According to a recent article in the latest RBI Bulletin, the Indian economy is anticipated to exhibit robust growth in the fiscal year 2023-24, surpassing earlier expectations. The government's emphasis on capital expenditure (capex) is reportedly starting to attract private investment, marking a positive trend for economic development. The article, titled 'State of the Economy,' highlights that the global economic landscape presents varying growth prospects in the near term, with emerging market economies in Asia expected to outperform the rest of the world.
The piece, authored by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra, underscores the shift in the Indian economy from consumption to investment as a key driver for the stronger-than-expected growth in 2023-24. The government's focus on capex is noted to be playing a pivotal role in encouraging private investment.
The authors suggest that India's potential output is on the rise, with actual output running slightly above it, albeit with a moderate gap. Looking ahead to 2024-25, the article proposes a goal of sustaining this growth momentum by achieving a real GDP growth of at least 7% within the framework of macroeconomic stability. It emphasizes the need for inflation to align with the projected target by the second quarter of the year and maintain stability.
Furthermore, the article outlines key areas for improvement, including strengthening the balance sheets of financial institutions, enhancing asset quality, and continuing the consolidation of fiscal and external balances. It encourages harnessing the benefits of ongoing technological advancements for inclusive and participative growth in a secure, risk-free environment.
The authors stress the importance of collaboration between government capex and the corporate sector, supplemented by foreign direct investment, to sustain the positive trend in investment. Additionally, the article acknowledges that a resolution of geopolitical conflicts globally could brighten the weak global outlook, with a focus on mitigating their repercussions on commodity and financial markets, trade, transportation, and supply networks.
In conclusion, the RBI emphasizes the need to conquer inflation and pave the way for easing financial conditions to support growth. However, it clarifies that the views expressed in the article are those of the authors and do not necessarily represent the official stance of the central bank.
(With Agency Inputs)
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