India emerged stronger from pandemic years, says RBI report


When global growth is set to slow down or even enter a recession in 2023, as global financial markets falter, India has emerged from the pandemic years stronger than initially thought, with a steady gathering of momentum since the second quarter of the current financial year, as per an RBI report.

The “State of the Economy” chapter of Reserve Bank of India’s (RBI) monthly bulletin for March 2023, released on Tuesday, noted that “on the supply side, agriculture is into a seasonal uptick, industry is emerging out of contraction and services have maintained momentum.

Consumer price inflation remains high and core inflation continues to defy the distinct softening of input costs”.

In another chapter titled “Financial Stocks and Flow of Funds of the Indian Economy 2020-21”, the Central bank noted that the overall domestic financial resource balance – measured by the net acquisition of financial assets less net increase in liabilities – continued to improve, turning marginally positive at 0.3 per cent of GDP in 2020-21.

Further, the household financial savings spiked significantly during 2020-21 from its long-term trend reflecting an elevated stock of both currency and deposits and increased savings in insurance products.

The balance sheet of the RBI expanded in 2020-21 with a rise in financial assets reflecting unconventional monetary measures to mitigate the impact of the pandemic and to ensure adequate liquidity for smooth functioning of the economy.

Other financial corporations with excess inflows from households, and in view of reduced demand for bank credit in the pandemic year, increased investment in government securities.

The non-financial corporations deleveraged their balance sheets in 2020-21; as a result, their net financial wealth improved after years of successive deterioration.

With a relatively reduced dependence on external financing, particularly by the Indian corporates, the growth in both financial assets and liabilities of the rest of the
world decelerated in 2020-21, the chapter said.

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