The Reserve Bank of India (RBI) noted in its November bulletin published on Thursday that India is not free of the challenges of high prices, but the decrease in retail inflation over the last two months is a relief. "We are not out of the woods yet and have a long way to go," the RBI stated in its 'State of the Economy' piece in the bulletin. "However, (inflation) readings of around 5% and 4.9% in September and October, respectively, are a welcome relief from the average of 6.7% in 2022-23 and 7.1% in July-August 2023." 

Annual retail inflation in India fell to 4.87% in October, a four-month low, but remained above the RBI's 4% objective. Inflation is expected to average 5.4% in 2023-24, according to the central bank. According to the RBI, high-frequency food pricing data for this month up to November 13 show that cereal and pulse prices have grown further, but edible oil prices have continued to fall.  

According to the RBI, India's growth remains dependent on local demand, which acts as a buffer against foreign shocks. According to the report, the country's external sector has remained sustainable, with a tiny current account deficit supported by durable capital flows, one of the world's least volatile currencies, and a "healthy" level of foreign exchange reserves. 

The momentum of the change in gross domestic product is likely to be sequentially stronger in October-December based on "ebullient" festival demand, according to the central bank. According to the central bank, investment demand appears to be resilient due to government infrastructure spending, an increase in private capex, and digitization, among other factors.  

The RBI also stated that the calibrated normalization of surplus liquidity and steady loan growth aided transmission during the current tightening period, while transmission is not yet complete. Rate transmission to term deposits has been solid, while deposit rates have shown "rigidity," according to the central bank.