Momentum in the economy better than expected: report of the Ministry of Finance


NEW DELHI: Macro risks in India have receded over the past six weeks due to steps taken by the Center and the Reserve Bank of India (RBI) and lower oil prices on fears of a global recession, the finance ministry said in a report on Thursday, asserting that momentum in the economy is holding up better than expected, but he warned of the need to remain vigilant.
“All that said, it is still early days in the financial year and there are still many challenges to overcome. The Federal Reserve continues to tighten. Global liquidity conditions will tighten, and a downturn in asset markets may dampen sentiment and curb spending. Geopolitical risks, near and far, are present. For now, we will accept the good news, on the margin, while being vigilant and ready to tackle the expected and present risks”, it is stated in the monthly economic report of the Ministry of Finance for June.
A report prepared by the Ministry of Economic Affairs said that the recent reduction in international prices of food items, industrial metals and even crude oil are welcome developments to control inflation in India.
The recent revenue generation measures announced by the government will not only help contain the widening current account deficit but also ensure that the fiscal gap, if any, is well contained, it added.
“Overall, at the margin, June and the first ten days of July were better for Indian macro than the first two months of the current financial year. This is cause for relief and even cautious optimism in these times,” the report said.
It said that as long as retail inflation in India remains higher than the RBI’s tolerance of 6%, as it is still at 7% in June 2022, stabilization policy measures will have to continue to walk the tightrope of balancing inflation and growth concerns.
The report cautioned that global headwinds, however, remain a downside risk to growth as crude oil and edible oils, which have fueled inflation in India, remain major import components in the consumer basket.
“For now, their global prices have softened, as fears of a recession have eased. In addition, the various measures taken by the government to ease inflationary pressures may also contribute to some extent in containing price inflation. This would weaken inflationary pressures in India and curb inflation,” the report said.
It said the service sector’s recovery was continuing and manufacturing strength was stable. There is an obvious desire for investment by the private sector. Banks are ready to lend and their financial condition, as shown by central bank stress tests, is quite strong. The brisk monthly GST receipts confirm the momentum of economic activity.
It said that as long as retail inflation in India remains higher than the RBI’s tolerance of 6%, as it is still at 7% in June 2022, stabilization policy measures will have to continue to walk the tightrope of balancing inflation and growth concerns.





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