India’s GDP growth is robust on the back of solid investment demand, which is supported by healthy balance sheets of banks and corporate rates, the government’s focus on capital expenditure, and prudent monetary, regulatory, and fiscal policies, the RBI said on Thursday.
In the Annual Report for 2023–24, the central bank said that the Indian economy was navigating the drag of an adverse global macro-economic and financial environment. It is said that the Indian economy is well-placed to step up its growth trajectory over the next decade in an environment of macroeconomic and financial stability. “As headline inflation eases toward the target, it will spur consumption demand, especially in rural areas,” it added.
The external sector’s strength and buffers in the form of foreign exchange reserves will insulate domestic economic activity from global spillovers. Political 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, the report added.
The RBI also emphasized that the Indian economy would have to navigate challenges posed by the rapid adoption of AI and ML (artificial intelligence and machine learning) technologies, as well as recurring climate shocks.