The Indian economy must address challenges arising from rapid advancements in artificial intelligence (AI) and machine learning (ML), as well as recurrent climate shocks, even as it prepares for stronger growth over the next decade, according to the Reserve Bank of India’s annual report for FY24.
The central bank asserted that the upcoming decade’s growth will be supported by macroeconomic and financial stability, leveraging Bharat’s demographic dividend and competitive advantages.
“The Indian economy is navigating the drag from an adverse global macroeconomic and financial environment,” stated the RBI in its report released on Thursday.
Robust GDP Growth Amid Global Challenges
Despite a challenging global environment, Bharat’s real gross domestic product or GDP growth is strong, driven by solid investment demand and healthy balance sheets of banks and corporations. The growth is further enhanced by the government’s focus on capital expenditure and prudent monetary, regulatory, and fiscal policies.
In FY24, the Indian economy expanded robustly, with real GDP growth accelerating to 7.6 per cent, up from 7 per cent in the previous year – marking the third consecutive year of 7 per cent or higher growth.
“The domestic economy exhibited robust growth in 2023-24, underpinned by strong investment activity amidst subdued external demand,” the report noted.
Moderating Inflation and Strong External Sector
The report highlighted that inflationary pressures have moderated, albeit unevenly, during FY24. This moderation is attributed to calibrate monetary tightening, easing of input cost pressures, and supply management measures. Headline inflation softened to 5.4 per cent in 2023-24 from 6.7 per cent the previous year, driven by a decline in core inflation – consumer price index (CPI) excluding food and fuel – to 4.3 per cent from 6.1 per cent.
“As headline inflation eases towards the target, it will spur consumption demand, especially in rural areas,” the RBI stated.
The RBI also underscored the strength of the external sector, with foreign exchange reserves providing a buffer against global economic spillovers.
Risks to Growth and Inflation Outlook
The RBI report cautioned that geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements, and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.
Navigating these challenges will be crucial for sustaining Bharat’s economic momentum and ensuring stable, long-term growth.
