India staged a full recovery in FY 22 –ahead of many nations -- but rupee depreciation challenge persists

The Indian economy staged a full recovery in FY 2022, ahead of many other countries, and positioned itself to tread a pre-pandemic growth path in FY 2023, says the Economic Survey 2023.

The survey, presented in Parliament, noted that measures taken by the government and the Reserve Bank of India (RBI), along with the easing of global commodity prices, managed to bring inflation below the RBI upper tolerance target of 6 percent in November 2022.

But the survey stated that the challenge of the depreciating rupee persists with the likelihood of further increases in policy rates by the US Federal Reserve.

The Current Account Deficit may continue to widen as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong.

Exports could also remain under pressure as slowing world growth and trade shrinks the global market size in the second half of the current year.

The survey states that despite the risks, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 percent in FY 2023.

The optimism stems from an uptick in private consumption which has boosted production, resulting in an increase in capacity utilization across sectors. The consumption rebound was engineered by the near-universal vaccination coverage.

Capital expenditure of the Centre, which increased by 63.4 percent in the first eight months of FY 2023, was another growth driver.