RBI Acknowledges India's Resilience Amid Global Risks; Digital Transactions Surge In FY23

The Reserve Bank of India (RBI) has acknowledged India's robust resilience in the face of various challenges but has also highlighted the potential downside risks posed by slowing global growth and external factors. Transactions routed by digital channels increased significantly in 2022-23, outpacing the previous year's high rise.

RBI earned 2.35 trillion rupees ($28.4 billion) in net income for fiscal 2023, up from 1.6 trillion rupees the previous year, according to its annual report released on Tuesday.

The central bank earned 1.03 trillion rupees from foreign exchange operations last year, allowing it to enhance the amount of its contingency reserve, according to the report.

Slowing global economy, persistent geopolitical tensions, and an increase in financial market volatility as a result of new stress events in the global financial system, according to the RBI, could all offer adverse risks to growth.

It went on to say that India outperformed other countries to become the global leader in real-time transactions, with a 46% share in 2022.

"It is important, therefore, to sustain structural reforms to improve India's medium-term growth potential," it said in the report, adding that the outlook for the domestic services sector "remains positive in FY24."

RBI forecasts the Indian economy to have grown by 7% in real GDP in the previous fiscal year, despite substantial global headwinds. During the last five years, India has contributed more than 12% of global growth on average.

The latest Annual Report for 2022-23, a statutory report of its Central Board of Directors, also stated that its monetary policy remains focused on gradually withdrawing accommodation to ensure that inflation gradually aligns with the target while sustaining growth.

The demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) fell on an annual basis but remained higher than the pre-pandemic level in the preceding fiscal year. This suggests that the recovery, particularly in the unorganised sector, is not yet complete, according to the RBI.

During the year, the Reserve Bank of India issued the Payments Vision 2025, with the theme E-Payments for Everyone, Everywhere, Everytime, vowing to further elevate India's payment systems in order to provide every user with safe, secure, dependable, accessible, inexpensive, and efficient payment choices.

"With a stable exchange rate and a normal monsoon -- unless an El Nino event strikes -- the inflation trajectory is expected to move down over 2023-24, with headline inflation edging down to 5.2 per cent from the average level of 6.7 per cent recorded last year," the report said.