He said: “Although the global economy is expected to contract significantly in 2023, the worst appears to be behind us, both in terms of growth and inflation.”
That said Das 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 a slowdown in inflation in various countries, although still high.
That added a warning, noting that central bankers are simultaneously reaffirming their commitment to bringing down inflation and pursuing their individual goals with a strong sense of urgency. However, the future seems to hold the clear likelihood of high interest rates for an extended period of time.
In terms of growth, forecasts are currently pointing towards a milder recession than a few months ago, which should be more severe and broader.
On the domestic front, he said that “our economy remains resilient” and is being supported by its macroeconomic fundamentals in this unfriendly and worrying international climate.
Das further said: “Our financial system remains robust and stable. Banks and companies are healthier than before the crisis. Bank loans are growing at double-digit rates. We are widely seen as a bright spot in an otherwise bleak world. Our inflation remains elevated, but there was a welcome slowdown in November and December. However, core inflation remains sticky and elevated.”
Since the 1990s, “we’ve come a long way in building financial markets,” Das said of domestic financial markets.
“This indicated that “the journey of our financial markets over the past decade has been one of steady progress and stability. Greater difficulties will arise as our banks expand their presence in international markets, as product diversity increases, as the share of non-residents in domestic markets increases, and as capital account convertibility increases.”
“Market participants must prepare to manage the changes and risks associated with globally integrated markets. Achieving the desired outcomes depends on financial institutions and market participants advancing the reform agenda so that we can have more vibrant and resilient financial markets. ” he added.
He said that on the international front, protectionism and deglobalization are on the rise, as illustrated by recent supply chain shocks around the world.
Therefore, in order to overcome such obstacles, it is imperative to develop and strengthen bilateral economic partnerships. As a result, the government recently signed bilateral trade deals with Australia and the United Arab Emirates, and more such deals are on the horizon.
He noted that the average current account deficit to GDP ratio is 3.3 in the first half of FY23 as a result of ongoing reforms.
He was quoted as saying, “Although slowing global demand weighs on exports of goods, our exports of services and remittances remain highly manageable and within viability parameters.”
Macroeconomic data prints
Nominal GDP expanded fourfold, from €64 lakh crore in FY10 to €273 lakh crore in FY23, and foreign trade more than quadrupled €29 lakh crore to €137 lakhcrores. In 2021, the trade-to-GDP ratio will rise to 45 from 25 in 2000, and since 2010 foreign direct investment has increased 2.5 times.
from €12 lakh crore in FY12 to €22 lakh crore in FY22, the flow of resources into the commercial sector has doubled significantly. Although banks still provide the bulk of funding, the corporate sector’s borrowing from the market increased €74,000 crore in FY12 to €3.16,000 crore in FY22.
On the funding front, net foreign direct investment inflows are still very strong and foreign portfolio flows have returned with occasional outflows since late July. It has gone from $524 billion on October 21, 2022 to $572 billion on January 13, 2023 and is now a comfortable amount.
In addition, foreign debt ratios are modest by global comparison. For this reason, even in times of significant capital outflows, the Reserve Bank has been able to press ahead with its efforts to further internationalize the rupee.
Despite the challenges, Das suggested a positive view of the situation, saying: “Looking ahead today, we still see challenges, but we can prepare for them with optimism and confidence even as the global economy is still reeling from shocks and uncertainties.” is clouded and financial markets remain volatile and the geopolitical situation remains tense.”
(With inputs from PTI)
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