Informist, Wednesday, May 31, 2023
NEW DELHI – Headline CPI inflation is expected to fall near the Reserve Bank of India's mandate of 4% in the current financial year ending March, Chief Economic Adviser V. Anantha Nageswaran said today.
He was briefing the media after the GDP data for the year and quarter ended March was released today. India's deviation from its inflation target was among the lowest in major economies around the globe, Nageswaran said.
India's headline inflation peaked at 7.79% in April 2022, above the central bank's medium-term inflation target of 4% in a band of 2% on either side. While CPI inflation was above the upper bound of 6% for 10 months in 2022, consumer inflation has moderated to an 18-month low of 4.70% in the latest print in April.
The RBI projects CPI inflation to average 5.2% in the current year and in Jan-Mar, according to its latest forecast in April.
Soon after the government released its full year finance data for 2022-23, Nageswaran also said that India was on track to meet its fiscal deficit target of 5.9% of GDP in the current financial year. In 2022-23, the government's fiscal deficit was at 6.4% of GDP, matching its revised Budget aim, according to data released earlier today.
In absolute terms, the government's fiscal deficit in 2022-23 was 17.331 trln rupees, accounting for 98.7% of the revised target of 17.553 trln rupees.
Speaking about the economy, he said that capital expenditure will be driving the economy in 2023-24. This is in line with the current government's sustained push on such spending to revive the economy. It has more than doubled its capital expenditure target in the last four years to 10 trln rupees in 2023-24 from 4.26 trln rupees in 2020-21.
At 7.363 trln rupees, capital expenditure in 2022-23 has overshot the revised Budget target by 86 bln rupees, data released today showed.
The economy is seen reaching good momentum in 2023-24, he said.
GDP data released by the National Statistical Office today showed that the Indian economy grew 7.2% in the financial year ended March, higher than the earlier estimate of 7.0% but lower than 9.1% growth a year ago. On this, Nageswaran said that India will see a further upward revision of GDP numbers going forward, with growth prospects now appearing brighter than before.
Resilient domestic growth would offset exogenous pressures in 2023-24, he said.
The economy grew 6.1% in Jan-Mar, well above the median estimate of 5.1% in an Informist poll of 21 economists.
He saw signs of a turnaround in rural demand, with consumption growing in Jan-Mar for the first time in 2022-23. Other positive key indicators included private sector capital formation beginning to unfold, steady revenue mop-up and external sector being stable amid global headwinds, he pointed out.
Mentioning that downside and upside risks to growth will be evenly balanced in the current financial year, Nageswaran listed half a dozen external factors that will impact growth in 2023-24, weighing heavier on the positive side.
A slowdown in global economy and trade may impact export growth, and prolonged geopolitical uncertainty and tightened financial conditions are two downside risks that he pointed out.
This comes at a time when India's merchandise trade deficit fell to a 20-month low of $15.24 bln in April from $19.73 bln in March with imports contracting 14.1% year-on-year to $49.90 bln in April, and exports declining 12.7% to $34.66 bln.
However, it is to be mentioned his list of negative risks to the growth outlook is shorter than the one he had after the release of second advance estimate of 2022-23 GDP data in February.
Quashing worries regarding the farm sector emanating from unseasonal rainfall, Nageswaran said that it is speculative to comment on it as there has been no negative impact observed so far.
He also added that while fears of El Nino loom in the hearts of farmers, the government has adequate buffers in the form of water reservoir, seeds for sowing and warehouse storages to combat it.
El Nino is associated with warm winds which result in extremely hot summers and drought-like conditions in India. End
Reported by Priyasmita Dutta
Edited by Maheswaran Parameswaran
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