Mumbai, Jan 18 (IANS): India’s economic activity remained resilient on the back of robust domestic demand, notwithstanding the external headwinds. Supply chain pressures in India ebbed in December and remained below historical average levels, according to the RBI’s monthly bulletin released on Thursday.

"Our economic activity index (EAI) now casts GDP growth for Q3:2023-24 at 7 per cent," the report states. Earlier the growth rate was projected at 6.5 per cent

The Indian economy recorded stronger than expected growth in 2023-24, underpinned by a shift from consumption to investment with the government’s thrust on capex starting to crowd-in private investment, according to it.

Headline inflation recorded a marginal uptick in December, driven by higher food inflation due to unfavourable base effects, according to the report on the state of the economy.

At the same time, the report flags the downside risks due to the global slowdown. The world economy faces divergent near-term growth prospects.

The report also points out that there has been a steady expansion in the consolidated balance sheet of Indian banks (SCBs), driven by credit to retail and services sectors. Higher net interest income and lower provisioning boosted net interest margins (NIMs) and profitability.

There has also been a steady improvement in asset quality, with the gross non-performing assets (GNPA) ratio at 3.2 per cent at end-September 2023. The consolidated balance sheet of non-banking financial companies (NBFCs) also expanded, led by double digit credit growth while profitability and asset quality improved and CRARs remained higher than the regulatory requirement.

Looking ahead, the report flagged the increasing inter-connectedness between banks and NBFCs, with the latter needing to broad base their funding sources and reduce over-dependence on bank funding. Banks and non-banks need to bring in greater empathy in their customer services, while making concerted efforts to protect them and the payments system from the risks of fraud and data breaches emanating from cyber threats, the report adds.

The report also states that global economic activity turned out to be stronger than expected in 2023. It is projected to slow down in 2024 with considerable cross country heterogeneity. In its latest Global Economic Prospects (GEP), the World Bank has projected global growth to ebb from an estimated 3 per cent

The report states there is a need in 2024 to "take a leap of faith, and prevail over the formidable downside risks that are seen over the horizon".

The weak global outlook can be brightened if geopolitical conflicts end and their repercussions through commodity and financial markets, trade and transportation, and supply networks are contained. Inflation must be vanquished, paving the way for financial conditions to ease in support of growth. The adverse effects of climate change must be addressed, it said.

Re-globalisation must commence. Advanced economies need to resuscitate growth impulses and boost consumption and investment as the lingering effects of past price shocks dissipate. In emerging market economies, investment has to be rekindled and the ongoing weakening of potential growth and productivity reversed to open up space to address issues relating to high debt levels and macroeconomic stability, the report concludes.