GDP growth may have slowed to 4.4% in the third quarter (Q3) from 6.3% in Q2, but “growth has not gotten shallower” and the momentum has sustained through the course of 2022-23, the Finance Ministry asserted on Monday.
Macroeconomic stability was likely to get a further boost this year as the current account deficit was “set to narrow from year-beginning estimates”, the ministry said, citing the jump in net services exports, moderation in oil prices and the recent decline in import-intensive consumption demand.
The current account deficit is estimated to narrow in FY24 as well, providing a buffer to the rupee “in uncertain times”, it said. “This will provide a much needed cushion... to India’s external sector at a time when the Fed is likely to raise rates further and ensure that India’s external finances are not a major cause of concern,” the ministry noted in its economic review for February.
Lost opportunity
Arguing that the growth momentum could have been higher but for the contraction of Gross Value Added (GVA) in the manufacturing sector, the ministry partly attributed the shrinkage to subdued export growth owing to weaker demand in advanced economies. “However, in general, the contraction of manufacturing GVA appears to have been caused by a sharper rise in the cost of inputs than the value of output,” it reasoned.
While various agencies’ forecasts suggest that inflation will moderate to 5%-6% in 2023-24, the ministry acknowledged that risks are evenly balanced and the trajectory of prices will hinge on several factors, including the possibility of an El Nino year hurting foodgrain output.
Although February 2023 was the hottest on record since 1901, as per an official review on March 10, no adverse effects have been seen on the wheat crop in the States of Punjab, Haryana, Uttar Pradesh and Rajasthan so far, the ministry pointed out.
