RBI Governor Shaktikanta Das, in the recently held MPC (Monetary Policy Committee) meeting, said India is not completely excluded from adverse global spillovers and with weakening external demand, the country's exports will get affected negatively. Despite headwinds from slowing global growth and trade, the Indian economy is exhibiting resilience and holding up well, Das said, revealed the MPC minutes of the meeting report released today.

The RBI this month hiked the key repo rate by 35 basis points to 6.25% as the inflation showed some signs of easing. The RBI kept the inflation target for the fiscal year unchanged at 6.7% while cautioning the battle against inflation is yet not over.

India's economy grew 6.3% in the July-September quarter, said the RBI governor. Despite macro challenges, Das said, the RBI thinks economic activity will remain strong in Q3. "Real GDP growth at 6.3% in Q2 FY23 was on the lines expected by us. Overall, India’s real GDP is expected to grow by 6.8% in 2022-23."

He argued India will remain among the fastest-growing major economies, even as rising recession possibilities characterise the global economy.

On inflation, the RBI governor said there are signs of inflation slowing down but it is only expected to decline in H1 FY24. "Uncertainties surrounding the inflation trajectory remain sizeable, given the geopolitical tensions, global financial market volatility, pending pass-through of input costs to domestic output prices and weather-related disruptions."

India's retail inflation rate eased to an 11-month low of 5.88% in November 2022, marking a fall below 6% for the first time this year, thanks to easing food prices.

Among other MPC members, Dr Shashanka Bhide said the official estimate of year-on-year real GDP growth in Q2 FY23 at 6.3% equals the RBI's September forecast. Economic indicators point to a "mixed outlook" for growth, Bhide said.

"While the economic activity levels moving into Q3: FY 2022-23 suggest resilience, the outlook is, however, faced with the slowing global growth conditions," opines Bhide.

Another panellist Ashima Goyal said multiple global risks continue but as the growth slowdown threatens many countries, inflation and rate actions of major central banks are also slowing. "Markets have priced in a possible pivot, although communication shocks continue to create volatility. The dollar is weakening especially as other advanced economy central banks also raise rates."

Prof Jayanth R. Varma was the only member who voted against increasing the repo rate. He said the global inflation seems to have peaked and is now probably heading lower. "35 basis point rate hike approved by the majority of the MPC is not warranted in this context of reduced inflationary pressures and heightened growth concerns. I, therefore, vote against this resolution."

He said on the domestic front,too, there is strong evidence of easing of inflationary pressures. "Inflation has eased from the 7%+ levels witnessed in the middle of the year, and more importantly inflation expectations of both households and businesses have trended down," he said.

Dr. Rajiv Ranjan said overall, the growth concerns globally and in India may assume primacy in 2023 as the global economy slows down on the back of tightening financial conditions. Dr. Michael Debabrata Patra said inflation in India remains unconscionably elevated, persistent and generalised, despite a grudging let-up in October solely due to favourable base effects.

Except for Varma, all other members including Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shri Shaktikanta Das voted to increase the policy repo rate by 35 basis points.

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