India gaining momentum amid global uncertainty with moderating inflation, less volatile rupee: RBI Bulleti

Despite upbeat forecasts for FY24, looming risks could make FY25 more challenging

India expects its economy to grow around 7% in the next fiscal year, outpacing the global economy. The growth will be supported by stable domestic demand and private investment. Recent events in the Red Sea crisis may impact global trade and supply chains, affecting trade flows, transportation costs, economic output, and inflation worldwide.

Inflation is already moderating and the external account is sound, the Reserve Bank of India (RBI) said, but the El Nino and its adverse impact on rainfall remain potential threats to macroeconomic stability and food prices. Furthermore, moderating global growth, protracted geopolitical tensions and a possible upsurge in financial market volatility, evident in the implosion of many regional US banks, pose downside risks.

The World Bank has kept India's growth forecast unchanged at 6.3% for FY24, citing investment as a significant driver. However, it has revised its inflation projection to 5.9% from 5.2%. It also notes that inflation is likely to spike more than expected due to abnormal rainfall and the concern over oil prices.

S&P Global Ratings predicts that India will remain the fastest-growing major economy in the next three years, with a growth rate of 6.7%. The report projected a recovery for India's economy with a growth rate of 6% for the current fiscal year, with further growth expected to reach 6.9% in FY25 and FY26.

Reserve Bank of India Governor Shaktikanta Das has stated at the World Economic Forum (WEF) Annual Meeting in Davos that India's economy is projected to grow at 7% in fiscal year 2024-25. He highlighted India's position as the fastest-growing major economy, emphasizing the country's strong domestic demand.

Hausmann, who is also Rafik Hariri professor of the practice of international political economy at Harvard Kennedy School, said India provided opportunity for companies to set up operations in the country, as it had a huge domestic market with a large supply of labour, especially engineers, at a time when the world needed both. He said India is better integrated than some of the Southeast Asian economies.

Indias headline and core inflation has been unrelenting with data post market close showing annual retail inflation remained above the Reserve Bank of Indias RBI upper limit easing only slightly

The Reserve Bank of India's Monetary Policy Committee (MPC) is expected to keep benchmark lending rates unchanged for the fifth consecutive time. The relatively favorable macroeconomic indicators in India, with easing retail inflation and a GDP growth rate of 7.8% in Q2FY24, provide confidence to chart its own path, independent of US Federal Reserve, European Central Bank and Bank of Japan