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Underlying economic activity continues to be strong, but external sector to dent growth: RBI Governor

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Reserve Bank Governor Shaktikanta Das on Wednesday said underlying economic activity in India continues to be strong, but external factors will cause some “dent” to the economy.

Speaking at the BFSI Insight Summit 2022 organised by Business Standard, Das said the RBI tracks 70 fast moving indicators and most of them are in the “green box”.

It is the external sector, mired by a fear of recession or clear visibility about slowing growth in a large part of the world, where the challenges lie, he said, adding that the impact of external demand will “dent” the economy.

Earlier this month, the RBI revised down its growth estimate for FY23 to 6.8 per cent from the earlier 7 per cent.

The Indian financial sector remains resilient and is much better placed, Das said, adding that both the regulators and the financial sector players deserve credit for this achievement.

The monetary policy will continue to be guided by domestic factors on inflation and growth, Das said, acknowledging that it also takes into account other inputs like actions by the US Fed.

On inflation, he said there has been a “very coordinated approach” between the government and the central bank to tame the runaway number, Das said.

There is no big gap between deposit and credit growth in absolute terms, and base effects make the two growth numbers look divergent, the RBI Governor said.

In the year to December 2, 2022, the credit growth in absolute numbers stood at Rs 19 lakh crore, while deposit growth was Rs 17.5 lakh crore, Das said, adding that credit growth came off a low base in the last two years while deposit growth was relatively high even during the Covid years.

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