Welcome to our blog where we discuss the latest insights and updates on India’s economy. Recently, a deputy governor of India’s central bank shared some key observations at the New York Fed Central Banking Seminar that shed light on the country’s macroeconomic fundamentals and global uncertainties.
In his speech, deputy governor Michael Patra emphasized the importance of fortifying India’s macroeconomic fundamentals as the best defense against elevated global risks. He highlighted that India’s merchandise exports and imports have been affected by rising geopolitical tensions.
One key strategy India is implementing is building up its foreign exchange reserves, which now cover external debt and debt servicing needs, providing a buffer equivalent to around 12 months of imports, according to Patra.
Looking ahead, the central bank estimates India’s real GDP to grow at 7.2% in fiscal year 2024/25 and around 7% in 2025/26, with a strong likelihood of growth reverting to an 8% trend in the future.
While inflation has risen above the central bank’s 4% target in September, Patra explained that this increase was driven by price momentum in some food items and base effects in year-on-year measurement. He projected that these price pressures would persist in the coming months before realigning with the target by the end of 2024.
Despite uncertainty shocks leading to slower growth and higher inflation, the RBI has maintained its interest rates for ten consecutive meetings. However, there is anticipation of a possible rate cut in early 2025.
As we navigate through global uncertainties, strengthening macroeconomic fundamentals and prudent policies remain crucial for India’s economic resilience. Stay tuned for more updates on India’s economic landscape!
