India is the best performing major economy in the world in crisis. |
Even though economic growth and rising inflation remain major concerns for India, with Finance Minister Nirmala Sitharaman saying these two challenges will be at the center of the upcoming Union budget, the monthly economic review in September said the country’s economic performance was “impressive”. in the first half of 2022-23.
Do you shine in a gloomy economic landscape?
“India’s economic performance in the first half of 2022-23 has been impressive compared to the world. As measured by the composite PMI, the level of economic activity was higher for India at 56.7 from 51.0 for the global level from April to September 2022,” said the economic review published on Saturday by the Ministry of Finance.
“While wholesale inflation has declined significantly from its peak of 16.6% in May 2022 to 10.7% in September 2022 due to moderation in commodity prices and government measures, inflation Retail prices remain above the RBI’s upper tolerance band due to higher food prices, however food inflation is expected to moderate as harvest and supply seasons progress, contributing to to a decline in headline retail inflation in the remainder of the fiscal year,” he said while elaborating on inflation.
The rupee is doing well despite its fall?
“On the external front, the rupee has performed relatively well in the first half of 2022-23 compared to other major economies, reflecting the strong fundamentals of the Indian economy.”
The rupee had actually hit an all-time low of 83.18 earlier this week, although Sitharaman said she saw it more as a case of the dollar strengthening than the rupee falling.
The September 2022 economic report, however, noted that “the country should be able to meet these challenges and maintain steady economic growth”.
What works for India?
“Cautious macroeconomic policies that have served the country well since 2014 remain essential. As is the case with the bat in swing conditions, balls left well (policy mistakes avoided) will be as important as balls well played ( political decisions taken), ” It said.
The central government’s continued push on capital spending promotes broad-based growth by facilitating private sector capital formation. A significant recovery in consumption has led to a more than proportional increase in GST revenue, a more robust economic recovery could allow collections to stabilize at a high level, proving the high productivity of large-scale consumer income, l review noted below.
A well capitalized banking system has resulted in increased credit disbursements to the retail, industrial and service segments.
“High-Frequency Indicators (HFIs) suggest continued broadening of traction in service activity. Electronic channel bills, in particular, point to overall growth in interstate wholesale and retail trade.
Pent-up demand strong enough to stimulate growth?
“Going forward, pent-up demand in the services sector, combined with strong economic prospects for India, will drive growth in the services sector,” the review said.
Companies in the services sector are positive about demand conditions, turnover, their hiring plans and the overall business situation they expect in the third quarter of the current fiscal year.
However, he warned that “even if India remains one of the bright spots in an otherwise bleak global scenario where the dark clouds of recession are gathering, the country’s fiscal and monetary authorities must remain The globalized nature of the Indian economy suggests that even if inflationary pressures abate, another challenge to macroeconomic stability will emerge in the form of external sector pressures”.
The US Fed won’t back down
On the one hand, the US Federal Reserve continues to be aggressive in the fight against inflation, thereby signaling further interest rate hikes. This can reduce capital inflows, increase pressure on the rupee to depreciate, and make commodity imports more expensive. On the other hand, an unfavorable global economic outlook is expected to dampen export growth, affecting the country’s trade balance, according to the review.
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