In its February report, the Ministry of Economic Affairs also tried to allay fears of rising inflationary pressures in the economy.

The recent spike in crude oil prices, if it continues well into FY23, will pose a downside risk to growth estimates by some agencies that have forecast GDP to rise 8-10% in the next fiscal year, it said. Ministry of Finance Tuesday. According to the latest economic survey, real growth for FY23 is 8-8.5%.

However, the crisis between Russia and Ukraine is unlikely to weigh on India’s real economic growth for the current budget from the 8.9% projected by the National Statistical Office in its second preliminary estimate, it added.

In its February report, the Ministry of Economic Affairs also tried to allay fears of rising inflationary pressures in the economy. Wholesale price inflation is expected to decline in FY23, supported by a large base effect, while food inflation is set to decline on the back of record grain production and good buffer stocks. “Given the inherently unsustainable nature of high prices, international commodity prices are expected to level off early with an increase in inventories outside the crisis zone,” the report said.

The price of Brent crude fell below $100 a barrel in intraday trading on Tuesday, the lowest level since the conflict in Ukraine began nearly three weeks ago as fears of supply disruption eased and Covid cases escalate. rekindled demand in China.

Nevertheless, the report admits that the impact of the crisis in Ukraine on India’s growth, inflation, current account and budget deficits will depend on maintaining high commodity prices.

Retail inflation reached an eight-month high of 6.07% in February, reaching the upper end of the Reserve Bank of India’s medium-term target of 2-6% for the second straight month. Of course, it averaged 5.4% for the April-February period of this fiscal year, up from 6.2% a year earlier.

As the geopolitical crisis continues to evolve, it is too early to make a plausible prediction of its impact on the Indian economy in FY23, the report said.

Nevertheless, India has “braced well” to cope with the impact of rising commodity prices, it stressed. Foreign exchange reserves remain at a comfortable level and are large enough to finance more than 12 months of imports. Foreign investors are “largely invested in the economy as the exchange rate depreciates in a flatter trajectory” shaped by the exceptional growth in exports. External debt, of which one third of its value is denominated in Indian currency, is significantly light at 20% of GDP to deal with any deterioration in the trade balance.

“The (Ukraine crisis) impact on India’s activity level in March, if any, cannot be assessed until a month later, when high-frequency data becomes available. However, given that activity levels do not decline in February, it is unlikely that real 2021-22 GDP prints will differ from the levels indicated in the second advance estimates,” it said.

The report also highlighted the fact that economic activity continues to recover with an upturn in mobility, resilient electricity demand, healthy road pricing and generations of electronic waybills.

“Continuing momentum in GST revenue collection with 18% year-over-year growth and 1.33 trillion mobilization in February 2022 is also evidence of growing sales and trade revenue beyond the festival season,” it said. Surpluses of systemic liquidity, surge in non-food bank lending, growth in PMI production and services, and “solid performance” of rail freight amid increased economic activity, it turned out.

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