange rate.

Regarding the internationalization of the rupee, he said, the RBI has enabled the settlement of international trade in rupees in 18 countries. No less than 17 banks have opened 30 special vostro accounts.

Sberbank and VTB Bank, Russia’s largest and second-largest bank respectively, are the first foreign lenders to receive approval after the RBI announced the rupee’s foreign trade guidelines in July. last year.

Another Russian bank, Gazprom, which does not have a unit in India, also opened this account with UCO Bank, based in Kolkata.

A vostro account is a bank account held by a domestic bank for a foreign bank, denominated in the domestic currency of the former. The Vostro Rupee account specifically holds the foreign entity’s deposits in Indian Rupees with the Indian bank.

Mr. Das stressed the urgent need to ensure availability and access to technology.

He stressed that the future belongs to technology and industry has a major role to play in technology development, and the public and private sectors must work together to be ready for technology.

Regarding liquidity, he said the central bank would maintain sufficient liquidity to meet the productive needs of the economy and ensure exchange rate stability.

Regarding FDI, he said he expected a slight increase in foreign capital flows in May.

He also informed the meeting that the RBI is refining the Central Bank Digital Currency (CBDC) architecture based on the experience gained so far.

The RBI on November 1 and December 1, 2022 launched the CBDC for wholesale and retail respectively.

While the wholesale CBDC use case is limited to the settlement of secondary market trades in government securities, the retail e-Rupee is driven within a closed user group (CUG) comprising customers and participating merchants.

The first phase includes four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank and subsequently four lenders Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank joined.

The CBDC is expected to make the interbank market more efficient, and electronic rupee settlements can reduce transaction costs by obviating the need for settlement collateral infrastructure or collateral to mitigate settlement risk.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)