Resilient domestic demand, an investment cycle revival, a strengthened financial system and structural reforms will provide an impetus to India's economic growth despite the rapid deterioration in global prospects, the finance ministry said Thursday.
India is set to grow at a "moderately brisk rate," amid increased fears of an impending global recession, the ministry's Monthly Economic Review for October said.
The global slowdown may, however, dampen India's export outlook.
The report noted that easing international commodity prices and new kharif crop arrivals will ease inflationary pressures in the coming months, and hiring by firms is expected to improve.
"In a world where monetary tightening has weakened growth prospects, India appears well-placed to grow at a moderately brisk rate in the coming years on account of the priority it accorded macroeconomic stability," the monthly publication said.
It said capital formation had suffered as the private sector-financial and non-financial-went about repairing its balance sheet, but that process is over now.
"Private sector financial and non-financial balance sheets are healthy and incipient signs of a new personal sector capital formation cycle are visible," the report said, pointing out that the government had stepped in with substantially higher capital expenditure while the private sector was fixing its balance sheet.
It added that net payroll additions by the Employees' Provident Fund Organisation, India (EPFO) witnessed double-digit growth in September 2022, reflecting improved formalisation of the economy.
The report said that macroeconomic stability will cushion India against global growth headwinds, maintaining it on a growth path, at a moderately brisk pace.
The Reserve Bank of India expects the economy to grow 7% in the current fiscal, among the fastest in the world. The report highlighted that policy measures such as export restrictions has addressed India's food security concern and it will continue to get the utmost priority from the government.
"Going forward, continued macroeconomic stability, fiscal prudence, and execution of various path-breaking policies such as Gati Shakti, National Logistics Policy and the Production-Linked Incentive schemes will boost the manufacturing share of employment and lend further upside to India's growth prospects," the report said.
The report cautioned that the global economy faces turbulence.
"Persistently high global inflation despite accelerated monetary tightening is increasing macroeconomic uncertainty, while hawkish monetary stances run the risk of tipping economies into recession," it said.
The spillover of the global slowdown may dampen the outlook of India's export businesses. It further cautioned that US monetary tightening is a "future risk" that could lead to a dip in stock prices, weaker currency and higher bond yields, resulting in rising borrowing costs for many governments.
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