Reserve Bank of India (RBI) Governor Urjit Patel said with growth picking up in the second quarter of the current financial year, the economic slowdown may have bottomed out.
“Our recent growth numbers may have disappointed some in the first quarter of this fiscal year, but the second quarter has recorded an uptick and the slowdown may well be bottoming out,” Dr. Patel said in a speech delivered on December 7 at a conference organised by CAFRAL on “Financial System and the Macroeconomy. The RBI uploaded the text of the speech on its website on Friday.
Official data released this month, showed gross domestic product (GDP) in the July-September quarter expanded 6.3% year-on-year, snapping a four-quarter slowdown. Growth in the preceding quarter was 5.7%.
‘Efficiency augmenting’
Dr. Patel said while structural changes, such as the introduction of the Goods and Services Tax (GST), may result in temporary disruptions, they were “efficiency augmenting” in the medium to long term. He said the current account deficit “remains within sustainable levels”, and other indicators of external viability also reflected a healthy improvement.
The RBI chief said international investors had warmed to the Indian economy as reflected in the sizeable foreign investment inflows.
“Meanwhile, domestic financial markets have shown resilience and stability in spite of escalation of global geopolitical uncertainty and heightened volatility in financial markets. These developments have enabled the build-up of buffers against unforeseen shocks.”
At the same time, building up adequate buffers in foreign exchange reserves was a natural “self-insurance” to manage risks arising out of volatile capital flows.
Commenting on inflation, the central bank governor said while some disinflation was underway and inflation expectations were, perhaps, getting re-anchored, “considerable caution and vigilance” was warranted.
The monetary policy committee has left interest rates unchanged for two successive bimonthly policy reviews, citing concerns about the outlook for inflation. The RBI has also retained a ‘neutral’ policy stance.
