Finance Minister Nirmala Sitharaman said on Friday that despite the tense geopolitical environment and looming uncertainty, growth prospects for the Indian economy remain optimistic thanks to strong macroeconomic fundamentals and structural reforms undertaken by the government.
Speaking at the IMF-World Bank Development Committee meeting, Sitharaman said the “tense” and “uncertain” geopolitical environment could trigger new supply concerns.
“The geopolitical environment remains tense and uncertain. This could trigger further winter supply concerns for key commodities such as crude oil and natural gas. Controlling inflation would be a major concern in developed economies,” she said.
“A return to reality from stock markets in developed countries could bring chills back to growth everywhere. However, the growth outlook for the Indian economy remains optimistic thanks to strong macroeconomic fundamentals and structural reforms and initiatives undertaken by the government,” Sitharaman added.
The Russian-Ukrainian war is having an outsized impact on the global supply chain, impeding the flow of goods, fueling dramatic cost increases and product shortages, and creating catastrophic food shortages around the world, experts say. It has driven up energy prices for many consumers and businesses, hurting households, industries and entire economies in several countries.
Speaking about India’s strong performance in times of crisis, Sitharaman said India’s example is remarkable because “In a world of uncertainties, India is one of the very few countries to stand out”. Sitharaman said that despite the global headwinds, the IMF expects India to remain the only major economy with a growth projection above 6% for 2022 and 2023.
She said India’s National Statistical Organization (NSO) has now placed GDP growth for the first quarter of the current financial year 2022-23 at 13.5% on an annual basis, which is the highest of all major economies in the current scenario. .
The government is on the path to consolidation and has planned to reduce the GFD-GDP ratio to 6.4%, from 6.7% in 2021-22 and 9.2% in 2020-21. According to Sitharaman, hitting 13.5% GDP growth in the first quarter lifted India past the pre-pandemic level of 3.8%. India has fully withdrawn from lockdowns since April 2022.
The economic indicators available for the period from April to July 2022 corroborate the forecast. The industrial production index and 8 key industries point to strengthening industrial activity, she said. The Purchasing Managers Index (PMI), which is a measure of the prevailing direction of economic trends in the manufacturing sector, hit an 8-month high in July and continues to remain in the expansion zone for September 2022 with marked gains in new business and production growth, the minister said. “Nevertheless, momentum could be challenged if merchandise exports, which fell to a nine-month low in September 2022, do not recover to previous high levels as slowing growth in advanced economies is expected weaken cross-border trade,” she added.
Noting that the latest annual meeting of the IMF and World Bank may provide a timely opportunity to address current issues, Sitharaman said we should think about how to navigate headwinds caused by multiple ongoing crises, including the lingering effects of the pandemic.
“Our deliberations can pave the way for a silver lining for the global economy amid mounting inflationary pressures, currency depreciations, mounting debts and shrinking fiscal space,” she noted.