“It is not necessarily the right thing to do to project either optimism or pessimism too far ahead in these uncertain times. For now, India looks better placed on the growthinflation-external balance triangle for 2022-23 than two months ago,” according to the finance ministry’s monthly economic report for July.
It said such an improvement in the cyclical prospect is a reflection of the swift economic policy response bythe government and the central bank. The economy’s resilience, especially in the light of growth challenges elsewhere in the world, is due, in no small measure, to the sustained efforts of the government and the centralbank to regain and preserve the underlying macroeconomic and financial stability, according to the report.
“Few countries are better placed and can point to a recovery in their macro fortunes in the last few monthsas India is able to,” said the report. It said that household and business expectations have moderated over the last two months, indicating that the high inflation of the past few months has not entered the anchoring zone of inflation expectations.
It said that going forward, kharif sowing supported by southwest monsoon coupled with higher MSP for kharif crops is likely to enhance rural demand. Urban consumption is expected to benefit from the demand for contact-intensive services, improving performance of corporates and growing optimism of consumers. But it cautioned that risks remain. “The geopolitical environment remains tense and fraught. This could trigger fresh supply concerns in the winter for critical commodities such as crude oil and natural gas,” it said.
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