India's growth rate has become more stable, according to the finance ministry, but it issued a warning about the potential negative effects of El Nino, the geopolitical environment, and the stability of the global financial system on the Indian economy.
The latest Opec decision to reduce production was also noted in the monthly economic report as one of the elements that could reduce the 6.5% GDP growth projection for the current fiscal year. The report did mention that India's goods exports decreased during the December quarter, resulting in a lower trade deficit as imports decreased more quickly. However, it also claimed that the current account deficit shrunk as services exports kept their momentum.
“Even as external stability strengthened, factors contributing to internal stability also improved,” the finance ministry document said, pointing to higher revenue, better expenditure quality due to an increase in the capex and an improvement in the fiscal situation of the states.
“The easing of international commodity prices, the promptness of measures taken by the government, and monetary tightening by the Reserve Bank of India (RBI) have helped to rein in domestic inflation. Inflationary expectations also appear to be anchoring, as witnessed in various surveys for households and businesses,” it added.
Besides, it further argued that Indian banks remained stable as supervision and regulation by the central bank was robust and domestic players fared better on most counts, rendering the Silicon Valley Bank-type incident “improbable”.