India on course to become fastest growing economy despite global recession fears

Currently, India's forex reserves have declined by USD around 40 billion in 2022.

The Reserve Bank of India (RBI) has stated that the Indian economy remains resilient despite fears of a global recession.

RBI observed this in its monthly bulletin. It stated:

“There are sparks in the wind that ignite the innate strength of the economy and set it on course to becoming the fastest growing economy in the world, though besieged it might be by fears of recession.”

According to the RBI, the Indian economy has been showing signs of resilience. This is despite high-risk aversion in financial markets that is stampeding portfolio investors.

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The RBI further stated that this is taking down all currencies against the unrelenting strength of the US dollar.

Further, the provisional data released by the National Statistical Office (NSO) on July 12 showed that retail inflation in India has eased marginally in June to 7.01 per cent.

The RBI notes that the recent surge in inflation will be left behind if the price moderation endures alongside the easing of supply chain pressures. This will help the Indian economy to escape the global inflation trap. The RBI said in its bulletin:

“There is some evidence now that supply-chain pressures are peaking globally and in India, so that a major source of upward inflation pressures may be ebbing.”

RBI said India’s current account deficit (CAD) could widen to 2.3% of GDP in 2022/23 if oil prices average $105 per barrel. It would widen to 2.8% if oil averages $120 per barrel but still remain “within the sustainable limit of 3%”.

RBI has also called for close and continuous monitoring of the widening trade deficit and capital outflows. Currently, India’s forex reserves have declined by USD around 40 billion in 2022.