NEW DELHI: India’s macro risks have eased over the past six weeks on actions by the Center and the Reserve Bank of India (RBI) and falling oil prices on global recession fears, the Treasury Ministry said in a report on Thursday, claiming that momentum in the economy is holding up better than expected but warned of the need to stay alert.
“However, the financial year is still in its infancy and there are still many challenges to be overcome. The Federal Reserve continues to tighten. Global liquidity conditions will tighten and declines in asset markets may dampen sentiment and dampen spending. Geopolitical risks, near and far, are common. For now, we will keep the good news on the sidelines while remaining alert and prepared to address anticipated and present risks,” said the Treasury Department’s monthly economic report for June.
The report, prepared by the Economy Ministry, said the recent softening in international prices for food, industrial metals and even crude oil are welcome developments for India’s inflation control.
The latest revenue-generation measures announced by the government will not only help curb the widening of the current account deficit but also ensure that any fiscal slippage is well contained, she added.
“All in all, June and the first ten days of July were better for the Indian macro than the first two months of the current fiscal year. That is cause for relief and even cautious optimism at this time,” the report said.
As long as retail inflation in India remains above the RBI’s tolerance level of 6%, as it is still 7% in June 2022, stabilization policies must continue to walk the fine line between inflation and growth concerns.
However, the report warned that global headwinds remain a downside risk to growth as crude and cooking oils, which have fueled inflation in India, remain the key imported components in the consumer basket.
“Currently their global prices have fallen as recession fears have been dampened. In addition, various government measures to alleviate inflationary pressures could also help contain inflationary prices somewhat. This would ease inflationary pressures in India and rein in inflation,” the report said.
The recovery in the service sector is ongoing and manufacturing strength is stable. The private sector’s willingness to invest is evident. Banks are ready to lend and their financial health, as shown by the central bank’s stress tests, is quite strong. Brisk monthly GST receipts confirm the dynamism of economic activity.
As long as retail inflation in India remains above the RBI’s tolerance level of 6%, as it is still 7% in June 2022, stabilization policies must continue to walk the fine line between inflation and growth concerns.
“However, the financial year is still in its infancy and there are still many challenges to be overcome. The Federal Reserve continues to tighten. Global liquidity conditions will tighten and declines in asset markets may dampen sentiment and dampen spending. Geopolitical risks, near and far, are common. For now, we will keep the good news on the sidelines while remaining alert and prepared to address anticipated and present risks,” said the Treasury Department’s monthly economic report for June.
The report, prepared by the Economy Ministry, said the recent softening in international prices for food, industrial metals and even crude oil are welcome developments for India’s inflation control.
The latest revenue-generation measures announced by the government will not only help curb the widening of the current account deficit but also ensure that any fiscal slippage is well contained, she added.
“All in all, June and the first ten days of July were better for the Indian macro than the first two months of the current fiscal year. That is cause for relief and even cautious optimism at this time,” the report said.
As long as retail inflation in India remains above the RBI’s tolerance level of 6%, as it is still 7% in June 2022, stabilization policies must continue to walk the fine line between inflation and growth concerns.
However, the report warned that global headwinds remain a downside risk to growth as crude and cooking oils, which have fueled inflation in India, remain the key imported components in the consumer basket.
“Currently their global prices have fallen as recession fears have been dampened. In addition, various government measures to alleviate inflationary pressures could also help contain inflationary prices somewhat. This would ease inflationary pressures in India and rein in inflation,” the report said.
The recovery in the service sector is ongoing and manufacturing strength is stable. The private sector’s willingness to invest is evident. Banks are ready to lend and their financial health, as shown by the central bank’s stress tests, is quite strong. Brisk monthly GST receipts confirm the dynamism of economic activity.
As long as retail inflation in India remains above the RBI’s tolerance level of 6%, as it is still 7% in June 2022, stabilization policies must continue to walk the fine line between inflation and growth concerns.
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