Global economic developments expected to complicate outlook for Indian economy: Finance ministry report

Global economic developments are expected to complicate the outlook further for the Indian economy next year and there is a need to maintain vigilance on the external front, a finance ministry report said on Friday.

According to the ministry's Monthly Economic Review for November, the external sector continues to face the headwinds emanating from the global slowdown. However, it said, the downside to a widening current account deficit is expected to be limited by a robust services export performance through the rest of the year and by inward remittances, which are expected to touch USD 100 billion this fiscal, as per the World Bank.

"As we head into 2023, global economic developments are expected to complicate the outlook further, and therefore continued vigilance is a critical aspect in maintaining India's external resilience," it said.

No country can afford to sit on its laurels, India included, it said, adding that continued commitment to macroeconomic stability will underpin both economic performance and investor interest in India.

"The latter is very high, currently. It needs to be nurtured. Going forward, India needs to focus on medium-term challenges such as securing technology and resources for energy transition and skilling its youth for the 21st-century economy while staying the course on fiscal consolidation at the general government level," it noted.

The good news is that much hard work has been done in the last several years and a strong platform has been erected on which the superstructure of a middle-income economy can be constructed, it said.

On inflation, the report said pressures have been easing, with retail and wholesale inflation falling to 11- and 21-month lows, respectively, in November.

WPI inflation rate continues to decline, and CPI inflation rate came in below the RBI's upper tolerance limit of 6 per cent, primarily driven by the decline in food inflation.

Core inflation, however, continues to remain sticky and persisted at an elevated level of 6 per cent in November 2022, partially reflecting increased pass-through of high manufacturing costs to consumer prices as demand continues to recover swiftly, it said.

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With regard to India taking over the G-20 presidency, the report said it marks a significant step towards undertaking a leadership role on the global stage as the world economy sails through the storm of a unique set of economic challenges.

India inherits the responsibility of steering collective action for restoring global economic and financial stability in the aftermath of the pandemic and the Russia-Ukraine conflict, it said.

India has identified several priorities for its G20 presidency -- inclusive, equitable and sustainable growth; LiFE (lifestyle for environment); women's empowerment; digital public infrastructure and tech-enabled development in health, agriculture, education, commerce, skill-mapping, and culture.

Other priorities include tourism; climate financing; circular economy; global food security; energy security; green hydrogen; disaster risk reduction and resilience; developmental cooperation; fight against economic crimes; and multilateral reforms.