India experienced a unique mix of difficulties, including tightening financial conditions and supply chain disruptions brought on by a prolonged war in Europe, but withstood them better than most nations, according to the annual report on the state of the economy. According to the study Nirmala Sitharaman, the minister of finance, presented in Parliament, India is the world’s third-largest economy in terms of PPP (purchasing power parity) and fifth-largest in terms of exchange rate.
Economy has nearly recouped what was lost, renewed what had paused, and re-energised what had slowed during the pandemic and since the conflict in Europe, it said.
The Survey noted that while India’s recovery from the pandemic was relatively swift and that growth would be supported by strong domestic demand and an increase in capital investment, it also highlighted the challenge facing the rupee due to the likelihood of further interest rate increases by the US Federal Reserve. Due to the continued rise in global commodity prices and the momentum of robust economic development, the current account deficit, or CAD, may continue to grow. It stated that the growth of exports slowed down in the second half of the current fiscal. The second part of the current year saw a loss in export stimuli due to sluggish global economy and declining global trade.
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According to the survey, which estimated nominal growth at 11% for 2023u20132024, the growth in the fiscal year that starts on April 1 will continue to be strong in comparison to most other economies, driven by sustained private consumption, an uptick in bank lending, and increased capital spending by corporations. The improvement of corporate balance sheets, the expansion of lending to MSMEs, and well-capitalized public sector banks all contributed to this improvement.
The survey said the growth is expected to be brisk in FY24 as a vigorous credit disbursal, and capital investment cycle are expected to unfold in India with the strengthening of the balance sheets of the corporate and banking sector. Since the COVID-19 epidemic, India’s economy has recovered, but the crisis in Russia and Ukraine has increased inflationary pressures and forced central banks, including India’s, to change their ultra-loose monetary policy.
According to the study, although the RBI’s projected inflation rate of 6.8% for the current fiscal year (FY23) is higher than the central bank’s tolerance level, the rate of price growth is neither too rapid to discourage private consumption nor too slow to impair investment.
According to the survey, the tightening of monetary policy may result in continued pressure on the Indian rupee. A strong local economy may cause imports to be high while a bad global economy may cause exports to decline, so the CAD may also continue to be high. India’s CAD was 4.4 per cent of GDP in July-September period, higher than 2.2 per cent a quarter ago and 1.3 per cent a year ago, as rising commodity prices and a weak rupee increased the trade gap. The survey said there has been an improvement in employment conditions in India due to stronger consumption but a pick-up in private investment is essential to creating more jobs.
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