The Secret Behind GDP Growth: Robust Bank Balance Sheets

India's GDP growth is strong due to high investment demand, supported by healthy balance sheets of banks and companies, the government's focus on capital spending, and wise financial, regulatory, and economic policies, the RBI said on Thursday. The Reserve Bank's Annual Report for 2023-24 stated that the Indian economy is handling the impact of an unfavorable global economic environment. The Indian economy is well-positioned to enhance its growth over the next decade in a stable macroeconomic and financial setting.

"As headline inflation moves towards the target, it will boost consumer demand, especially in rural areas." It also said the external sector's strength and foreign exchange reserves will protect domestic economic activity from global impacts. However, the report added that geopolitical tensions, economic fragmentation, global financial market instability, international commodity price changes, and unpredictable weather developments present risks to growth and could increase inflation.

The RBI also highlighted that the Indian economy needs to manage challenges from the rapid adoption of AI/ML (artificial intelligence/machine learning) technologies and recurring climate shocks. The annual report is a mandatory report of RBI's central board of directors. It covers the operations and functions of the Reserve Bank of India for the April 2023-March 2024 period.