With higher growth and lower inflation than most other countries, India is a bright spot in the post-pandemic world. In a piece for Mint, Dr Niranjan Rajadhyaksha, Executive Director, Artha Global, writes that the situation also presents some tricky policy choices.
Excerpts below:
“The Indian economy will likely lose momentum in the next financial year. Export demand will weaken as other major economies slip into recession. Domestic consumer spending may lose some steam as the excess stock of precautionary plus forced savings built up during the pandemic dries up. A lot will depend on urban wage growth. Private sector investment is showing some signs of picking up, but it is early days yet. Weaker aggregate demand as well as monetary tightening should bring Indian inflation back into the comfort zone of the Reserve Bank of India.”
“These two tricky policy choices—of sustaining the fiscal correction when nominal growth is trending down and of supporting the private sector investment cycle without triggering further pressure on the current account—may become bigger issues of discussion in the next financial year.”
Read the full article here.
