RBI Bulletin: Spurring private investments key to sustaining growth

The Reserve Bank of India (RBI) on April 18 said getting private investments is a key thrust area for sustaining economic growth.

"Going forward, spurring private investment remains a key thrust area for sustaining growth on a durable basis," the RBI said in its  April edition of monthly bulletin.

India has been struggling to get private investments despite offering perks for foreign investors. The COVID pandemic has added to the woes.

The global economy, which was recovering from covid pandemic, was hit further with the onslaught of geopolitical tensions triggered by Russia-Ukraine war. This impacted Investor sentiments to emerging markets including India.

Russia’s invasion of Ukraine in February sent shockwaves across global asset classes, sending crude oil prices to as high as near $140 per barrel, prompting an upward pressure on local bond yields and sending the rupee to a record low of 76.97 against the dollar.

India is very susceptible to moves in oil prices as the country imports nearly 85% of Its crude oil requirements, the RBI Bulletin pointed out.

The RBI has acknowledged the impact of adverse factors on domestic growth. The MPC cut the growth projection to 7.2 percent for FY23 from 7.8 percent, which is reflective of the panel’s assessment of the Russia-Ukraine war impact on global growth and its possible spill-over to the Indian economy.

“Rapidly widening trade and current account deficits co-existing with portfolio capital outflows weigh on external sustainability, although the strength of underlying fundamentals and the stock of international reserves provide buffers,” it said.

The RBI’s foreign exchange reserves currently stand at $604 billion. The RBI usually sells forex reserves from its kitty to prevent wild depreciation in the Indian rupee against the dollar and avoid volatility.

India faces negative global spillover challenges from a position of strength built on broadened vaccine coverage, financial sector resilience, robust export and remittances and fiscal reprioritisation to spur capital spending on infrastructure, the RBI said in the bulletin.