India's GDP to grow at 6.8% in FY23, inflation remains a pain point: RBI Governor 

NEW DELHI: Amid geopolitical tensions, global slowdown and tightening of financial conditions, India's real GDP growth for 2022-23 is expected to be at 6.8 per cent, with Q3 at 4.4 per cent and Q4 at 4.2 per cent, RBI Governor Shaktikanta Das said Wednesday. 

"The risks are evenly balanced. Real GDP growth is projected at 7.1 per cent for Q1 of FY 24 and at 5.9 per cent for Q2. Even after this revision in our growth projection for 2022- 23, India will still be among the fastest-growing major economies in the world," Das added. 

Even amid global economic challenges, the Indian economy remains resilient because of its strong macroeconomic fundamentals, Das said on Wednesday while announcing the key decisions of the monetary policy committee(MPC) meeting. However, inflation remains a pain point for India as other countries, he added. 

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"Our financial system remains robust and stable and corporates are healthier than before the crisis. Bank credit is growing double digit for eight months now. India is being seen as a bright spot in an otherwise gloomy world. Yet inflation remains elevated in most part of the world."

He projected India's headline inflation at 6.7 per cent in FY23, with Q3 at 6.6 per cent and Q4 at 5.9 per cent.

"The risks are evenly balanced. CPI inflation for Q1 of FY 24 is projected at 5.0 per cent and for Q2 at 5.4 per cent, on the assumption of a normal monsoon," Das added. 

According to Das, the outlook for the Indian economy is supported by good progress of Rabi sowing, sustained urban demand, improving rural demand, pickup in manufacturing and rebound in services and robust credit expansion. 

Mixed signals are emanating from geopolitical situations and financial market volatility. The Ukraine war overwhelmed the world in a black swan moment and fundamentally changed the global economic outlook. 

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"Consumer price inflation moderated to 6.8% year-on-year in October as expected but still it remains above the upper tolerance level of the RBI. Core inflation is exhibiting stickiness, while headline inflation may ease throughout the rest of the year and in the first quarter of FY 24. It is expected to rule above the target," Das stated. 

"On balance, the MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and contain second-round effects. These actions will strengthen the medium-term growth prospects of the Indian economy. Accordingly, the MPC decided to increase the policy repo rate by 35 basis points to 6.25 per cent and to remain focused on the withdrawal of accommodation, while supporting growth," he said. 

He said inflation remains high and broad-based world over. According to the International Monetary Fund (IMF), more than one-third of the world economy will contract this year or next year. The emerging economies have been the worst affected due to these tensions. 

The MPC on Wednesday increased the repo rate by 35 basis points to 6.25 % with immediate effect.  It maintained its stance of withdrawal of accommodation.