India’s performance ‘noteworthy’ in battle against inflation
The Indian government’s management of inflation has been “particularly noteworthy”, in contrast with many advanced economies, according to the latest Economic Survey 2022-23, published by the Finance Ministry, Government of India.
It said that in 2023-24 (FY24), the challenge of controlling inflation is expected to be “less stiff” than it was in FY23.
“Due to the anticipated slowdown in advanced economies, inflation risks coming from global commodity prices are likely to be lower in FY24 than in FY23. However, in terms of overall risks to the benign baseline view on inflation, upside risks to India’s projected rates may outweigh the downside risks,” the Survey said.
It also said that the Reserve Bank of India’s (RBI) projection “of retail inflation at 6.8% in the current fiscal is neither too high to deter private consumption nor so low as to weaken inducement to invest”.
Inflation across the globe
However, an extended period of inflation may mean borrowing costs may stay “higher for longer”, it said. “In such a scenario, the global economy may be characterised by low growth in FY24,” it said.
The Survey highlighted the danger that the re-emergence of Covid-19 in China, which would lead to supply chain disruptions, could boost inflation across the globe.
“On the other hand, if China returns to normalcy from Covid-19, there can be a surge in commodity demand – thus reversing the recent slump in commodity prices,” it said.
According to the RBI, India’s retail inflation will grow by 5% in the first quarter of FY24 and at 5.4% in the next quarter.
Retail inflation fell to a year-low level of 5.725 in December, while wholesale inflation was at a 22-month low of 4.95%.
The number of self-employed people grows
According to the Economic Survey 2022-23, the percentage of self-employed people in the employment market increased in India, while the number of regular wage/salaried workers declined in FY21, compared with FY20. This was shaped by the trend in both rural and urban areas; the share of casual labour declined slightly in rural areas.
The Survey said more than 75% of rural female workers in India are employed in the agricultural sector. “This implies a need to upskill and create employment for women in agriculture-related sectors such as food processing. Here, the self-help groups (SHGs) can play a crucial role in shaping rural women’s potential into concrete developmental outcomes of financial inclusion, livelihood diversification, and skill development,” it said.
It also said that the share of workers engaged in agriculture rose marginally, from 45.6 % in FY20 to 46.5% in FY21. Conversely, the share of manufacturing fell from 11.2% to 10.9%. The share of construction increased from 11.6% to 12.1%, and the share of trade, hotels and restaurants declined from 13.2% to 12.2% over the same period.
“This could be attributable to the impact of Covid-19 on manufacturing and services employment while agricultural growth remained strong during the period,” the survey said.
The labour force participation rate (LFPR) and worker population ratio in Population Labour Force Survey (PLFS) 2020-21 have improved for both males and females in rural and urban areas compared to PLFS 2019-20 and 2018-19.
“As India marches ahead, the ground lost as regards social sector improvements due to the pandemic has largely been recouped, powered by prompt policymaking and efficient implementation interwoven with technology. Going forward with the vision of ‘Minimum Government; Maximum Governance’, it said that further developments will hold the key to attaining more equitable economic growth,” it added.
Economy will slow in 2023, say IMF
Growth in the Indian economy in next fiscal year and will slow to 6.1% from 6.8% during the current fiscal ending March 31, according to the International Monetary Fund (IMF).
In its January World Economic Outlook update, the IMF said global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, then rise to 3.1% in 2024.
Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF, said: “Our growth projections for India are unchanged from our October Outlook. We have 6.8% growth for this current fiscal year, which runs until March, and then we’re expecting some slowdown to 6.1% in fiscal year 2023. And that is largely driven by external factors.”
He added: “Growth in India is set to decline from 6.8% in 2022 to 6.1% in 2023 before picking up to 6.8% in 2024, with resilient domestic demand despite external headwinds.”
