Indian Economy Capable of Weathering the Global Storm: RBI

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NEW DELHI: The Reserve of India seems to be optimistic about the investment activity in the country. In its monthly bulletin, India’s apex bank says investments should get an uplift from robust government capex, improving capacity utilisation, stronger corporate balance sheets and congenial financial conditions.

However it also flagged concerns about global tensions, which may affect the domestic economy. “…, the worsening external environment, elevated commodity prices and persistent supply bottlenecks pose formidable headwinds, along with volatility spillovers from monetary policy normalisation in advanced economies. On balance, the Indian economy appears capable of weathering the deterioration in geopolitical conditions but it is prudent to continuously monitor the balance of risks,” RBI said.

On global growth outlook, RBI said it appears grim amid geopolitical tensions, elevated commodity prices and withdrawal of monetary accommodation stance, going forward. Emerging economies face risks of capital outflows and higher commodity prices feeding into inflation prints. Meanwhile, the pandemic continues to impinge on near-term economic prospects, the report said.

In the hostile international environment, the Indian economy consolidated the path of recovery, as per RBI. It said the factors like improvement in contact-intensive services, consumer confidence and record GST collections helped in achieving that.

“In contrast to heavy selling by foreign portfolio investors (FPIs) in recent months, domestic investors have emerged as the strong counterbalancing force in the wake of increasing diversification by households into stock markets,” it added. Increased uncertainty surrounds the inflation trajectory, which is heavily contingent upon the evolving geopolitical situation. (Source: The New Indian Express)