The Reserve Bank of India (RBI) on Thursday said its objective for 2023 is to rein in inflation and align it to the targeted level by 2024.
The latest figures shows that the consumer price index (CPI) moderated to 5.7% in December from 5.9% a month ago, led by a sharp decline in food inflation.
The inflation numbers are within the RBI’s upper tolerance band of 6%. The inflation has been on a decline after touching 7.4% in September.
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The RBI in its monetary policy estimated headline inflation at 6.6% in Q3FY23 and 5.9% in Q4FY23. The projected CPI inflation at 5% in Q1FY24 and 5.4% in Q2FY24, subsiding to the mandated level of 4%.
On the growth front, the RBI expects Indian economy to be resilient despite a decline in the projected GDP growth to 6.5% from 7% earlier, hampered by three shocks from war, monetary policy tightening and recurring waves of the Covid pandemic.
The growth in output will be led by information technology (IT) services industry, domestic tech economy and an increase in setting up of manufacturing units by foreign companies.
“Even diehard disparagers acknowledge that India has a compelling story,” the central bank said in its State of Economy article.
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At current prices and exchange rates, India will be a $3.7 trillion economy in 2023, maintaining its lead over the UK as the fifth largest economy. India will move into fourth place in 2025 and into the third place in 2027 as a $ 5.4 trillion economy, as per International Monetary Fund’s estimates.
The Q3FY23 results announced by IT sector companies show that revenues were robust on account of the depreciation of the rupee providing tailwinds. Additionally, fiscal consolidation and easing of commodity prices which will aid in economic recovery.
“2023 may well be the opening ajar of a window in which India’s time on the world stage is arriving,” the RBI said.