Global economy and weather conditions may hinder with India's economic growth

The Finance Ministry listed potential risks for the Indian economy in its monthly economic review for March. These risks included geopolitical developments, global financial stability, and El Nino conditions that can cause drought conditions, lower agricultural output, and higher prices. It also stated that increased prices and financial tightening have hurt growth expectations and will continue to have an impact on the economy until February 2025.

However, according to the research, the macroeconomic stability demonstrated by an improved current account deficit, reduced inflation pressure, and a solid banking sector has made the growth rate sustainable.

With reducing inflationary pressures in March 2023, brought on by an easing of food prices and core inflation, which dropped to a 16-month low, it was said that internal macroeconomic stability had been further strengthened. Due mostly to a large base effect, retail inflation measured by the Consumer Price Index decreased to a 15-month low of 5.66% in March.

The unstable global crude oil market, however, could in the future have an impact on India's inflation trajectory, according to the paper. Crude oil prices have already increased as a result of this from April 2023. The report also stated that limited supplies of milk and wheat are anticipated to have an impact on the trajectory of inflation. The research highlighted flaws in the financial system by highlighting the recent failure of a few banks in the US and Europe as well as the Union Bank of Switzerland's (UBS) acquisition of the crisis-hit Credit Suisse Bank.

Droughts caused by the El Nino weather phenomena, which might affect food production and increase price pressures, was also warned about in the report. It also stated that geopolitical uncertainties and the global monetary tightening are likely to have an impact on India's growth.

However, the statement continued, 'we reiterate that downside risks to our official forecast of 6.5 percent for real GDP growth in 2023–24 dominate upside risks.'