The Indian economy appears to grow more durably than before, however, a host of external factors currently pose a threat to the country’s growth momentum, the Finance Ministry said in its annual review report on Thursday.
“India appears poised to sustain its growth in a more durable way than before. Nonetheless, it is no time to rest on laurels nor risk diluting the painstakingly and consciously achieved economic stability. If we are patient, the rising tide will lift all boats as it has begun to,” it said.
Continuing its pitch for durable growth, the ministry said that investments in supply-side infrastructure by the government mean that there is a potential for India to see sustained economic growth longer than it has been able to in several decades.
That said, external factors like escalation of geopolitical stress, enhanced volatility in global financial systems, sharp price correction in global stock markets, El Nino, and modest trade activity and FDI inflows are likely to constrain India’s pace of economic growth in the ongoing fiscal, it added.
The ministry notes that external demand worked in favour of Indian economy until Q1FY23, after which it fell as central banks across the globe began their monetary tightening process to curb rampant inflation. This in effect impacted merchandise exports. India also benefited from decline in global commodity prices, the ministry noted, as it reduced the cost of the country’s imports which remained high throughout FY23.
Loaded: 1.01%FullscreenThe report said that despite unprecedented global challenges in the last few years coming on top of balance sheet troubles in Indian banking and non-financial corporate sectors, “macroeconomic management has been stellar. It contributed significantly to enhancing India’s macroeconomic stability and set India on a quicker recovery path than has been the case in other nations.”
Observing that a critical cog in the wheel of economic growth in FY23 was the disciplined fiscal stance of the central government, the report said, the year ended with a lower fiscal deficit (as per cent of GDP) compared to the previous year.
On what is working for India’s economy, the ministry said that it sees strength in the country’s domestic demand. The ministry said that the Indian economy has carried the momentum from FY23 into the current fiscal year.
India’s rural demand is on the path to recovery. FMCG volume sales in rural areas turned positive in the last quarter of the previous fiscal, signalling a turnaround in rural demand scenario, data shows.
The Centre’s public debt at the end of Q3FY23 stood at 50.6 per cent of the GDP, still higher than the FY20 burden of 42.8 per cent, but lower than the peak of 52.6 per cent attained in Q1FY22. “The debt leverage is now on a glide path which will become more pronounced as the economy continues to defy global headwinds and grow above the pre-pandemic rate,” the report said.
FDI flows to India bore the brunt of inflationary pressures and tighter monetary policy abroad, the ministry noted. Gross FDI hit a record high of $84.8 billion in FY22, but moderated in FY23 by 16 per cent on a YoY basis.
“India needs to watch FDI data closely and continue to take measures to facilitate FDI inflows. Last-mile infrastructure issues, labour availability and measures to facilitate large capacity creation will be needed. This policy space may need India’s increasing attention in the coming months and years,” the report read.
Source : TheEconomicTimes
