Finance Minister Nirmala Sitharaman on Friday said despite the tense geopolitical environment and looming uncertainty, the outlook for the Indian economy’s growth remains optimistic on the back of strong macroeconomic fundamentals and structural reforms undertaken by the government.
Speaking at the Development Committee meeting of the IMF and the Word Bank, Sitharaman said the “tense” and “uncertain” geopolitical environment could trigger fresh supply concerns.
“The geopolitical environment remains tense and uncertain. This could trigger fresh supply concerns in the winter for critical commodities such as crude oil and natural gas. Inflation control would be a major concern in the developed economies,” she said.
“A reality check on the part of stock markets in the developed world could bring back growth chills everywhere. However, the outlook for the Indian economy’s growth remains optimistic on the back of strong macroeconomic fundamentals and structural reforms and initiatives undertaken by the government,” Sitharaman added.
The Russia-Ukraine war is having an outsized impact on the global supply chain, impeding the flow of goods, fuelling dramatic cost increases and product shortages, and creating catastrophic food shortages around the world, as per experts. It has pushed up energy prices for many consumers and businesses, hurting households, industries, and entire economies of several nations.
Speaking about India’s robust performance in these times of crises, Sitharaman said India’s example is remarkable as “in a world of uncertainties, India is one of the very few standout performers”. Sitharaman said that despite the global headwinds, the IMF forecasts that India remains the only large economy with a growth projection of above 6 per cent for both 2022 and 2023.
She said India’s National Statistical Organisation (NSO) has now placed the GDP growth for Q1 of the current financial year 2022-23 at 13.5 per cent on a year-on-year basis, which is the highest for any large economies in the current scenario.
The government is on a consolidation path and has budgeted to prune the GFD-GDP ratio to 6.4 per cent from 6.7 per cent in 2021-22 and 9.2 per cent in 2020-21. According to Sitharaman, touching 13.5 per cent GDP growth in Q1 enabled India to cross the pre-pandemic level by 3.8 per cent. India has completely withdrawn from lockdowns since April 2022.
The available economic indicators for the period April to July 2022 corroborate the forecast. Index of Industrial production and 8 core industries points towards strengthening industrial activity, she said. The Purchasing Managers Index (PMI), which is a measure of the prevailing direction of economic trends in manufacturing, touched an 8-month high in July and continues to remain in expansion zone for September 2022 with marked gains in growth of new business and output, the minister asserted. “Nonetheless, the momentum may be challenged if merchandise exports, which have fallen to a nine-month low in September 2022, do not recover to their earlier high levels, as slowing growth in advanced economies is set to weaken cross-border trade,” she added.
Noting that the latest annual meeting of the IMF and the World Bank can offer a timely opportunity to solve current issues, Sitharaman said we should think about how to navigate the headwinds caused by the ongoing multiple crises, including the lingering effects of the pandemic.
“Our deliberations can usher a silver lining for the global economy amidst mounting inflationary pressures, currency depreciations, rising debts, and shrinking fiscal space,” she noted.
