RBI monetary policy committee member Jayant R. Varma. Photo: iima.ac.in
Jayant R., a member of the Monetary Policy Committee (MPC) of the Reserve Bank of India. Verma said on 26 February that India’s economic growth appears to be ‘very fragile’ and the country may fall short of what it needs to meet the aspirations of its growing workforce.
In India, Mr Verma said he expected inflation to remain high in 2022-23, but ease significantly in 2023-24.
“However, growth appears to be very fragile, and monetary tightening is holding back demand,” he added. PTI,
Elaborating further, he said that rising EMI payments put pressure on the domestic budget and reduce spending, and exports are struggling in the face of global factors.
Noting that higher interest rates make private capital investment more difficult, Mr Verma said the government is in fiscal consolidation mode, thus reducing support to the economy from this source.
“Due to all these factors, I fear that given our demographic context and income levels, the development may fall short of meeting the aspirations of our growing workforce,” he said.
The Reserve Bank of India (RBI) has projected India’s economic growth for 2023-24 at 6.4 percent. Gross Domestic Product (GDP) growth is estimated to be 7% in 2022-23, according to the first advance estimates by the National Statistical Office. (NSO).
The Economic Survey 2022-23 has projected a baseline GDP growth of 6.5% in real terms for the next fiscal year.
Mr Verma, who is currently a professor at the Indian Institute of Management, Ahmedabad, said he sees global inflationary pressures easing in the coming months as supply shocks from the pandemic and the Ukraine war gradually resolve themselves. have been
“The world is learning to live with war,” he said. At the same time, monetary tightening is putting growth at risk around the world.
Answering a question on high inflation, Mr Verma said that 2022-23 is a year of high inflation due to various supply shocks as well as delay in monetary tightening during the second half of 2022-23.
“However, I expect inflation to ease significantly in 2023-24. I anticipate a gradual glide path that brings inflation closer to the target,” he said.
RBI reduced the Consumer Price Inflation (CPI) forecast for the current financial year to 6.5% from 6.7% earlier. India’s retail inflation stood at 6.52% in January.
To a question on the short-term lending rate hike by the Reserve Bank, Mr Verma said the balance of risks has shifted towards growth rather than inflation, and in this context, a pause is more appropriate.
Noting that rates are high enough for the MPC to wait and see how the situation develops, he said, “Inflation is unlikely to remain extremely high, at which point further rate hikes may be considered.” could.” The Reserve Bank, which has been hiking short-term lending rates since May last year, has cumulatively increased the repo rate by 250 basis points. The repo rate now stands at 6.5%.
Asked what would be the likely impact of the warm weather on the wheat crop and food inflation, Mr. Verma said he was hopeful that the weather anomalies would prove to be transient and that India would have a normal monsoon.