India on track to achieve 7% GDP Growth in FY23: Finance Ministry

The finance ministry has released its January economic review report outlining the current state of the economy and the road ahead.

On GDP Growth, the report says that India is on track to achieve 7% GDP growth in 2022-23. Manufacturing is growing steadily and overall demand conditions are conducive to support economic activity. However, the report also cautions that the 6.5% growth forecast for FY24 has more downside than upside risks.

On Inflation: Despite a sticky core inflation currently, the inflation risks are likely to be lower for India in FY24. While there have been some instances of inflation stiffening above the downward trending like, the report points out that "Inflation decline does not often happen in a straight line as prices are usually downward sticky." But that, this situation could prolong if global commodity prices do not head towards the pre-pandemic levels.

Another word of caution is basis predictions of the return of El-Nino conditions. If that happens, monsoon rains could be deficient which may lead to lower agriculture output and higher prices.

Exports: There is a likelihood of exports showing a tepid growth with major export markets of India likely to decline sharply.

External deficits may be a lesser challenge in FY24 than in FY23, but close attention to trends in international trade and capital flows will be
warranted.

Global outlook: Global inflation likely to moderate gradually, but will remain higher than pre-pandemic levels. However, inflation risks remain as geopolitical conflicts and the resulting supply disruptions that contributed to higher inflation in 2022 are still present.