According to the finance ministry’s Monthly Economic Review for April, which was released on Monday, it is expected that the Indian economy will face downside risks to growth and upside risks to inflation. This is partially due to issues in the country’s external sector as well as concerns connected to the weather.
According to the Department of Economic Affairs, going ahead, various variables, including a weaker-than-expected oil supply, higher-than-anticipated demand from China, an increase in geo-political tension, and adverse weather conditions, may provide an upside risk for India’s inflation estimates.
The Reserve Bank of India (RBI) put a halt on further interest rate hikes one month ago, maintaining the benchmark rate of 6.50 percent. It was anticipated that the average rate of retail inflation would be 5.2% in the current fiscal year. The Consumer Price Index inflation rate went from a high point of 7.8 percent in April 2022 to an 18-month low point of 4.7 percent in April 2023, reflecting a steady reduction.
According to recent statistics, India’s wholesale prices dropped for the first time in over three years in the month of April. This occurred as a direct result of falling global commodity prices, which pushed down the costs of food, gasoline, and other inputs for manufacturers.
Inflation, as measured by the WPI, has been trending downward for the last 11 months and came in at a negative 0.92 percent in April. Since June of 2020, when inflation was at (-) 1.81 percent, this is the lowest level of the wholesale pricing index (WPI) that has ever been recorded.
“Consumption has shown steady and broad-based growth, while investment in capacity creation and real estate is finding traction. April is too early to forecast the economic outcomes for the entire year. A good beginning, though, is a harbinger of positive outcomes,” the report read.
The Ministry of Commerce and Industry anticipates that increased exports will drive the following wave of economic growth in India. During fiscal year 22 (FY22), the value of merchandise exports reached an all-time high in absolute terms and a seven-year high as a percentage of GDP.
In 2021, compared to the pre-pandemic year of 2019, India’s goods exports climbed by 22%, which resulted in the country accounting for 17.5% of the world’s total merchandise exports.
“After witnessing strong growth in FY22, the pace of growth in global merchandise exports moderated in FY23, as persisting geopolitical tensions and monetary tightening induced recessionary fears have led to a decline in discretionary consumer spending across advanced nations,” it said.
