The ministry said it expects the manufacturing sector to pick up due to lower costs and festive demand.
The ministry said it expects the manufacturing sector to pick up due to lower costs and festive demand.
Continuing fall in crude oil price since June and fall in inflation rate below 7%, coupled with impressive growth in tax revenue collections, there has been a significant reduction in concerns over India’s growth and inflation in 2022-23, the finance ministry said. Is.
“It is not necessary to project optimism or pessimism too far in these uncertain times. For now, India looks to be in a better position on the growth-inflation-external balance triangle for 2022-23 than it was two months ago,” the ministry said, adding that some countries around the world are in a better position and are ‘towards an improvement’. Can point to ‘their macroeconomic fortunes India has been able to make over the past few months’.
Noting that domestic inflationary pressures have eased, the ministry in its monthly economic review for July said that in the coming months, in the absence of any fresh shocks due to global fall in commodity prices and steps taken by the government These pressures are expected to be limited. Government and Central Bank.
“Domestic and business expectations have moderated in the last two months, indicating that the high inflation of the past few months has not been able to enter the anchor zone of inflation expectations,” it said, adding that food inflation was under control after the fall. It is expected to remain at 6.8% in July while services inflation has declined.
The Survey estimates, “The softening of inflationary pressures in India continues as prices of critical raw materials such as iron ore, copper, tin, etc., involved in the domestic manufacturing process, see a downward trend in July 2022 globally. has grown.”
With bank and corporate balance sheets strengthening, the ministry said it expects the manufacturing sector to pick up pace on the back of lower costs and festive demand, while urban and rural demand will be fueled by contact-intensive services and higher MSPs for kharif crops. will be extended. respectively.
Recognizing that several risks remain, including a tense and fraught geopolitical environment, which could trigger fresh supply concerns for critical commodities such as crude oil and natural gas in the winter, the ministry warned the struggling Chinese economy. Said to be a matter of concern.
“This could trigger risk aversion in financial markets around the world, which, perhaps prematurely, are beginning to celebrate the easing of inflationary pressures in the short-term in the developed world. Inflation is still very high,” the review said, adding that more monetary policy tightening would ‘guaranteed a slowdown for economic growth and corporate profits.’
A reality check on the part of stock markets in the developed world could bring back growth freeze everywhere, the ministry cautioned, even as it emphasized that those under the custody of foreign portfolio investors (FPIs) 95% of the assets remain in India which shows their confidence. India’s economic strength.
“FPIs have been net buyers to the extent of $458 million in the month of July as the global sentiment of monetary tightening reached its peak profit levels. The net inflow of FPIs till the 12th of August has been around $ 2.9 billion.