The Indian economy remains resilient despite formidable global headwinds and amidst fears of a recession, the Reserve Bank of India said in its latest monthly bulletin. In spite of geopolitical spillovers, “There are sparks in the wind that ignite the innate strength of the economy and set it on course to becoming the fastest growing economy in the world, though besieged it might be by fears of recession,” the bulletin said.
The Indian economy is showing resilience and dynamism in spite of the geopolitical situation and high-risk aversion in financial markets that is stampeding portfolio investors and taking down all currencies against the unrelenting strength of the US dollar, it said Further, the recent revival of the southwest monsoon and rejuvenation of sowing activity has raised hopes of another bountiful year for agricultural activity, raising expectations that rural demand will soon catch up with urban spending and consolidate the recovery, it added.
Domestic inflation coming off its recent peak is also a source of relief. The provisional data released by the National Statistical Office (NSO) on July 12 showed that retail inflation eased marginally in June to 7.01 per cent.
The worst of the recent surge in inflation will be left behind if the price moderation witnessed in recent weeks endures alongside the easing of supply chain pressures, thereby enabling the Indian economy to escape the global inflation trap, it added. On the other hand, it called for close and continuous monitoring of the widening trade deficit and capital outflows. India’s forex reserves have declined by USD around 40 billion in 2022.
Besides, foreign portfolio investors were net sellers in the Indian equity market for the ninth consecutive month in June.