To know how well the country is performing in terms of economic growth, GDP plays a crucial role. The Gross Domestic Product (GDP) is a measure used by economists to assess the health of the economy. Growth in GDP numbers represents that the wealth of the country is in good condition. And the negative growth shows that the country is not performing well as expected and the country needs to revise its policies.
Now, let’s look at the GDP of India and see how the country is performing and what further initiatives are taken by the Indian Government to help grow the GDP of the country.
The expert believes that amid the global economic slowdown, India is performing well. The latest economic outlook reports of FICCI (The Federation of Indian Chambers of Commerce & Industry) forecast India’s GDP will increase with annual median growth of 7.0% in FY 2022-23. However, FICCI has downgraded its forecast from the 7.4% which it estimated earlier this year in the month of April. According to the reports, the slowdown is the consequence of geopolitical uncertainty and the current global market situation.
FICCI in its reports forecasts growth of 6.2% and 7.8% in industry and services sector respectively. While on the other hand, the growth of agriculture and allied activities is at 3.0% for 2022-23 which is slower in comparison to other sectors.
The Indian economy has recovered well after the post-pandemic era and braced itself to become the fastest growing economy in the world. Being a demand-driven economy, the consumption and investment contributing to 70% of the economy is a positive sign that puts India in a better position.
LOWERING EXPECTATIONS: WHAT THE OTHER FINANCIAL INSTITUTIONS PREDICT?
Other reputed financial institutions like India Ratings, Investment Information and Credit Rating Agency of India (ICRA), The Reserve Bank of India (RBI), World Bank, Citigroup, International Monetary Fund (IMF), Fitch, and Standard & Poor’s (S&P) have scaled down their forecast for India’s GDP.
World Bank had trimmed the forecast from 8.7 per cent to 8 per cent for the second time for India in April 2022. RBI has also hiked the repo rate by 50 basis points to 5.4% in the initial days of August 2022 to rein in high inflation.
THE GLOBAL ECONOMIC SCENARIO
One after another global economy is getting hit by major events and facing major repercussions because of it. The world somehow started to recover from the economic damages of the pandemic. Soon Ukraine-Russia hit the world and now the world has to face some serious consequences because of it.
Many experts believe that the global economy is heading toward a recession with high inflation and lower investment demands. While some suggest that it is still too early to predict that a global recession is going to hit soon. But one thing that all economists can agree on unanimously is that there is a strong possibility that a prolonged slowdown will remain for all.
The Covid and the war slow down the supply chain in the entire world. However, since the lockdown restrictions are lifted from almost every country in the world, it will take some time to strengthen the supply chain and bring it to an earlier level.
IMPACTS OF GLOBAL UNCERTAINTY ON THE INDIAN ECONOMY
The global business environment is greatly affected by geopolitical uncertainties and so does the Indian economy. Tension escalates as the war between Russia and Ukraine continues for a longer period than it was expected. Although the diplomatic response of India, help the country to escape a major recession situation similar to what it is right now in the United States and Europe.
The experts believe that geopolitical tension affects the country’s growth outlook, supply chain disturbance, inflation in commodity prices, and restricting the monetary liquidity leading to a downturn in the economic growth of the country.
But the question arises if the world is facing such major geopolitical crises how is India doing well in terms of the GDP?
Along with the world, inflation also hit India greatly and particularly the people who belong to the lower income bracket. The purchasing power of India’s population decreased now more than ever. But the slowdown in major economies anticipated the growth of India’s export and supported the GDP growth that lacked domestic demands. In April 2022, India exported the record wheat as it has ever before because of the uncertainty in the geopolitical environment.
INFLATION AND INDIA
All over the world, countries are battling with global surges in prices and facing constantly high levels of inflation. The economists are of the opinion that inflation is not going to leave us soon. And India will also get hit by it in the coming times.
One after another global incidents starting from the supply chain disruption by the Covid pandemic, the Ukraine-Russia conflict and the recent strict lockdowns in china are the major factors that are contributing to inflation.
Energy crises are another major reason why the prices of goods and services are skyrocketing in the global market. The reports suggest that, from January 2022, the inflation rate exceeds the maximum range set by the RBI for five consecutive months. Leading to an increase in the prices of edible oil, vegetables, fruits, petrol and almost everything.
The survey released by the Reserve Bank of India (RBI) predicts a further increase in the manufacturing input costs from Q1 to Q3 in FY 2022-23. And a further increase in commodity prices can be expected. However, the central bank of India is trying to maintain inflation by restricting cash liquidity.
India as a developing country is performing better than most of the countries in the world right now, keeping in mind the current world scenarios and its own problems. After getting hit hard by the pandemic, India is hopefully on the right path to growth and development.
It still takes time for India to become a $5 trillion economy but even this steady growth will help the country to become the fastest growing economy in the world.
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