A rapid deterioration in global growth prospects, coupled with high inflation and worsening financial conditions, has increased fears of an impending global recession, the finance ministry said in a report released on Thursday. It, however, added that in India, resilient domestic demand and a re-invigorated investment will provide impetus to economic growth going forward.
“In a world where monetary tightening has weakened growth prospects, India appears well-placed to grow at a moderately brisk rate in the coming years on account of the priority it accorded macroeconomic stability," the finance ministry said in the Monthly Economic Review for October 2022.
It added that continued macroeconomic stability, of which fiscal prudence is a part, and execution of various path-breaking policies such as Gati Shakti, National Logistics Policy and the production-linked incentive schemes to boost the manufacturing share of employment lend further upside to India’s growth prospects.
“A rapid deterioration in global growth prospects, coupled with high inflation and worsening financial conditions, has increased fears of an impending global recession. Global slowdown may dampen India’s exports businesses outlook; however, resilient domestic demand, a re-invigorated investment cycle along with strengthened financial system and structural reforms will provide impetus to economic growth going forward," the report said.
It said that going forward, the current retail inflationary pressures are expected to ease with fresh Kharif arrivals and a pass-through of lower input costs to consumers, also affirmed by RBI’s inflation projections for the next two quarters.
India’s retail inflation in October eased to a three-month low of 6.77 per cent. Inflation in rural areas in October 2022 cooled to 6.98 per cent, while that in urban areas softened to 6.50 per cent.
It also said that so far in the current year, India’s food security concerns have been addressed and will continue to receive the utmost priority from the government. Easing international commodity prices and new kharif arrival are also set to dampen inflationary pressures in the coming months.
“Hiring by firms is likely to witness an improvement in upcoming quarters driven by a rebound in new business hiring as firms continue to benefit from the lifting of the COVID-19 restrictions and optimism engendered by the vigorous sales volumes experienced during the festive season," the finance ministry added.
India’s GDP Data for the July-September quarter will be released at the end of this month. In the last quarter ended June, India’s GDP had grown 13.5 per cent in the June 2022 quarter (Q1FY23) as compared with the 20.1 per cent growth registered in Q1 2021-22.
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