'Worst of inflation, growth and currency crises behind us', says RBI governor
Latest data-prints on growth, inflation and currency volatilities indicate that the worst for the financial markets and the world economy is behind us and that high interest rates for a longer period looks a distinct possibility going forward

Shaktikanta Das, governor of the Reserve Bank of India, stated on Friday that the most recent data on growth, inflation, and currency volatility show that the worst for the financial markets and the global economy is behind us and that higher interest rates for a longer period of time are very likely in the future.
He said, “Though the global economy is projected to contract significantly in 2023, the worst, both in terms of growth and inflation, seems to be behind us."
Das said this at the annual meeting of the Fixed Income Money Market and Derivatives Association of India (Fimmda) and the Primary Dealers Association of India (PDAI) held in Dubai on Friday.
He noted that recently there has been some easing of Covid-related restrictions and cooling of inflation in various countries, though it is still high.
Das added a warning, noting that central bankers are simultaneously reiterating their commitment to bringing inflation down and toward their individual targets with a strong sense of urgency. The future appears to hold the distinct likelihood of high policy rates for a longer time, nevertheless.
In terms of growth, forecasts are currently leaning more toward a milder recession than the one that was predicted a few months ago, which was expected to be more severe and broad.
On the domestic front, he said that "our economy remains resilient" and draws support from its macroeconomic fundamentals in this unfriendly and unsettling international climate.
Das went on to say, "Our financial system remains robust and stable. Banks and corporates are healthier than before the crisis. Bank credit is growing in double-digits. We are widely seen as a bright spot in an otherwise gloomy world. Our inflation remains elevated, but there has been a welcome softening on November and December. Core inflation, however, remains sticky and elevated."
Since the 1990s, "we have come a long way in building the financial markets," Das said about the domestic financial markets.
"Das pointed out that, "our financial markets' journey over the past ten years has been one of steady advancement and stability. Greater difficulties will arise when our banks develop their presence in international markets, the variety of products increases, the share of non-residents in domestic markets rises, and the convertibility of capital accounts rises."
"Market participants will have to prepare themselves to manage the changes and the risks associated with globally integrated markets. The achievement of desired outcomes is contingent on financial institutions and market participants taking forward the reform agenda so that we have more vibrant and resilient financial markets," he added.
He said that on the international front, protectionism and deglobalization are on the rise, as seen by the most recent supply-chain shocks around the world.
To overcome such obstacles, it is therefore vital to develop and strengthen bilateral economic partnerships. As a result, the administration recently inked bilateral trade pacts with Australia and the United Arab Emirates, and further such deals are on the horizon.
He noted that as a result of ongoing reforms, the average current account deficit to GDP ratio in the first half of FY23 is 3.3.
He was quoted saying, "Though slowing global demand is weighing on merchandise exports, our services exports and remittances remain strong. The net balance under services and remittances remains in a large surplus, partly offsetting trade deficit. Consequently, the current account deficit is eminently manageable and within the parameters of viability."
Macroeconomic data-prints
Nominal GDP expanded by four times, from ₹64 lakh crore in FY10 to ₹273 lakh crore in FY23, and external trade increased by more than four times, from ₹29 lakh crore to ₹137 lakh crore. In 2021, the ratio of trade to GDP will increase from 25 in 2000 to 45, and since 2010, foreign direct investment has increased by 2.5 times.
From ₹12 lakh crore in FY12 to ₹22 lakh crore in FY22, the flow of resources to the commercial sector substantially doubled. Even while banks still account for the majority of funding, market borrowings by the business sector increased from ₹74,000 crore in FY12 to ₹3,16,000 crore in FY22.
On the funding front, net FDI flows are still very high, and foreign portfolio flows have returned since late July with occasional outflows. It has increased from $524 billion on October 21, 2022, to $572 billion on January 13, 2023, and is now a comfortable amount.
Additionally, the external debt ratios are modest by global norms. Because of this, the Reserve Bank has been able to advance efforts to further internationalise the rupee even during times of substantial capital outflows.
Suggesting a positive view towards the situation despite the challenges, Das said,"Today, when we look ahead, we still see challenges, but we can prepare for them with optimism and confidence even as the global economy is still marred by shocks and uncertainty and financial markets remain volatile and the geopolitical situation continues to be tense."
(With inputs from PTI)
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