Underlying economic activity continues to be strong, says RBI chief Shaktikanta Das

The head of the RBI predicted that the effect of foreign demand would “dent” the economy.

Shaktikanta Das, governor of the Reserve Bank of India, stated that although the underlying economic activity in India is still solid, external factors will cause some “dent” to the economy on Wednesday, December 21, 2022.

The majority of the 70 rapid moving indicators that the RBI tracks are in the “green box,” according to Mr. Das, who was speaking at the BFSI Insight Summit 2022, hosted by Business Standard.

The obstacles are in the external sector, which is plagued by a fear of a recession or is visibly slowing down in many parts of the world, he said, adding that

The RBI reduced its growth forecast for FY23 from 7% to 6.8% earlier this month.

The Indian financial sector is still strong and in a far better position, according to Mr. Das, who added that the regulators and financial sector participants both deserve praise for this accomplishment.

Despite acknowledging that it also takes into account other factors, such as actions taken by the U.S. Fed, Mr. Das said that domestic factors affecting inflation and growth will continue to guide monetary policy.

In order to control the out-of-control rate of inflation, the government and the central bank have taken a “highly synchronised strategy,” according to Mr. Das.

The RBI Governor stated that although there isn’t a significant difference between deposit and credit growth in absolute terms, base effects make the two growth numbers appear different.

According to Mr. Das, credit growth came off a low base in the last two years and was relatively high even during the COVID years, while deposit growth was relatively high even in the year leading up to December 2, 2022, when credit growth stood at 19 lakh crore and deposit growth at 17.5 lakh crore, respectively.