Reserve Bank of India (RBI) Governor Urjit Patel has said that with growth picking up in the second quarter of the current financial year, the economic slowdown may have bottomed out. He said that “Our recent growth numbers may have disappointed some in the first quarter of this fiscal year, but the second quarter has recorded an uptick and the slowdown may well be bottoming out”.
The RBI governor in a speech at a conference organised by CAFRAL on “Financial System and the Macroeconomy said, while structural changes, such as the introduction of the Goods and Services Tax (GST), may result in temporary disruptions, they were "efficiency augmenting" in the medium to long term. He said the current account deficit "remains within sustainable levels", and other indicators of external viability also reflected a healthy improvement.
He further said that to add one more important reform to the list, there has been substantial liberalisation of Foreign Direct Investment (FDI) policy, embraced by FDI investors with record inflows to India. He added that domestic financial markets have shown resilience and stability in spite of escalation of global geopolitical uncertainty and heightened volatility in financial markets. These developments have enabled the build-up of buffers against unforeseen shocks. At the same time, building up adequate buffers in foreign exchange reserves was a natural "self-insurance" to manage risks arising out of volatile capital flows.
Talking about inflation he said that a related source of concern for policymakers is about managing inflation. There is growing global uncertainty regarding the determining factors of inflation, especially in advanced economies and while some disinflation was underway and inflation expectations were, perhaps, getting re-anchored, “considerable caution and vigilance” was warranted.