Although the 6.5 per cent growth projection for this fiscal aligns with the estimates of the World Bank and the Asian Development Bank, there are factors that could affect the favourable combination of growth and inflation outcomes currently estimated, said the March edition of the review.
India needs to be vigilant against potential risks of lower agriculture output, elevated prices and geopolitical developments, the finance ministry’s monthly economic review has cautioned.
The sequential growth of core consumer price index-based inflation in March was the weakest since June 2022.
Foreign exchange reserves had increased by the end of Q3 FY23.
“The strength is seen in the economy, estimated to grow at 7 per cent, higher than the trend rate and the growth of the other major economies. Growing macroeconomic stability as seen in the improved current account deficit, easing inflation pressure, and a banking system strong enough to survive the increase in policy rates, has made the growth rate further sustainable,” it said.
On the price situation, the report said, the sequential growth of core consumer price index (CPI)-based inflation in March this year was the weakest since June 2022 and can be attributed to the beginning of the pass-through of declining wholesale price index-based inflation in consumer goods prices.
Although CPI for the full year rose from 5.5 per cent in FY22 to 6.7 per cent in FY23, the report said, it was much lower in the second half of FY23 at 6.1 per cent compared to 7.2 per cent in the first half.
“The easing of international commodity prices, the promptness of measures taken by the government, and monetary tightening by the RBI [Reserve bank of India] have helped to rein in domestic inflation. Inflationary expectations also appear to be anchoring, as witnessed in various surveys for households and businesses,” it said.
The narrowing of the current account deficit, accompanied by a rising inflow of foreign portfolio investment resulted in a rise in foreign exchange reserves by the end of Q3 in the last fiscal.
Fibre2Fashion News Desk (DS)
