India to be fastest growing economy this year, no chance of recession: Report

As several economies in the world face a risk of falling into recession, India will be the fastest growing economy this year as well as in the next despite headwinds from rising inflation number and a declining rupee, according to a PTI report.

Although the current account deficit (CAD) has alarm bells going off due to the expanding trade imbalance and diminishing foreign reserves as a result of rising import costs, the situation should stabilise shortly, top government sources told PTI on Thursday. Adding further, they said that the Rupee's 7 per cent loss in value this year versus the US dollar was not concerning and that the government and Reserve Bank of India (RBI) are confident in their ability to control the situation.

"There is no chance of India slipping into recession. We are on a steady path of growth. There is no second thought that growth will slow down,... we will still be the fastest growing economy this year and next year," the source told PTI.

The RBI is one of the primary forecasters and it has estimated the Gross Domestic Product (GDP) growth for the current fiscal at above 7 per cent, which is greater than the growth rate of any major country. Notably, the pent-up demand for services and increased industrial output have kept the economy on its recovery path even while inflation remains over the comfort level.

'Rupee's vale not worrisome; govt & RBI monitoring it continuously'

On the falling value of the rupee against the US dollar, the top government sources said, "Rupee level (is) not worrisome. The government and RBI are monitoring the rupee movement continuously. There is no further measure on cards to encourage inflow of dollars," PTI reported.

In response to worries that India would have a balance of payments crisis and run out of foreign currency to pay for imports, the source stated to PTI that because the cost of crude oil and electronic goods has decreased, CAD shouldn't be a significant problem. It should shortly stabilise. According to experts, the CAD will increase from 1.2 per cent of GDP last year to 3 per cent in the current year, PTI reported.

Notably, the price of crude oil, the one and only commodity that India imports in large quantities, has decreased recently from $110 per barrel to $ 95-96 per barrel, which has relieved importers whereas the other commodity prices, including the price of edible oil, have fallen recently, according to PTI.

The government is working with the RBI and taking ongoing action to reduce inflation, government sources told PTI. It is significant to mention that inflation has stayed above the upper tolerance limit of 6 per cent for six straight months. Edible oil, crude oil and fertiliser prices have come down in the recent past, sources said, adding a normal monsoon would bring down prices of foodgrains and further ease inflation, PTI reported. "We are not going to relent till inflation eases to a tolerant level," sources told PTI.

(With inputs from PTI)