Economic growth number for Fiscal Year 2022-23 (FY23) may hold a “positive surprise”, Reserve Bank of India (RBI) Governor Shaktikanta Das said here on Thursday. The RBI Governor also expects retail inflation for May to be lower than April. He, however, emphasised that the decision on interest rate shall be taken on actual ground situation.

“Initially, it appeared in the third quarter as if pent-up demand was supporting economic activity. But the economic activity has sustained its momentum. In fact, all the high-frequency indicators maintained their momentum in the fourth quarter. Therefore, we should not be surprised if growth is slightly more than 7 per cent for FY23,” Das said while addressing the plenary session of industry chamber CCI’s Annual Conference.

GDP data for FY23 and for the January-March quarter will be announced on May 31.

Probable headwinds

The growth estimate for the current fiscal 2023-24 is 6.5 per cent. Das said though some agencies have lowered their projections, things are looking better.

“The IMF project stated 5.9 per cent, but we derive confidence at this point of time from the fact that agriculture has done well and we are assuming that there will be normal monsoon. Services sector continues to perform very well,” he said. 

About the downside risk to the Indian economy, Das said any surprises on the geopolitical front could be a drag and a slowdown in exports is another headwind. El Nino could be another risk, he said, quoting India Meteorological Department (IMD).

“There is evidence of positive Indian Ocean Dipole which, to some extent, should be able to neutralise the impact of El Nino. But let us leave that to weather experts. This is an uncertainty. Only time will tell to what extent it affects our economy,” he said.

Softening inflation

He said retail Inflation based on Consumer Price Index (CPI), which has already come down, is expected to drop further. “Inflation has moderated (and) the last print is 4.7 per cent. Perhaps the next print could be even lower,” he said. However, he emphasised that although inflation has moderated, there is no room for complacency.

He said that inflation had been looking benign earlier too but the sudden outbreak of the Russia-Ukraine war changed the situation, resulting in a disruption in the global supply chain and firming up global commodity prices. He assured that the war against inflation is not over and the RBI will remain alert to evolving situations.

“Sanjeev Bajaj (CII President) has mentioned he hopes that RBI will take a pause in the coming monetary policy meetings. It’s not in my hands. It depends on the situation on the ground. I am driven by what’s happening on the ground. What is the outlook on the ground? What are the trends? How is the inflation build-up or the inflation softening,” he said.

Later, referring to the April MPC decision, he urged: “It is s a pause and not a pivot.” He also clarified that raising the rate 2.5 per cent over a year was a prudent decision, and the pause was also a prudent decision. He said RBI would continue to be proactive and take steps according to the situation.