India’s growth affected by external factors and global economic conditions Pradeep Multani PHD Chamber

Continued depreciation of the rupee is another concern as it would make India’s energy imports expensive and lead to further fuel inflation as well as a widening trade deficit, said Pradeep Multani, president of the Chamber of Commerce. and industry PHD, chairman of Multani Pharmaceuticals. Edited excerpts:

Is India eyeing a possible recession amid Ukraine crisis?

The economy is moving at a rapid pace and showing strong resilience to global headwinds, as indicated by the performance of leading economic and trade indicators. GST collections, which is one of the supply side indicators of business activity, marked the second highest gross collections of Rs. 1,48,995 crore in July 2022.

In addition, India is showing high dependence on external shocks with significant improvement in external debt-to-GDP ratio, net foreign position-to-GDP ratio, debt service and foreign exchange reserves sufficient.

The government says we have higher growth than many economies in the world. To what extent do you agree with this?

Thanks to India’s strong and resilient fundamentals, the economy is expected to be among the fastest growing economies in the world, according to IMF projections in its recent July 2022 forecast.

In its recent monetary policy decision, the RBI kept GDP growth projections at 7.2% for the financial year 2023, in the hope that the Indian economy will quickly emerge from the shadow of the pandemic and the effects geopolitics.

The economy is well supported by the continuation of the calibrated approach and policy measures by the RBI and the government to maintain a balance between economic growth and inflation.

What do you think of the fall of the Indian currency?

Continued depreciation of the Rupee is another concern as it would make India’s energy imports expensive and lead to further fuel inflation as well as a growing trade deficit.

The risk of imported inflation has only increased with the Rupee falling to record lows. The main reasons for the decline in the value of the rupee are the strengthening of the US dollar, the tightening of monetary policy in advanced economies and the outflow of foreign capital.

However, compared to other pear economies, the depreciation of the rupee is relatively less, which also indicates that the rupee has become strong against other currencies in 2022.

Do you think that in recent years there has been insufficient growth for the kind of jobs we need?

India’s economic growth trajectory shifted from stable during the 1960s to 1990s to strong in the 2000s and faster in the 2010s, indicating the promising nature of the Indian economy.

During these years, the series of economic reforms enhanced socio-economic growth and development and provided a conducive and promising business environment and labor market.

However, the year 2020 has been marked as a difficult year for the Indian economy due to the disheartening impact of the economic crisis brought on by COVID-19. The pandemic has caused severe disruptions to industrial production and growth by severely undermining supply chains and job opportunities.

Nevertheless, the immediate containment measures and the extent of effective policies by the government, along with the calibrated measures of the RBI, and the tireless efforts of the industry have again shifted the trajectory of India’s economic growth to the side of growth.

According to national and international agencies, India is a bright spot in the global ecosystem and India’s growth promises to be very lucrative in the coming years. So, on the growth front, India is doing quite well, but one of the reasons for the unemployment scenario in recent years could be the uneven recovery across sectors.

The International Monetary Fund (IMF) sharply cut its growth forecast for fiscal year 2023 to 7.4% from 8.2% it had estimated in April. Your point of view on this?

The main reason for the IMF’s downgrading of India’s growth outlook could be less favorable external conditions and faster policy tightening by other advanced economies. India’s growth is mainly influenced by external factors and global economic conditions.

However, even after the revised growth outlook, India’s position is much better than other economies that have seen a sharp decline in their growth projections by the IMF.

There are rumors of possible stagflation, do you agree with that?

While the global economy is still recovering from the Covid-19 pandemic, the Russian-Ukrainian crisis has created another hurdle in the recovery process, negatively impacting stakeholders’ sentiments regarding the socio-economic development of many economies.

In addition to inflicting immense suffering and a humanitarian crisis, the Russian-Ukrainian war has threatened global peace and stability. The entire global economy will feel the effects of slower growth and faster inflation, due to this geopolitical distress, creating a great risk of stagflation.

However, stagflation risks are low in India compared to the rest of the world. Although inflation is high, economic demand is slowly recovering, and the pace of employment and the hiring process by companies is also improving.

Furthermore, the pace of economic activity in India is expected to remain buoyant thanks to the various structural reforms undertaken by the government over the past two years.

What are the main measures that the central government should take in terms of economic growth? Are there any shortcuts?

At this point, continued government control is needed to mitigate the impact of recent geopolitical developments while maintaining a balance between inflation and economic growth. India is currently witnessing cost-driven inflation, therefore, government supply-side measures will go a long way in containing inflationary pressures.

It is very appreciable that the central government has recently taken the decision to reduce excise duties on petroleum products to curb inflation.

Few states have also followed the steps of the central government and reduced taxes. At this point, more states should offer to reduce excise taxes in the event of price escalation.


Shirlene J. Manley