India's economy remains resilient despite looming global headwinds and recession fears, the Reserve Bank of India said in its latest monthly bulletin.
Despite the geopolitical fallout, "There are sparks in the wind that will ignite the economy's innate power and set it on course to become the world's fastest-growing economy, even though it may be besieged by recession fears," the bulletin said. .
The Indian economy is showing resilience and momentum despite the geopolitical situation and high risk aversion in financial markets, which is pushing portfolio investors and pulling all currencies against the unrelenting strength of the US dollar.
The recent revival of the southwest monsoon and rejuvenation of crop activity have further raised hopes for another bountiful year for agricultural activity and raised expectations that rural demand will soon catch up with urban spending and consolidate the recovery, he added.
Domestic inflation, which has come off its recent peak, is also a source of relief.
Preliminary data released by the National Statistics Office (NSB) on July 12 showed that retail inflation eased slightly to 7.01 percent in June.
The worst of the recent surge in inflation will be behind us if the easing of prices seen in recent weeks persists along with the easing of supply chain pressures, allowing the Indian economy to escape the global inflation trap, he added.
On the other hand, he called for careful and ongoing monitoring of the deepening trade deficit and capital outflow. India's foreign exchange reserves are down by around $40 billion in 2022.
In addition, foreign portfolio investors were net sellers in the Indian equity market for the ninth consecutive month in June.
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