In spite of global challenges, India will go ahead to become fastest-growing economy in the world

India's economy has remained resilient in the face of global headwinds and with inflation coming off its recent peak is expected to stay on course to become the world's fastest-growing economy, the Reserve Bank of India said on Saturday.

In a bulletin, RBI also said that the recent revival of the southwest monsoon and renewed planting raised expectations that rural demand will soon catch up with urban spending and consolidate a recovery.

"Knock-on effects of geopolitical spill-overs are visible in several sectors, tapering the pace of recovery," the bank said.

In addition to it, the bank said, "In spite of this overwhelming shock, there are sparks in the wind that ignite the innate strength of the economy and set it on course to becoming the fastest growing economy in the world, though besieged it might be by fears of recession."

Nonetheless, it did not mention the time frame.

"If the commodity price moderation witnessed in recent weeks endures alongside the easing of supply chain pressures, the worst of the recent surge in inflation will be over," RBI maintained.

India's annual consumer inflation remained above the 7 per cent mark which is beyond the central bank's tolerance band and this has happened for the sixth month in a row, the data revealed.

"There is some evidence now that supply-chain pressures are peaking globally and in India, so that a major source of upward inflation pressures may be ebbing," the bank added.

Referring to the impact of high global crude prices on India's current account deficit (CAD), RBI said, “CAD could widen to 2.3 per cent of GDP in 2022/23 if oil prices average $105 per barrel. It would widen to 2.8 per cent if oil averages $120 per barrel but still remain within the sustainable limit of 3 per cent".

India’s CAD stood at 1.2 per cent of GDP in 2021/22, data released in June mentioned.

“External debt remains modest as a proportion to GDP and has actually declined between March 2021 and March 2022,” RBI said.