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Indian economy showed resilience, but recovery from Covid pandemic shock not complete: RBI report

The Indian economy shown strong resilience in the last fiscal year, ranking among the major economies with the fastest growth rates. However, the Reserve Bank of India stated in its annual report released on Tuesday that declining consumption in the second half of FY23, muted rural demand, and ongoing cost constraints continued to be a drag.

According to the RBI, there may be risks to the Indian economy due to the slowing of global growth, ongoing geopolitical unrest, and potential increases in financial market volatility as a result of fresh stress in the world financial system.

The RBI emphasized the muted character of private investment in India amid persistent uncertainties. “Inflation pressures and effects of fragmentation on world trade may be lowering aggregate consumption demand, a slow-moving drag on growth,” the report cautioned.

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The Indian Economy slowed:

In the second half of the fiscal year, the India’s economy growth slowed. This is what the RBI has blamed on adverse base effects, declining private consumption demand brought on by high inflation, a slowdown in export growth, and ongoing input cost pressures.

The sluggish growth of entry-level, price-sensitive vehicles in comparison to the rebound in passenger automobiles may be the cause of the uneven recovery in consumption. The ongoing gap in two-wheeler sales, 40% of which go to rural India, signaled that rural demand was also weak.

The average annual wage rise for agricultural and non-agricultural labourers for FY23 was 5.8% and 4.9%, respectively.

According to RBI, even if at a slower rate than the urban economy, rural demand, which was adversely impacted by the second wave of the Covid-19 outbreak a year ago, has begun to rebound. However, despite a clear increase in economic activity, it claimed that real rural wage growth had essentially stagnated in FY23. Despite a yearly reduction in job demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), it was still higher than it was prior to the epidemic in the previous fiscal year. According to the RBI, this shows that the recovery, particularly in the unorganized sector of the economy, is still in progress.

In spite of significant global headwinds, the RBI anticipates that the Indian economy would have grown by 7% in real GDP in the last fiscal year. India’s Economy is still in better shape than the rest of the World. Where countries like USA and UK are struggling in recession, India is still in a much better place in terms of economy.

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