The Indian economy registered a broad-based expansion of 9.7 per cent during April-September 2022, supported by robust domestic demand and upbeat investment activity, according to a report by the finance ministry. It added that the growth was driven by pent-up demand from the services sector, enhanced agriculture exports and robust construction activity aided by increased infrastructure investment.
“Private consumption, bolstered by pent-up demand, reached its highest among all second quarters during the past 11 years at 58.4 per cent of GDP. The investment rate also rose to be the highest among all the second quarters since 2012-13 at 34.6 per cent of GDP, hinting at the beginnings of an investment cycle,” the finance minister said in its Monthly Economic Review for November 2022.
It added that as we move ahead in Q3, the momentum has been sustained well. There is cautious optimism as the slowdown in global economic activity is not mirrored in India’s performance of various high-frequency indicators.
“An overall increase in Rabi coverage with adequately filled irrigation reservoirs bodes well for agricultural output growth in 2022-23. An increase in minimum support prices for both Kharif and Rabi crops in 2022-23 and progress in rice procurement have already been supplementing rural incomes in the country,” the report said.
It added that higher incomes, among others, have led to increased sales of passenger vehicles, two- and three-wheelers and tractors by a good year-on-year margin in October-November. Industrial activity, as gauged by PMI Manufacturing, continued to remain in the expansionary zone during Q3:FY2022-23 (till November), driven by an improvement in operating conditions, expansion in new export orders, and a rise in production. Buoyant GST collection, robust e-way bill generation and increased e-toll collection reaffirm resilience of the economic activity.
On inflation, the report said inflationary pressures have been easing, with retail and wholesale inflation falling to 11- and 21-month lows, respectively, in November. WPI inflation rate continues to decline, and CPI inflation rate came in below the RBI’s upper tolerance limit of 6 per cent, primarily driven by the decline in food inflation.
It said, “Core inflation, however, continues to remain sticky and persisted at an elevated level of 6 per cent in November 2022, partially reflecting increased pass-through of high manufacturing costs to consumer prices as demand continues to recover swiftly.”
The Indian external sector continues to face the headwinds emanating from the global slowdown. However, the downside to a widening current account deficit is expected to be limited by a robust services export performance through the rest of the year and by inward remittances, which are expected to touch $100 billion this fiscal year as per the World Bank, the finance minister added.
“As we head into 2023, global economic developments are expected to complicate the outlook further, and therefore continued vigilance is a critical aspect in maintaining India’s external resilience. No country can afford to sit on its laurels, India included. Continued commitment to macroeconomic stability will underpin both economic performance and investor interest in India. The latter is very high, currently. It needs to be nurtured,” the report said.
It added that as the pandemic recedes more and more into the background, India needs to turn its attention towards medium-term challenges, such as securing technology and resources for energy transition and skilling its youth for the 21st-century economy while staying the course on fiscal consolidation at the general government level.
“The good news is that much hard work has been done in the last several years, and a strong platform has been erected on which the superstructure of a middle-income economy can be constructed,” the report said.
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