Can’t rest on laurels
- September 13, 2023
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India’s painstakingly built economic stability, which placed it on a quicker recovery path than many other nations, should not be diluted as the economy is poised to sustain its growth in a more durable way in the future, a finance ministry report said.
“India appears poised to sustain its growth in a more durable way than before. Nonetheless, it is no time to rest on laurels nor risk diluting the painstakingly and consciously achieved economic stability,” the ministry’s Annual Economic Review for FY2023 said.
The word of caution from the department of economic affairs (DEA), which prepares annual budgets, is significant in a pre-election year when governments tend to loosen fiscal controls and announce fresh schemes.
The review also states that despite urban demand remaining resilient and rural demand in recovery mode, any deepening of geopolitical stress and El Nino impact could pose risks to growth in the rest of the fiscal year.
“Strong balance sheets and digital advancements could lead to better credit decisions, allowing India’s financial cycle to sustain for longer periods before encountering the challenge of bad debts,” the report said.
According to DEA, factors that can constrain the pace of growth include greater geopolitical stress and volatility in global financial systems, sharp corrections in global stock markets, the deep impact of El Nino, and modest trade activity and foreign direct investment (FDI) inflows owing to frail global demand.
Should these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge India’s growth outlook for FY2024,” it added.
India’s gross domestic product (GDP) growth accelerated to 6.1% in the March quarter, pushing FY2023 growth to 7.2% from 7% estimated earlier.