India’s GDP growth in 2022-23 may well surpass the 7% estimate, while retail inflation is likely to go below the 4.7% mark this month, and gross non-performing assets in the banking system have likely dipped further in the January to March 2023 quarter, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday.
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“I will not be surprised if India’s GDP growth last year turns out to be higher than the 7% estimated earlier,” the Governor said, noting that almost all of the 70 high frequency indicators monitored by the central bank have maintained growth momentum through the last quarter of 2022-23. The National Statistical Office will release the GDP data for 2022-23 next week.
The RBI’s growth expectation of 6.5% for this year — which Mr. Das noted is higher than the 5.9% projected by the International Monetary Fund — is based on the hope of agriculture doing well, a normal monsoon and a sustained uptick in the services sector, even though geopolitical risks, slowing world trade and goods exports remain a risk.
Investment revival
Mr. Das, who was speaking at the annual session of the Confederation of Indian Industry, said that there was a private investment revival underway which was noticeable in sectors like steel and cement. He added that the industry body’s surveys suggest that capacity utilisation in manufacturing is higher than the 75% level last estimated by the RBI.
“I don’t know whether they have shared the number with you, so I’m not mentioning it, but in our interaction last week in Mumbai, I was told it is clearly much more than 75%,” he said, adding that credit offtake from banks is also growing at a resilient 15.5%.
“Inflation has moderated to 4.7% in the last print and the next print could be even lower but there’s no room for complacency. In February last year, the outlook was very benign, but then we had the big surprise from the Ukraine war. Nobody expected it to happen with such intensity and it naturally had some impact on prices across the board,” Mr. Das pointed out.
Evolving situation
On whether the coming monetary policy review could see another pause in rate hikes, Mr. Das said: “It’s not in my hands. It depends on the situation on the ground as it evolves.”
While some central banks have hit a pause on rate hikes in recent meetings, the Governor pointed out that the Bank of New Zealand had raised interest rates by 25 basis points earlier on Wednesday, while Canada — which had paused hikes — opted to increase rates again recently.
“So, therefore, global monetary policy is still settling down because the inflationary conditions are fast evolving and all central banks are watching it with what I call an Arjuna’s eye or what others call a hawk’s eye,” he said.
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Mr. Das alluded to unaudited fourth quarter results (Jan-March 2023) from banks that suggested gross non-performing assets at the systemic level were even lower than the 4.4% recorded as of December 31, 2022. “But I would not like to mention the number because they are unaudited and we would rather wait for the audited figures to come in,” he added.
