The threats and international headwinds from geopolitical circumstances are the near-term challenges for the Indian economic system, and should stay for 6-12 months, Chief Economic Advisor V Anantha Nageswaran mentioned in his keynote deal with on the FE Modern BFSI Summit at the moment. The international state of affairs is resulting in excessive inflation in most international locations; excessive international costs of commodities with vital import dependency (crude oil, edible oil, fertilisers, metals, and so on); tightening of financial insurance policies in most international locations; monetary and macro instability threat (international spillovers and native dangers); seemingly correction in inventory markets; provide chain bottleneck (delays and absence of key inputs); potential international recession with impression on export progress for India; and transition to inexperienced economic system, he mentioned.
India was hit by geopolitical battle simply when it was reemerging from two years of Covid pandemic. Nageswaran added that regardless of progress revisions by the IMF and World Bank, India continues to be the quickest rising main economic system. He mentioned that India is changing into inflation illiberal, and it is very important stabilise inflation expectations, going ahead.
On the state of the banking sector, Nageswaran famous that the banking sector stability sheets are in good condition with properly capitalised banks and decrease dangerous mortgage ratios. Economic restoration will drive demand for credit score and banks able to assist the financial progress of the nation.
Nageswaran additionally mentioned that banks have good quantity of liquidity within the system, and with restoration in economic system, rising credit score demand, possibilities of decide up in personal capex cycle, enchancment in capability utilisation. All of it will assist enhance the profitability of the banking sector. Most of the worldwide ranking companies (like Fitch, S&P) envisage additional enchancment within the banking system going ahead. “We must accept that sustained growth rates of 7 per cent or more must be backed by correctly identifying the economic fundamentals and risk,” he mentioned.
Source: www.financialexpress.com”