GDP on path to 7% growth, inflation to subdue soon: Finance Ministry

Notwithstanding global challenges, the Indian economy is predicted to expand by 7% in FY23, and retail inflation would reduce in line with wholesale inflation, which dropped to a 25-month low in January, the Finance Ministry's report Monthly Economic Review noted.

India's current account deficit is expected to decrease in FY23 and FY24, protecting the rupee in tumultuous times, according to the Monthly Economic Review published by the ministry. This is due to the benefits from high services exports, the moderation in oil prices, and the recent decline in demand for import-intensive goods.

This would ensure that India's foreign finances are not a significant source of concern at a time when the Fed is anticipated to raise rates further, the report added. It will also give India's external sector the much-needed cushion it needs.

As India increases its market share in both IT and non-IT services, whose demand has been stimulated by the pandemic, the increase in net service exports over the previous year is a critical development, it was stated. It was also noted that imports are now less expensive due to the drop in global commodity prices.

According to numerous foreign forecasting organizations, India's inflation will likely moderate in FY24 compared to FY23 and remain in the range of 5 to 6%, with risks being evenly distributed, it added.

Although corporates are already highly leveraged, tightening financial conditions by central banks to control inflation has sparked worries about the escalation of corporate debt vulnerabilities, it said.

The issue appears to be limited, according to the research, in the instance of India. Since mid-2021, the debt in India's private non-financial sector has steadily decreased, and the quality of the debt has improved.

According to the report, India's corporate sector credit-to-GDP ratio is also below its historical trend, indicating that there is enough room for the corporate sector to borrow more. It also stated that the corporate sector's strong debt profile will be crucial in preserving the macroeconomic stability of the economy in the future.