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“India continues to grow… Inflation is down,” Central Bank report

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The Reserve Bank of India’s Reserve Bank diagnosed that the economy was maintaining a growth trend in the January-March quarter of 2023, and inflation was better than expected, showing signs of calming down, Market Watch and PTI News reported on the 23rd.

According to the media, the Reserve Bank made this prediction about the Indian economy in its 2023/24 fiscal year (April 2023-March 2024) first quarter (April-June) economic report released the day before.

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The Reserve Bank analyzed that growth in the first quarter was driven by a recovery in personal consumption, a recovery in demand in the provinces, and a recovery in the manufacturing industry due to easing pressure on input costs.

The report observed that “investment activity will also improve, and public spending and facility investment will increase as commodity prices subside, contributing to growth.”

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In addition, the Reserve Bank predicted that if service exports continue their recent strong performance, the stagnation in external demand throughout the first quarter will ease.

Regarding inflation, the report explained that the inflationary momentum has eased more than expected against the background of a decline in the price of wheat, a staple food, a decline in oil and oil prices for the fifth consecutive month, and a decline in egg prices for the third month.

“The decline in headline inflation rates (including food and energy) is the result of a combination of monetary tightening, measures to expand supply and a base effect,” the Reserve Bank explained.

In addition, the Reserve Bank predicted that the current slowdown in the producer price index (PPI) would lead to a decline in the consumer price index (CPI) in the future.

Earlier, on the 4th of last month, the World Bank (WB) announced that it was lowering its forecast for India’s economic growth rate for fiscal year 2023/24 to 6.3% from 6.6% previously.

The World Bank said today that it is lowering India’s growth rate for this fiscal year, which begins on April 1 and ends on March 31 next year, in light of the pressure on consumption due to interest rate hikes.

The Reserve Bank of India has raised the interest rate on repurchase agreements (repo repo), the benchmark interest rate, by a total of 250 basis points (2.50 percentage points) on six occasions since May last year.

In its report, the World Bank analyzed that “private consumption growth is constrained by rising borrowing costs and slowing income growth.”

The report estimates India’s gross domestic product (GDP) growth at 6.9 per cent for fiscal year 2022/23.

The World Bank also forecasts retail price inflation in India to slow to 5.2 per cent in 2023/24, down from 6.6 per cent the previous year.

Source: Donga

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