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RBI said – "India is better placed than many other economies to avoid stagflation."

India is better placed than many other countries to avoid the risks of potential stagflation that has to increase hostile external environment, per an RBI article on the state of the economy. The article, published by the RBI in the June bulletin, stated that global economic conditions continue to deteriorate as it reaches commodity prices. Financial market volatility has led to heightened uncertainty.

"Amid this increasingly hostile external environment, India is better placed than many other countries in terms of avoiding the risks of a potential stagflation," said the RBI's Deputy Governor Michael Debabrata Patra. Stagflation refers to a situation where inflation and unemployment are high while demand remains stagnant in the economy. With most constituents of GDP surpassing pre-pandemic levels, domestic economic activity is gaining strength, it said, and added the inflation print for May had brought some relief as it recorded a decline after seven months of continuous rise.

The central bank, however, added that the opinions expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India (RBI). With a growth rate of 8.7 percent in 2021-22, India's gross domestic product (GDP) surpassed its pre-pandemic (2019-20) level by 1.5 percent, and the recovery remains robust in 2022-23 far, the article said. "The recovery remained broadly on track. This demonstrates the economy's resilience in the face of multiple shocks and the innate strength of macro fundamentals as India strives to regain a sustainable high growth trajectory," is said.

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