The Reserve Bank of India (RBI) stated in its state of the economy report for October that the Indian economy is at best resilient as internal inflationary pressures start to diminish while it faces “formidable headwinds” due to the erratic international financial markets.
According to the RBI, “top economic activity indices show to sustained resilience of the Indian economy in a hazy and unfriendly global environment.”
India, which recently passed the UK to become the world’s fifth-largest economy, is predicted to post GDP growth of 6.1% in the third quarter of 2018.
India is on track for a growth rate of roughly 7% in 2022–2023 if this is realised. According to the report, the economy’s supply responses grew stronger in Q3.
The opinions expressed in the paper, however, are those of the researchers under the direction of deputy governor Michael D. Patra, not the central bank, according to the RBI.
Recent data from India and on the other side of the Atlantic point to a reluctant easing of inflationary pressures. Benefiting from lower commodity prices, particularly food, inflation has somewhat decreased across the BRICS economies and in several other emerging market economies as well.
This caused central banks to change their perspective; several of them have halted rate hikes and signalled that the end of rate raising is near, the research noted.
Some of them are providing “75s” but comforting the market with a dovish shift following a 75 bps hike. The risk that they will ease off too soon when they view the outlook getting worse is increased by lags in the transmission of monetary policy, as previously stated.
However, the International Monetary Fund underlined two key dangers to global financial stability in its most recent Global Financial Stability Report: an uncontrollable tightening of financial conditions and debt distress among developing and frontier nations.
As the medium-term estimates show a worsening global economic picture and accompanying fears that a polycrisis on a global scale may be imminent, it has also been forecasted that a third of the world economy will contract this year or next.
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