How can India make a soft landing amid global economic crash?

Source– The post is based on the article “How can India make a soft landing amid global economic crash?” published in The Indian Express on 2nd December 2022.

Syllabus: GS3- Indian economy

Relevance– Performance of economy

News– The article explains the current situation of the Indian economy. It also exp-lains the future economic prospects.

What is the current global economic situation?

There was no disruption of economic activities by Covid-19 pandemic for the second consecutive quarter. Covid is unlikely to affect economic growth for coming times with the exception of China which is following the zero-Covid policy.

There are also some downsides. Geopolitical tensions, high inflation in many parts of the world and sharp increase in policy rates will impact economic growth.

How did the Indian economy perform in the July -September quarter?

Economic growth slowed down to 6.5% because of a fading low base effect.

Contact driven services such as trade, hotels and transport continued to be key drivers of economic growth. This sector has been impacted by recurrent lockdowns.

Private consumption was quite strong. It was growing by 9.7%. It is now 11.2% above pere-pandemic level.

Manufacturing GDP slowed sharply due to the base effect and margin pressure on manufacturing companies.

Despite climate-related disturbances, agriculture growth was satisfactory. Rain was lopsided and led to drop in rice acreage.

Food inflation, particularly in cereals, was high. It was due to abnormal weather.

Healthy tax revenues have allowed higher investment by the government. Investments grew 10.4% in the second quarter.

What are the future economic prospects?

The contact-intensive service is likely to maintain its momentum.

The resilience of domestic demand will shape the contours of GDP growth in upcoming quarters as global economic prospects are weak.

Manufacturing sector will likely face challenges as poor growth in the global economy has started to impact export growth.

Prospects for rabi crops look good because of favorable soil moisture conditions and health reservoir level. Overall, agriculture is expected to grow at 3% this year.

Consumer inflation is likely to be averaging at 6.8% this year.

Strong corporate balance sheets will protect them against the global economic slowdown. It will also provide an opportunity to kick-start the investment cycle once uncertainty ends.