India is in a better position to adjust liquidity levels without stalling growth sharply. Downside risks persist, however, as next winter in Europe could lead to a geopolitical flare-up.

These are the key takeaways from the Treasury Department’s latest monthly economic report (August) released on Saturday.

“As long as India remains integrated with the rest of the world, downside risks to growth will persist. , there is no room for complacency on the inflation front as agricultural inventories and market prices need to be managed skillfully,” the report said.

As Russia cuts off energy supplies to mainland Europe before winter, growing international concern over the energy security of developed nations could heighten geopolitical tensions, pushing India’s energy demand so far higher. ‘s prudent response could be tested, says a report drafted by the ministry’s economics department. Said.

“In these uncertain times, it may be impossible to sit comfortably for long periods of time. Perpetual macroeconomic vigilance is the price of stability and sustained growth.”

Gross Domestic Product (GDP) growth for the April-June quarter (Q1FY2023) was 13.5%, below the Reserve Bank of India and independent analyst forecasts, and GDP growth for FY2023 by various banks and institutions. urged a significant reduction in forecasts. However, India is still poised to become the fastest growing major economy this year.

India’s retail inflation reversed its three-month downtrend in August, rising to 7% from 6.7% the previous month on the back of soaring food prices. This could put pressure on the central bank to raise the policy rate further later this month.

The MER emphasized that there are many positives to come from the previous year, including India overtaking the UK to become the world’s fifth largest economy.

“Real GDP in the first quarter of FY2023 is currently nearly 4% higher than its corresponding 2019-20 level, marking a strong start to India’s growth recovery in the post-pandemic phase. The sector is likely to drive growth in 2022-2023 based on the release of latent demand and the near-universalization of vaccination.

A sharp rebound in consumer spending, underpinned by soaring consumer sentiment and rising employment, will sustain growth in the coming months, while higher consumer spending and higher capacity utilization this year will lead to The investment scenario looks healthy.

“Government capital expenditure spending is likely to sustain as revenue growth is expected to continue unabated in the balance period this year,” it said.

According to the Regular Labor Force Survey, the urban unemployment rate has shrunk for the fourth consecutive quarter, job demand under the main scheme We recorded the lowest values ​​compared with the corresponding periods. Rural unemployment could fall, the report said.

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