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RBI’s Survey On India’s Economy


At a time of global uncertainty and rising inflation, two developments in India provide a good indication of the state of the Indian economy.

These two events are the release of India’s July trade data and the unveiling of the RBI’s latest monetary policy review.


GS Paper 3: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.

Mains Question

Do you agree that the Indian economy has recently recovered in a V-shape? Give reasons to back up your answer. (250 words)

India’s trade statistics

  • Trade Deficit o With the exception of April, India’s trade deficit has reached an all-time high in each of the last three months — May, June, and July.
  • The trade deficit is the amount by which a country’s imports cost more than its exports.
    • The trade deficit has risen so dramatically that it is already equal to the full-year trade deficit of 2020-21 and more than half of the trade deficit in 2021-22 after only four months of the current fiscal year.
    • According to many analysts, India’s Current Account Deficit (CAD) will rise from 1.2% of GDP in 2021-22 to around 4% (of GDP) in 2022-23.
  • If the value of goods and services imported exceeds the value of those exported, the difference between the two is CAD.
  • The rupee has depreciated against the US dollar.
    • One of the primary reasons for the rupee’s depreciation against the US dollar has been the increase in the trade deficit.

Monetary Policy Review by the RBI

  • Interest rates have been raised o The RBI has shifted its focus from boosting growth to containing inflation. The recent interest rate increases demonstrate this.
    • Repo rates have risen by 140 basis points since May 2022. (or 1.4 percentage points).
    • The repo rate is already at pre-pandemic levels, at 5.4%.
  • Growth is forecast to be 7.2%.
    • However, analysts believe that the recent interest rate hike will stymie India’s economic recovery.
    • However, the RBI continues to forecast 7.2% growth in India this year.

Surveys by the RBI

• The RBI also released the results of seven surveys it conducted on the state of the Indian economy.

• Consumer Confidence Survey (CCS) o Consumer confidence for May 2022 has been steadily increasing since July 2021.

o Though sentiments on key parameters such as employment and household income improved further, they remained pessimistic.

• Inflation Expectations Survey (IES) – It measures people’s inflation expectations.

o The latest survey round shows that households’ inflation perception for the current period has moderated by 80 basis points to 9.3%.

• Order Books, Inventories, and Capacity Utilization Survey (OBICUS)

o From January to March 2022, the survey provided a snapshot of demand conditions in India’s manufacturing sector.

o According to the survey, capacity utilisation is low. It implies that manufacturing firms can meet current demand without increasing output.

o This, in turn, has a negative impact on job creation and the likelihood of private sector investment in the economy.

o However, the CU is well above pre-pandemic levels, indicating that India’s aggregate demand is steadily recovering.

• Industrial Outlook Survey (IOS)

o This survey attempts to track the attitudes of businessmen and women.

o It showed that businesses were optimistic in Q1, though not as much as in previous quarters.

o However, they anticipate that things will improve as the months pass.

• Services and Infrastructure Outlook Survey (SIOS)

o This survey provides a qualitative assessment of how Indian companies in the services and infrastructure sectors perceive the current situation and future prospects.

o It demonstrated that companies in the services sector are far more optimistic than those in the infrastructure sector.

o What matters is that the net responses — the difference between the percentages of respondents who report optimism and those who report pessimism — are positive for both sectors.

• Bank Lending Survey (BLS) o It captures the mood — qualitative assessment and expectations — of major scheduled commercial banks (SCBs) on credit parameters (such as loan demand and loan terms and conditions) for major economic sectors.

O According to the survey, bankers’ expectations for loan demand in Q1: 2022-23 remained positive across all major sectors.

• Professional Forecasters Survey (SPF)

o This is a survey of professional forecasters (not affiliated with the RBI) on key macroeconomic indicators such as GDP growth rate and inflation rate for the current and next fiscal years. o According to SPF, GDP growth will range between 7% and 7.4%, with the second most likely outcome being a slowing to 6.5%-6.9%.

December 2023