India will not slow down, maintain the pace: RBI article

Mumbai: Unlike the global economy which is risk of recession, India would not slow down and maintain the pace of expansion achieved in 2022-23, said the RBI bulletin on Tuesday.

Even as global growth is set to slow down or even enter a recession in 2023 as global financial markets wager, India has emerged from the pandemic years stronger than initially thought, with a steady gathering of momentum since the second quarter of the current financial year, said an article in the March bulletin of the Reserve Bank.

Year-on-year growth rates do not reflect this pick-up of pace because by construction they are saddled with statistical base effects, and instead suggest a sequential slowing down through successive quarters of 2022-23 to an unsuspecting reader, it said.

"Unlike the global economy, India would not slow down it would maintain the pace of expansion achieved in 2022-23. We remain optimistic about India, whatever the odds," said the article authored by a team led by RBI Deputy Governor Michael Debabrata Patra.

They said the NSO's end-February data release indicates that the Indian economy is intrinsically better positioned than many parts of the world to head into a challenging year ahead, mainly because of its demonstrated resilience and its reliance on domestic drivers.

Currently available forecasts of India's real GDP growth for 2023-24, including those of the RBI, settle between 6.0 and 6.5 per cent.

The article observes that hawkish minutes of the Federal Open Market Committee's (FOMC) meeting, a sharp rise in US treasury yields, and fresh geopolitical risks after Russia suspended its participation from the New Strategic Arms Reduction Treaty (START) dented positive sentiment in the Indian equity market during the second half of February 2023.

Consequently, the BSE Sensex reversed its earlier gains and registered a cumulative decline of 1 per cent during February 2023. The BSE Sensex recovered its losses in early March 2023, aided by optimistic domestic and global economic data.

Domestic equities, however, declined thereafter tracking the sell-off in global markets as the collapse of US-based Silicon Valley Bank (SVB) and concerns over the financial health of a large European financial services provider dented investors' sentiments.

The central bank said that views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India.