According to a report by The Finance Ministry on Wednesday said that current year may as well end with an economic reset manifest of a post pandemic world. It added that commitment in the Union Budget towards asset creation will invigorate the virtuous cycle of investment and crowd in private investment.
“Once the uncertainty and anxiety caused by the Covid-19 virus recedes, consumption will pick up and the demand revival will then facilitate the private sector stepping in, finance ministry’ Department of Economic Affairs (DEA) said in its Monthly Economic Report.
However, external geopolitical and economic shocks could pose a risk in the economic revival, it added..
Economic Activity
The Ministry said that overall economic activity remained resilient amid the third wave. It is reflected in robust performance of several high-frequency indicators like power consumption, PMI manufacturing, exports, e-way bill generation.
Growth in exports will sustain provided the global economy does not slowdown. Import will also grow but re-aligned to requirement what is not available within, the report said.
The ministry in the report emphasised that the impact of the Omicron-induced third wave on economic activity has been much weaker than the previous two waves.
Indian Economy
“India’s economy is well on its way to growing at above 9% as projected in the advance estimates for the current year. With MPC retaining its inflation forecast for FY22 at 5.3%, inflation for the current financial year is set to close within its tolerance band of 2%-6%, the report noted.
Notably, India’s headline inflation rate based on the Consumer Price Index (CPI) jumped to 6.01% in January 2022, which was highest in seven months.
Monetary Policy
The ministry also underlined that the unchanged repo and reverse repo rate along with the Monetary Policy Committee’s accommodative stance prioritize growth during these uncertain times. Should retail inflation remain range-bound at 4.5% as projected in 2022-23, liquidity levels in the economy will remain high, the repoirt said.
Global inflation and energy prices are likely to be influential in determining India’s rate of inflation and the government expects it to decline to eventually obtain a GDP deflator of 3.0-3.5% assumed in the Budget 2022, it added.
GDP Growth
On the GDP growth, the DEA said that the Budget’s real growth component was about 8% which is close to the forecast in Economic Survey, as well as 7.8% projected by the RBI. The budget has targeted nominal GDP growth of 11.1 % in FY23. While Economic Survey pegged growth at 8-8.5%. (Economic Times)
