India’s economic momentum has been sustained well in the third quarter of 2022-23 and there is cause for cautious optimism as the slowdown in global economic activity is not mirrored in the performance of India’s high-frequency indicators, the Finance Ministry said on Friday.
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“Private consumption, bolstered by pent-up demand, reached its highest among all second quarters during the past 11 years at 58.4% of GDP,” the ministry said in its monthly economic review. “The investment rate also rose to be the highest among all the second quarters since 2012-13 at 34.6% of GDP, hinting at the beginnings of an investment cycle,” it added.
The easing of retail and wholesale inflation levels in November to 5.88% and 5.85%, respectively, along with the moderation in households’ inflation expectations as per a central bank survey, augurs well for augmenting consumption in rural and urban regions in the upcoming months, the ministry noted.
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The downsides of India’s widening current account deficit are 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 ministry said.
“Stable foreign direct investment (FDI) flows, resurgent foreign portfolio investment flows, and foreign exchange holdings that provide an import cover of nine months, cushion the external front,” it noted. The overall economic outlook ‘as we head into 2023’ would be complicated further by global economic developments, the ministry said, underlining that vigilance was 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,” it concluded.