Reserve Bank of India (RBI) says that the global economy is currently grappling with formidable challenges, including elevated inflation, substantial debt burdens, volatile financial conditions, ongoing geopolitical tensions, instances of fragmentation, and severe weather occurrences. In its latest Bulletin, RBI says that contrary to previous concerns, several economies have displayed impressive resilience, alleviating the once-dire prospects of a severe downturn. Nevertheless, worldwide growth is anticipated to persist at levels below historical norms for the present year and the subsequent years, despite the International Monetary Fund’s upward revision of the 2023 global growth projection. The World Trade Organization predicts a deceleration in the growth of global merchandise trade volume, slowing from 2.7 percent in 2022 to 1.7 percent in 2023. Notably, headline inflation is gradually subsiding across different nations but remains elevated in major economies. Although the pace of monetary tightening has moderated, policy interest rates could remain elevated for an extended period. Financial markets, which were buoyed by anticipation of an early conclusion to the monetary tightening cycle, have become turbulent, showcasing substantial fluctuations in reaction to recent credit rating events and incoming data.
These external factors are anticipated to impact the growth trajectories of most leading advanced and emerging economies. However, India is positioned to weather these external challenges more effectively than many other nations. India’s overall economic activity maintains a positive momentum. On the supply side, crop cultivation has gained pace, facilitated by steady progress in the southwestern monsoon. Nonetheless, the distribution of monsoon rains has been uneven both in timing and location. Industrial activity is holding steady, as evidenced by the most recent data concerning the Industrial Production Index (IIP), output in core industries, and the Manufacturing Purchasing Managers’ Index (PMI). A vibrant services sector is evident in substantial expansion seen in e-way bills, toll collections, railway freight, and a notable surge in the services PMI. Conversely, there has been a contraction in sales of commercial vehicles and domestic air cargo traffic during the first quarter of the fiscal year 2023-24. For more details see RBI Bulletin August 2023
