India tipped for fastest economic growth in 2022-23
India’s economy is set to grow faster than any other large nation’s, thanks to a raft of government initiatives unveiled in Budget 2022-23, according to the Finance Ministry’s Monthly Economic Review.
It highlighted manufacturing and construction as the ‘growth drivers’, while agriculture will continue to diversify, strengthening food buffers and benefiting farmers.
And it said India is the only major country listed by the International Monetary Fund (IMF) whose economic growth projection has been revised upwards for 2022-23. “In a testimony to the resilience of its people and the farsightedness of its policymaking, the Indian economy that contracted by 6.6% in 2020-21 is now projected in 2022-23 to grow the quickest among the league of large nations,” the Review said.
On the impact of third wave of Covid-19, the Finance Ministry’s Review said overall economic activity remained resilient and that his was reflected in robust performances of several indicators such as power consumption, manufacturing, exports and e-way bill generation.
“Once the uncertainty and anxiety caused by the Covid-19 virus recedes from people’s minds, consumption will pick up and the demand revival will then facilitate the private sector stepping in with investments to augment production to meet the rising demand. Barring external shocks – geo-political and economic – this scenario should play out for the Indian economy in 2022-23,” it said.
In the recent Budget the government targeted a nominal GDP growth of 11.1% in 2022-23 with a GDP deflator of 3.0-3.5%, implying real growth at about 8%.
Growth slows in services sector activity
Business grew at a slower rate in India’s services sector in January, amid the escalation of the pandemic, reintroduction of restrictions and inflationary pressures, according to the seasonally adjusted IHS Markit India Services Business Activity Index.
It reports that activity fell to 51.5 in January, down from 55.5 in December, pointing to the slowest rate of expansion in the past six-months. A score above 50 means expansion, while a score below 50 denotes contraction.
However, January was the sixth successive month that the sector witnessed an increase in output.
Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “The escalation of the pandemic and reintroduction of curfews had a detrimental impact on growth across the service sector. Both new business and output rose at slight rates that were the weakest in six months.
“Concerns about how long the current wave of COVID-19 will last dampened business confidence and caused job shedding. Firms were also alarmed about price pressures,” said Lima.
Service sector jobs declined for the second month running during January, owing to reduced output requirements among some businesses and future uncertainty.
Meanwhile, the Composite PMI Output Index – which measures combined services and manufacturing output – fell from 56.4 in December to 53.0 in January, the slowest rate of expansion in the current six-month period of growth.
“The January data pointed to a second successive monthly drop in private sector employment. Despite being modest, the rate of job shedding accelerated from December,” its report said.