Reserve Bank of India (RBI) Deputy Governor Michael Patra, in a recent address at the New York Federal Reserve Central Banking Seminar, strengthens India’s macroeconomic fundamentals as a strategic defense against growing global uncertainty. He emphasized the importance of this. Patra highlighted that the country’s imports and exports of goods have taken a hit at a time of heightened geopolitical risks.
Patra said the RBI is actively increasing its foreign exchange reserves, which currently cover external debt and all debt servicing needs and are equivalent to almost 12 months of import costs. . This approach is part of the central bank’s broader strategy to strengthen the country’s economic resilience.
The Deputy Governor gave an optimistic outlook for India’s economy, estimating real GDP growth of 7.2% in the 2024/25 fiscal year and around 7% next fiscal year. Patra predicted that the 8% growth trend could return after these periods.
However, India’s inflation rate has been a challenge, rising above the RBI’s target of 4% in September after falling below this level in July and August. The rise in inflation can be attributed to increases in the prices of certain food items and negative base effects associated with year-on-year measurements.
Patra said the central bank expects these inflationary pressures to persist into October-November, but to be in line with the target from December 2024 to fiscal year 2025/26.
The Vice Governor also noted the dilemma facing monetary policy in a scenario where uncertainty, combined with high inflation, leads to slower economic growth. This situation poses a dilemma: whether to tighten policy to curb inflation or ease policy to stimulate growth.
The RBI maintained interest rates stable and kept them unchanged for the 10th consecutive meeting. However, there are expectations that the central bank could start cutting interest rates, possibly in early 2025, as part of its monetary policy adjustment.
Reuters contributed to this article.
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