RBI FY23 Annual Report: Decoded!

Unveiling RBI Annual Report

On 30th May 2023, the Governor of the Reserve Bank of India (RBI) submitted its annual report for 2022-2023 to the Finance Secretary. Let’s look at what it says about the country’s financial health and prospects for the next fiscal year, 2023-2024.

What’s Happening?

The report highlights a transfer of Rs 87,416 crore as surplus funds to the central government. Additionally, it provides an overview of the economic challenges encountered throughout the fiscal year and outlines the measures implemented along with their outcomes.

During the fiscal year 2022 to 2023, the global stage witnessed a remarkable rebound from the pandemic’s clutches. The recovery was seen because of the overflowing of liquidity in the economy. However, this liquidity flush also brought a not-so-welcomed guest: high inflation.

Central banks worldwide swiftly responded by tightening their policies, which unfortunately caused global growth to take a nosedive from 6.1% in 2021 to 3.4% in 2022, according to RBI’s annual report. The repercussions were felt far and wide, with soaring borrowing costs and stressed-out corporations leading to portfolio outflows.

The report later focuses on inflation which was the big story of the fiscal year 2022-2023.

Because of the tightening cycle, the global median inflation skyrocketed by a whopping 400 basis points, shooting up from a modest 4.7% to 8.7% between 2021-2022. With weak demand and bothering supply chain, global trade growth eased its pace, stumbling down to a lacklustre 5.1% in 2022 from 10.4% in 2021.

Despite a slightly tempered growth rate compared to the previous year, India’s projected GDP growth of 7% in FY23 remains impressive. And all thanks to the agriculture sector.

Agriculture Sector to the Rescue

With a robust growth rate surpassing 3.3%, the agricultural sector came to the rescue, compensating for lacklustre performances in other sectors. Construction, capital goods, and infrastructure withstood global spillovers and showed promising signs, although the road to recovery in consumer goods and automobiles seemed lopsided.

Exports Pacing Against the Trend

On the export front, merchandise exports in the fiscal year soared by a staggering 6.7% and touched US $450.4 billion. Services exports enjoyed a healthy 27.9% boost.

What Does the RBI Project For FY24?

The global GDP growth is projected to slow down to 2.8% in the next fiscal year. However, despite this subdued global outlook, India stands strong with sound macroeconomic policies, favourable commodity prices, a robust financial sector, a healthy corporate sector, and new avenues for growth.

The growth story for Indian companies in FY24 will likely revolve around three factors: the realignment of global supply chains, the transition to green energy, and technological advancements.

Moreover, the ‘China Plus One’ policy adopted by global firms, including Apple and Samsung, bodes well for India.

The services sector, driven by Information Technology (IT), Business Process Management (BPM) and the Gulf Cooperation Council (GCC), is likely to continue as a significant contributor to service export growth.

What’s Next?

Following the report, a crucial question arises: Will the rate hikes halt if the economy remains stable?

The RBI’s stance suggests that the previous rate increases should aid in disinflation. Consequently, they focus on withdrawing accommodation to ensure inflation gradually aligns with the target, all while supporting economic growth.

Looking ahead, the RBI anticipates a reduction in the impact of shocks experienced during 2022-23, paving the way for a more favourable climate for economies and businesses. This positions the Indian economy and companies on a promising trajectory.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The company mentioned in the article is for information only. This is not investment advice.
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