The Ministry of Finance released the September Monthly Economic Review on Saturday, in which India’s economic activity was described as “impressive” amid concerns over soaring inflation and the rupee hitting historic lows. .
Finance Minister Nirmala Sitharaman assured that the upcoming FY24 budget will focus on two key challenges: economic growth and rising inflation.
However, the September 2022 Economic Review noted that “the country should be able to meet these challenges and maintain steady economic growth.”
Here are the top 10 takeaways from the September Economic Review:
- The first half of FY23 saw fewer growth and stability issues than the rest of the world. As measured by the composite PMI, the level of economic activity was higher for India at 56.7 compared to 51.0 for the world from April to September 2022.
- Retail price inflation for India over the past six months stood at 7.2%, lower than global inflation of 8.0%, represented by the median inflation of major economies. It remained stable throughout the April-September period at nearly 7%, the statement said.
- Wholesale inflation has fallen to 12.4% and retail inflation is a notch above 7% in the second quarter of FY2022-23. The gap between wholesale inflation and retail inflation has narrowed, indicating that the magnitude of the pass-through from input costs to retail inflation affecting consumers is likely to be smaller in the future. coming.
- Hikes in RBI repo rates and lower global commodity prices helped contain inflation. In addition, government measures, including reductions in excise and import duties, collection of export duties and restrictions, and buffer stocks, have helped to contain inflation on the side of the offer. Barring further extreme weather conditions, retail food price inflation is expected to decline over the coming months, leading to lower headline retail price inflation.
- The rupee, which hit historic lows, depreciated 5.4% against the US dollar. However, the depreciation is lower than that of 8.9% of the six major currencies in the DXY index.
- India’s real economic growth in 2022-23 is expected to be 6.8%, the second highest in the G20. At 6.1% for 2023-2024, it will be the highest in the G-20. Global energy prices and supplies remain sources of concern. Geopolitical conflicts could further intensify supply chain pressures that have eased recently. If so, inflation could still experience a resurgence rather than a decline in 2023, the statement said.
- The growth story in the first half of FY23 highlighted the government’s continued push to capital spending. Rising levels of capital spending were also supported by stronger revenue generation following improved tax compliance, increased corporate profitability and growing economic activity.
- Increased revenue generation further kept the fiscal deficit through August in line with its budgeted level, which could otherwise have gone awry with high capital expenditures, higher fertilizer and food subsidies and reductions in excise duties to contain inflation.
- PMI Manufacturing remained in the expansion zone in September 2022. Expansion was driven by new business growth, resilient demand and expanding operational capabilities. In addition, business confidence also improved as input cost inflation fell to its lowest level in 23 months due to lower industrial metal prices, leading to higher corporate sector profits. private. The contact services sector has shown great promise in supporting growth by venting pent-up demand for much of the April-September period.
- Foreign direct investment (FDI) inflows from April to July jumped to $18.8 billion from $13.1 billion in 2021-22. Despite rate hikes by the Fed, FDI outflows declined in the first half of FY23 compared to the previous half (H2 of FY22) as foreign portfolio investors became net buyers in second quarter of fiscal year 2022-23 with a net investment of US$ 3.3 billion.
