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Business News/ Economy / Growth likely at 6.5% in FY24; war on inflation continues: Das

NEW DELHI : India’s economic growth may touch 6.5% in the current fiscal year and surpass the projected 7% growth rate in the previous year, Reserve Bank of India (RBI) governor Shaktikanta Das said while adding a note of caution about inflation and El Nino.

“The situation is very dynamic, and the war against inflation is not over; we have to remain alert, there is no cause for complacency, we have to see how the El Nino factor that is anticipated will play out," Das said at the annual session of the Confederation of Indian Industry (CII) in New Delhi.

India’s retail inflation slowed to an 18-month low of 4.7% in April primarily due to a moderation in food prices, which makes up nearly half of the consumer price basket. The RBI expects the May figure to be even lower.

Das said he expects the economy to grow a bit faster than the projected 7% in FY23 since all high-frequency indicators monitored by the central bank had sustained momentum in the final quarter of the last fiscal year.

Das reassured the audience about the stability and resilience of the banking system, highlighting its robust capital, liquidity position and improving asset quality. He said RBI would maintain a proactive and prudent approach, ensuring support for the country’s economy and financial stability.

On the Central Bank Digital Currency (CBDC), Das said the RBI is finetuning its architecture based on the experience so far, indicating its commitment to exploring and enhancing the digital currency landscape. He said the number of digital transactions in India, which stood at 22.8 million per day in 2016, has risen to 377.5 million now, and within that, UPI has the lion’s share with 299.5 million transactions per day.

Das also addressed the withdrawal of the 2,000 currency notes, stating the decision was made due to its limited usage and concerns over “collateral issues" related to high-denomination notes. “In our surveys, we found out that 2,000 notes were not being used at all... It was being used, but not commonly used," he said. He said the note has also completed its lifecycle. RBI continues to monitor the situation regularly and has not noticed any significant concerns due to the withdrawal. He expressed confidence that the entire exercise would be completed without disruptions.

RBI had previously said that the total value of 2,000 notes in circulation was down from a peak of 6.73 trillion at the end of FY18 to 3.62 trillion at the end of FY23. The note was not commonly used, RBI had said, assuring the public that the stock of banknotes in other denominations was adequate to meet currency requirements.

Asked about the pause in interest rate hikes, Das said: “Pausing rate hikes isn’t a decision entirely in my hands because I’m driven by what’s happening at the ground level." His remark came after CII president Sanjiv Bajaj said he hoped the economic situation would aid in pausing rate hikes. At its last rate-setting meeting in April, the RBI had kept the repo rate unchanged at 6.50%.

Earlier, Das also defended the central bank’s intervention in the forex market to stabilize the rupee last year, saying that this was one of its important functions.

In the wake of the war in Ukraine, there was a surge in dollar outflows for some period last year, resulting in the RBI pumping dollars into the market.

Due to outflows, the forex reserve of India dropped to $524 billion last year. Das said the forex reserve position was a lot better now at over $599 billion just below its peak of $642 billion.

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Updated: 25 May 2023, 12:30 AM IST
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