India’s forecast of 7.2% economic growth for FY 2022-23 could be in jeopardy if merchandise exports, which fell to their lowest level in five months in July 2022, do not recover. Previously high levels, warns the Ministry of Finance in the context of slowing growth in advanced economies should weaken cross-border trade.
India’s merchandise exports hit their highest level ever at $422 billion in FY22 from $330 billion the previous year.
The ministry, in its latest report, also warned that inflation would not fall below 5% until around the first half of next year (2023).
“An unchanged growth projection (by RBI in its August monetary policy) reflects the growth momentum of the Indian economy. However, the momentum could be challenged if merchandise exports, which have fallen to their lowest level in five months in July 2022, do not recover to their previous high levels,” the ministry said in its July economic review.
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Recession fears in advanced economies due to Russia’s invasion of Ukraine, continued disruption of supply chains and slowing China could lead to lower exports in 2022-23 after posting strong performance in 2021-22, analysts said.
The slowdown in exports is also expected to affect the performance of India’s manufacturing sector.
India’s manufacturing sector, which received a boost in FY22 due to export growth, is expected to be hit by a decline in foreign trade activity in FY23, according to a India Ratings and Research report this week.
Consumer demand in the United States and the EU, India’s two main export markets, as well as other advanced economies, is expected to slow as central banks resort to aggressive rate hikes. of interest. This will impact export orders in the coming months.
The ministry, however, said that the balance sheets of the private sector and the banking sector are healthy and that there is an appetite to borrow and lend respectively.
“As India’s private sector embarks on the long-awaited capital spending cycle, building on the government’s capital spending of recent years, India’s potential and estimated economic growth performance India for the rest of the decade will inevitably be revised upwards,” the ministry said. said.