Global slowdown to dampen India’s exports, says Finance Ministry

India is set to grow at a moderately brisk rate in the coming years on the back of macroeconomic stability despite the global economic slowdown, the country’s Finance Ministry said in its latest monthly economic review.

So far in 2022, India’s food security concerns have been tackled, and food security will continue to be the government’s top priority, according to the report.

It said: “A rapid deterioration in global growth prospects, coupled with high inflation and worsening financial conditions, has increased fears of an impending global recession. The global slowdown may dampen India’s exports businesses outlook; however, resilient domestic demand, a re-invigorated investment cycle, along with strengthened financial system and structural reforms, will provide impetus to economic growth going forward.”

Exports of goods fell by 16.7% year-on-year in October, the first drop in 20 months and the worst slide since May 2020, when a nationwide lockdown was imposed to contain the spread of the pandemic. The World Trade Organisation recently warned that growth in global trade will drop to only 1% next year, from 3.5% in 2022.

India’s retail inflation, which is measured by the Consumer Price Index (CPI), eased to a three-month low of 6.77% in October.

The ministry also noted that the gap between CPI and wholesale price index-based inflation (WPI) has been closing, due to the falling of international commodity prices and more demand from consumers, which has led to a hike in retail inflation.

The jobs market is likely to rebound in 2023, with firms hiring more staff. This will be driven by the lifting of the Covid-19 restrictions and “optimism engendered by the vigorous sales volumes experienced during the festive season”, the report noted.


Pact with Britain set to boost trade

India’s trade activity is expected to receive a boost early in 2023, when India concludes a free trade agreement (FTA) with the UK.

Prime Minister Rishi Sunak recently reiterated the UK’s commitment to the FTA with India as part of the country’s wider focus on enhancing ties with the Indo-Pacific region.

Delivering his first major foreign policy speech since taking charge at 10 Downing Street at the Lord Mayor of London’s Banquet at the end of November, the British PM reflected upon his Indian heritage and committed to promoting British values of “freedom and openness” around the world.

“Before I came into politics, I invested in businesses around the world. And the opportunity in the Indo-Pacific is compelling,” Sunak said. “By 2050, the Indo-Pacific will deliver over half of global growth compared with just a quarter from Europe and North America combined. That’s why we’re joining the Trans-Pacific trade deal, the CPTPP, delivering a new FTA with India and pursuing one with Indonesia.”


Finance boost for MSMEs

Digital lenders in India have recorded a sharp growth in both the number of loans and the amount loaned during the second quarter of 2022 (July-September) compared with a year ago, according to a report by the Fintech Association for Consumer Empowerment (FACE), a body of 21 fintech lenders offering credit to small businesses.

The report, compiled with data from FACE member organisations, noted 149% growth in loans disbursed, from 65.56 lakhs (£670m) during Q2 FY22 to 162.95 lakh (£1.6bn) during Q2 FY23.

Chief executive of FACE, Sugandh Saxena, said: “The credit expansion witnessed this quarter demonstrates that the fintech industry is seizing unmatched opportunities to contribute to financial inclusion and an inclusive economy.

“The fintech lending industry is accelerating customers’ access to credit with more loans. Implementation of the Reserve Bank of India’s (RBI) Digital Lending brings tailwinds for the industry as it sets clear rules and standards, boosting the confidence of the customers, fintech lenders and other market participants.”