RBI panel member calls India's economic growth "very fragile"

New Delhi: India's economic growth appears to be 'very fragile', said RBI Monetary Policy Committee (MPC) member Jayanth R Varma. He added that it may fall short of what the country needs to meet the aspirations of its growing workforce.

Speaking to PTI, he said the monetary tightening is compressing demand and expects inflation to remain high in 2022-23 but come down significantly in 2023-24. He observed that the rising EMI payments increase the pressure on household budgets and dampen spending, and exports are struggling in the face of global factors.

The expert also noted that the high-interest rates make private capital investment more difficult. "The government is in fiscal consolidation mode, thus reducing the support to the economy from this source. Because of all these factors, I fear that growth may fall short of what we need to meet the aspirations of our growing workforce given our demographic context and income level."

Varma thinks the global inflationary pressures are dissipating in the months ahead because the supply shocks from the pandemic and the Ukraine war are gradually resolving themselves. "The world is learning to live with the war. In the unlikely event of inflation remaining stubbornly high, further rate hikes could be considered at that point in time."

When asked about the impact of hot weather on wheat crops and food inflation, he said the hope is that weather anomalies will prove transient and India will get a normal monsoon.

The RBI has projected India's economic growth at 6.4% for 2023-2024. GDP growth is estimated at 7% in 2022-2023.