The Reserve Bank of India has said in its ‘State of the economy’ report that forex reserves of $596 billion, as on May 6 this year, were equivalent to about 10 months of projected imports for FY23. The central bank also released data showing it sold $20 billion of its reserves in March 2022.
The report, released by the RBI on Tuesday, said that the global growth outlook was grim as geopolitical tensions lingered, and commodity prices remained elevated, even as withdrawal of monetary accommodation gathers speed worldwide. “Emerging economies face risks of capital outflows and higher commodity prices feeding into inflation prints. Meanwhile, the pandemic impinges on nearterm economic prospects,” the RBI said in its report.
Since the RBI announced its policy in April, inflation risks have become more accentuated in recent months. The increase in international commodity prices also imparts net terms of trade shock that is widening the trade and current account deficits.
“To achieve a higher growth path on a sustainable basis, private investment needs to be encouraged through higher capital expenditure by government, which crowds in private investment,” the report said. It added that impro- ving infrastructure, ensuring low and stable inflation and maintaining macroeconomic stability is critical for reviving animal spirits and spurring growth.
The RBI, which had maintained a status quo position in its April policy, said that inflation pressures became increasingly generalised across commodity groups in the April print of the consumer price index, resulting in asharp spike in headline inflation to 7. 8% — well above the upper tolerance band.
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