According to the Reserve Bank’s report, the emerging market economies (EMEs) are looking even more vulnerable due to slow growth and rising inflation, due to currency depreciation and capital outflows.
The danger of corona has started looming again in the world. The way the central banks of the world are increasing the interest rates and are indicating to increase the rates next year as well, due to which the world is in recession. (Global Recession) There is a danger of becoming a situation. Regarding which the Reserve Bank of India (Reserve Bank of India) The concerns have started increasing a lot. RBI report (RBI Report) According to the RBI, the risk balance is tilted towards a dark global outlook and the world’s emerging market economies ie EMEs appear more vulnerable, while economic data suggests that global inflation may be at its peak. The RBI said in its ‘State of the Economy’ report that inflation may ease slightly, but it is likely to remain above the target for next year as well.
Repo rate was increased
After increasing the repo rate by 225 basis points since May this year to control inflation, the RBI report said that the growth outlook for the Indian economy is supported by domestic drivers. Equity markets touched new highs in November due to strong portfolio flows in India. Despite inflation remaining stable at 6 per cent, retail inflation declined by 0.90 per cent due to fall in vegetable prices and the level of retail inflation came down to 5.9 per cent. According to the report, due to reduction in input cost, increase in corporate sales and investment in fixed assets, the growth of Indian economy can be seen faster.
Decisions taken on monetary policy will have to suffer damages
According to the RBI report, the risk balance is increasingly tilted towards the dark global outlook for 2023. There is a reason for this too. Central banks all over the world will have to bear the brunt of the actions taken under the monetary policy. According to the report, emerging market economies (EMEs) are showing further weakness due to currency depreciation and capital outflows, apart from slowing growth and rising inflation. It has been said in the report that the loan crisis is increasing, the default rate is increasing.
GDP forecast for 2023 has been reduced
On 7 December, the RBI MPC raised the repo rate by 35 basis points to 6.25 per cent following a reduction in inflation in October. The six-member committee had earlier kept the GDP estimate for FY2023 at 7 per cent, which was reduced to 6.8 per cent. In fact, the risk is going to continue due to the tightening of long term geo-political tensions, global recession and global financial conditions.
Inflation target likely to be higher in 2023
The projections for 2023 are not looking better, pointing towards weak global growth. RBI said that inflation is likely to come down from the current level in 2023, but it will remain higher than the target in most economies. On inflation, it has been said in the report that due to the rapid decline in food inflation, relief has been seen in retail and wholesale inflation. The index declined by 11 bps month-on-month, due to which there was a decline of about 90 bps in inflation between October and November.
Private Consumption and Investment Outlook Up
Regarding the economy, the RBI report said that high frequency indicators show that domestic economic activities remained flexible in November and early December. The report said that the private consumption and investment outlook is looking up, although relatively higher inflation in rural areas is reducing spending in those areas.
: Language Inputs