RBI MPC member Jayanth Varma terms India’s economic growth “very fragile”

According to Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) member Jayanth Varma, India’s economic surge seems ‘very fragile’, and circumspection measures are stifling growth. Varma, a professor at the Indian Institute of Management, Ahmedabad, reportedly stated that the current growth trend isn’t enough to fulfil the aspirations of the nation’s burgeoning workforce.

“However, growth appears to be very fragile, and monetary tightening is compressing demand,” Varma supposedly said on Sunday. He expects the inflation in India to be high for fiscal 2022-23 but has forecasted a marked inflationary reduction in 2023-24. Varma further remarked that EMI payments are burdening Indian households and dampening spending while exports are also being negatively impacted due to global uncertainties.

Due to all these elements, Varma fears that the growth trajectory might not be enough to reap the benefits of India’s demographic dividend and raise the living standards of the population. While noting that increased interest rates make private capital investment strenuous, he stated that the government is in the fiscal consolidation process.

However, Varma expects inflation to recede in the coming months as the supply disruptions from the pandemic and the Russia-Ukraine war gradually get resolved. “The world is learning to live with the war,” he commented. Speaking on inflation, he said that FY23 will be characterised by high inflation due to several supply disruptions and austerity measures in the form of monetary tightening.

“However, I expect inflation to come down significantly in 2023-24. I anticipate a gradual glide path that brings inflation down close to the target,” said Varma.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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