RBI ANNUAL REPORT 2022-23.

 Reserve Bank of India's recently released Annual Report 2022-23 elaborated on the problems and prospects of India's macroeconomic scenario highlighting review of the economy, monetary policy, financial inclusion, financial markets, Management of foreign exchange and reserves, currency management and maintaining economic growth and financial stability.The impact of volatility engulfed in financial and capital markets on account of the failure of  some banks in  advanced economies in March 2023 have gradually subsided.But an uneasy calm still persist in the global economy with weak prospects for 2023 and 2024, as a result of Ukraine war elevation of food and energy prices etc.As of now inflationary pressures declined in commodity market partly  normalising supply chains.Amidst turbulent world economic environment, India has largely experienced macroeconomic and financial resilience with a steady pick up in growth momentum.

 Despite strong global headwinds domestic economy is expected to have achieved 7.2% real GDP growth in 2022-23 . Because of sustained recovery, discretionary spending,in contact intensive industries and restoration of confidence in the economy this has happened .The Gross Value Added(GVA)in agriculture and allied sector registered 3.3% growth in 2022-23.In the secondary sector growth has declined from 10.5% in 2021-22 to 1.7 % 2022-23.In services sector 2021-22 recorded 9.6% growth as  against 9.2% for 2022-23 with trade hotels transport communication etc registering 14.2% growth followed by construction 9.1%   On the demand side while infrastructure and capital goods production benefited from huge public infrastructure investment sustained, but production in consumer goods remained stagnant and recovery in sectors like automobiles remained lopsided and continued to lag because of  subdued rural demand.

 Like in other parts of the globe India experienced inflation surge during 2022-23 due to global supply shocks, spurt in energy,food, , metals and other commodity prices. Overall headline inflation increased from 5.5% in 2021-22 to 6.7% in 2022-23.When the retail inflation(CPI) spiked  to 7.0% in March and 7.8% in April 2022 RBI(Monetary Policy Committee MPC) raised the policy repo rate by 40 bps to 4.40 % in May 2022. Cumulatively the MPC increased repo rate by 250 bps from 4.00% to 6.50% during 2022-23.The Gross Fiscal Deficit (GFD) of the central Government declined from 6.75% of GDP in 2021-22 to 6.45% in 2022-23 (Revised Estimate).State Government's budgeted deficit (GFD) estimated as 3.4% of GDP for 2022-23.India's merchandise ts reached US$ 450.4 billion in 2022-23, showing 6.7% increase above the previous year.Most significantly robust growth of 27.9 % was recorded in service exports comprising of IT services, business process management (BPM) Engineering Research and Design (ER&D) etc .buttresed by Global Capability Centers (GCCs). India's merchandise imports recorded $ 714 billion in 2022-23 or growth of 16.5% from previous year.Petroleum ,oil and Lubricants(POL) were the largest item of imports followed by coal, transport equipment, machinery,iron and steel, gold etc. India's trade deficit increased from US$ 189459 million in 2021-22 to $214018 in 2022-23 (provisional). Trade deficit as a ratio of GDP increased from -6.0 in 2021-22 to -8.5 in 2022-23 (PE).

   In the external sector total flows under Non Resident Deposit Accounts increased from $3.2 billion in 2021-22 to $8 billion in 2022-23., whereas total Foreign Direct investment declined from $58.8 billion in 2021-22 to $ 46 billion with Singapore contributing large share followed by Mauritius, USA.UAE, Netherlands and Japan, with investment flows to sectors like manufacturing, financial services, computer services, trade and communications etc.While current Account balance showed -1.2 and -2.7, capital account net indicated 2.7 and 2.1 and foreign net investment showed 0.7 % each for both 2021-22 and 2022-23 years respectively as ratio to GDP in the corresponding years.

A glimpse at Reserve Bank of India's balance sheet showed increase of 2.50% from rupees 6190302.27 crore on March 2022 to rupees 6344756.24 crore as on 31 March 2023 . While assets increased due to rise in foreign investment, gold and loans and advances by2.31% 15.30% and 38.33% respectively.On the liability front expansion was due to increase in notes issued, revaluation and other liabilities by 7.81% ,20.50 % and 79.0 percent respectively. RBI's income showed increase from rupees 160112.13 crores in 2021-22 to 235457.26 crores in 2022-23 and total expenditure also increased from rupees 129800.68 crores to  148037.04 crores in the same period making a net income of rupees 30311.45 and 87420.22 crores respectively in 2021-22 and 2022-23 .Out of which rupees 30307.45 crores in 2021-22 and 87416.22 crores in 2022-23 were transferred by RBI to Union Government of India based on the recommendation of Bimal Jalan Committee o n Economic capital framework.Another often mentioned significant factor has been the substantial decline in Non Performing Assets (NPAs) of banks from15.5% in 2018-19 to 5.8 % in the Quarter ending December 2022.Measures taken by RBI also include regulatory framework for Asset Reconstruction companies (ARCs),four tiered regulatory framework for Cooperative sector,Extension of UPI transactions  to NRIs and also for foreigners for undertaking merchants firms in India .UPI of India and Pay Now of Singapore effected low cost fund transfer.Prospects for 2023-24.Ongoing projects envisaged an increased capital expenditure to the extent of 37.4% and increased food grain target of 332 million tonnes  an increase of 0.4%. and  also establishment of acentre for financial literacy in every village. 

 Overall macroeconomic parameters in India look relatively resilient  and stable. Inspite of withdrawal of accommodation and tightening of monetary policy GDP growth became stronger than estimated 7.0% to 7.2% in 2022-23..Despite retail inflation remained at an elevated level above or closer to upper tolerance level of 6% for about 20-27 months it got tamed in March and April to 4.7%. and MPC has forecasted CPI inflation to average 5.1% over 12 months ending March 2023.According to Chief Economic Advisor V.Anantha Nageswaran even without any additional reforms Indian economy could grow 6.5-7% annually between now and 2030.In any case global headwinds and domestic policy changes would impact both growth and price level. It may be noted here that tightened monetary policy for containing inflation not only raised credit costs but also retarded both investments and consumption activities. Similarly RBI initiatives like the introduction of electronic rupee CBDC is yet to get desired acceptance at the  retail sector, apparently because UPI, unlike CBDC do yield interest in respective accounts.In any case e- rupee, Extension of UPI pay now transactions to more countries, beyond  Singapore, Overseas Digital / mobile transactions by NRIs,extension of rupee trade in goods and services financial inclusion and literacy etc are measures desired to make central banking more effective.