Q What is the Context ?
A With two waves of COVID-19 largely behind us, many macroeconomic factors have changed dramatically, especially in the last fortnight due to Russia -Ukraine issues, here are the key facts of Indian economy using the EFGHIJ framework.
Q What is status of Export ?
- The $400-billion target of goods exports in FY22 appears achievable:
- This is a structural break from ~$300-330 billion per year over the last decade.
- Note that in calendar year 2021, India exported almost $400 billion worth of goods.
- This export growth comes at a time when global shipping and freight markets have been in a tizzy over the last few months as Covid-related supply chain disruptions across commodities and final products reverberated across the globe.
Q What is status of Fiscal growth ?
- India has significant fiscal headroom in FY23 with a 6.4% fiscal deficit pencilled in.
- The revenue buoyancy, assumed at less than 1, is conservative as is the overall assumption on nominal growth at 11%.
- In as volatile a world as this, the conservatism in forecasting should come to India’s advantage.
- India saw healthy direct and indirect tax receipts in FY22: the GST collections have consistently remained above the `1 trillion-a-month mark for many months now.
- Two aspects need a close watch:
- (a) as the prices of various commodities rise, there can be calls for softening the blow on the final consumer via tax cuts or direct support, and
- (b) the disinvestment programme of the government which could face a market where investor appetite is uncertain.
Q How is Growth challenges and opportunities for India ?
- India’s GDP growth in FY23 is projected to be 7.6-8.5%, making it one of the fastest-growing economies.
- With the newly changed circumstances, it is possible that this tight range and the absolute number may require revision.
- It is, however, too early to say in which direction and by what amounts.
- Opportunities for India: Global dislocations of supply chain or the creation of new supply sources could create divergent challenges and opportunities for India.
- The post Covid rebound in high frequency indicators (air and rail passengers, toll collections, UPI payments, etc.) suggests that the internal consumption economy is currently back on track.
- It is important to note that India continues to be the fastest-growing nation of its size in the world.
Q What is status of Health ?
- India has now completed almost 1.8 billion doses.
- The Omicron wave, thankfully both due to the inherent nature of the virus and the large vaccination drive, did not cause significant economic upheaval.
- It may be time to think of Covid as endemic and plan accordingly.
Q What is status of Inflation ?
- The inflation in 2021 was based on a sudden bout of fiscal-support-driven spending meeting with tight supply chain bottlenecks.
- It was expected that as spending normalises and supply chains open, prices will stabilise.
- However, the sharp uptick in the prices of crude, coal, commodities, and chips has created a more sustained scare for inflation.
- Many measures may be taken across the world to curb the impact for the common man: from opening of oil reserves, to cutting of taxes, to direct support, etc—all of which could impact the fiscal.
Q What is status of Capital ?
- Denoted by K by economists, expect to see a lot of ebb-and-flow here as investors react to evolving, volatile trends.
- Higher public investment in the last two years has supported economic recovery: India has planned for a record `10 lakh crore plus public capex.
- Net FDI has been strong at $25.3 billion up to December in FY2022.
- While FPIs have withdrawn $9.5 billion in FY22, DIIs and retail investors have supported the markets.