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India sees GDP growth slowing to 8-8.5% in 2022/23 as risks rise

At that pace, India’s economic growth next fiscal
year will still be the fastest among major economies.

All macro indicators indicated Asia’s
third-largest economy was well placed to face challenges, helped by improving
farm and industrial output growth, the government’s annual economic survey said
on Monday.

The report, tabled by finance minister Nirmala
Sitharaman in parliament ahead of the annual budget on Tuesday, warned about
risks from global inflation and pandemic-related disruptions.

“India does need to be wary of imported
inflation, especially from elevated global energy prices,” said Sanjeev
Sanyal, principal economic adviser at the finance ministry and the lead author
of the report.

India, which meets nearly 80% of its oil needs
from imports, faces the risk that inflation will hit consumer demand as global
crude prices hover near a 7-year high at more than $90 a barrel.

“The global environment still remains
uncertain,” the report said citing planned withdrawal of monetary support
by major central banks including the US Federal Reserve. Higher rates elsewhere
could lead to capital outflows for India.

The growth projections assumed a normal
rainfall and an orderly withdrawal of global liquidity by major central banks,
the report said.

Private economists said the government and
central bank would have to balance their efforts to support economic growth
considering rising inflationary pressures and sluggish domestic demand.

“With the rising pressure to tighten the
monetary stance, policymakers will have difficulty in calibrating policy choices
to balance between growth and (price) stability objectives,” said Rumki
Majumdar, economist at Deloitte India.

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The report said the government had fiscal
space to provide additional support if necessary, citing a 67% increase in
revenue receipts during the April-November period from a year earlier.

India’s economy has been on the mend after the
government lifted mobility measures in June to curb the spread of coronavirus,
after contracting 7.3% in the previous fiscal year.

But after a surge in Omicron cases early this
month, many private economists and the International Monetary Fund (IMF) have
cut growth estimates to 9% from an initial 11% estimate.

The annual report, which presents a report
card of India’s economic achievements and provides new estimates, has often
missed targets.

Last year it forecast annual economic growth
of 11%, that was later revised down by the statistics ministry to 9.2%, after
economic activity was hit hard by the Omicron variant.

Private consumption, accounting for nearly 55%
of GDP, remains weak amid rising levels of household debt, while retail prices
have soared since the coronavirus outbreak began in early 2020.

 

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Caption: A worker cleans the exterior of an
office building in Mumbai’s central financial district, India, Dec 4, 2018.
Reuters file photo/Danish Siddiqui

 

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