The State of the Economy article in the Bulletin, authored by RBI staff, including Deputy Governor Michael Patra, however, flagged inflation concern. “Global Inflation may be slightly down, but it is certainly not out. If anything, it has broadened and become stubborn, especially at its core,” it said.

According to the article, foreign exchange reserves worth $564.1 billion as on December 9 accounted for 9.2 months of imports projected for the current financial year.

This is comparatively low with the level of reserves in September 2021 had accounted for close to 15 months of imports.

After falling by around $100 billion from late February to end September, the RBI’s forex reserves have climbed by $31.4 billion. but still depleting of 70billion Us$ causing worry .

With bank credit growth having surpassed deposit growth since February, major lenders have increased deposit rates, the RBI staff wrote, pointing out that banks had come up with various ways to attract retail funds.

“Banks have come up with various special deposit schemes for different tenors with comparably higher rates than the regular schemes to attract more retail deposits,” the article said.

“The median term deposit rates on fresh retail deposits (card rates) of SCBs increased by 67 bps between May and November 2022. The extent of pass-through to deposit rates has been higher for longer tenor maturities, with the highest being for 1-3 years tenors,” it said.

In the period from May to November 2022, banks raised 1-year median marginal cost of funds-based lending rates by 95 bps in response to 190 bps of rate hikes by the RBI. The magnitude of transmission to weighted average lending rates on fresh and outstanding loans improved to 117 bps and 63 bps, respectively, from May to October, the article said.

Indian investors and economists take clues from the US Federal Reserve to prepare forecasts but RBI Governor explained that it is just one of the factors and domestic data guides the RBI policy. 

“What US Fed does is important for everyone as a large part of transactions are dollar-denominated. But for us, it is one of the factors. We are guided by domestic inflation and growth dynamics. We continually fine-tune our models of inflation forecasting. External factors will have an impact on the domestic growth scenario,” said Governor Das.

Lower input cost pressures, buoyant corporate sales, higher investment in fixed assets to boost capex

Earnings to improve in coming quarters, push up economic growth

Inflation may be within 2-6% tolerance band in FY24

FDI Withdrawal of accommodation needed as core inflation pressure persists

Banks making efforts to attract more deposits, emphasis on retail schemes

India State of the economy : RBI