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India’s Growth Impacted By External Factors And Global Economic Conditions: Pradeep Multani, PHD Chamber

On the back of India’s strong and resilient fundamentals, the economy is expected to be amongst the fastest growing economies in the world, as per the projections of IMF in its recent forecast in July 2022

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The ongoing depreciation of the Rupee is another worry as it would make India's energy imports expensive and lead to further fuel inflation along with a widening trade deficit, said Pradeep Multani, President PHD Chamber of Commerce and Industry, Chairman Multani Pharmaceuticals. Edited excerpts: 

Is India staring at a possible recession amid the crisis in Ukraine? 

The economy is moving at a swift pace and showing strong resilience to the global headwinds as indicated by the performance of key economic and business indicators. GST collections, which is one of the supply side indicators of business activity, have marked the second-highest gross collections of Rs. 1,48,995 crore in July 2022. 

Further, India is showing great reliance against the external shocks with significant improvement in the external debt to GDP ratio, net international investment position to GDP ratio, debt servicing ratio and sufficient foreign exchange reserves. 

The government is saying that we have higher growth than many economies in the world. To what extent do you agree with this?

On the back of India’s strong and resilient fundamentals, the economy is expected to be amongst the fastest growing economies in the world, as per the projections of IMF in its recent forecast in July 2022. 

In its recent monetary policy decision, RBI retained the GDP growth projections at 7.2 per cent for FY2023, with the expectation that the Indian economy will speedily emerge out of the shadows of pandemic and geo-political effects. 

The economy is well supported by the continuation of calibrated approach and policy measures by the RBI and Government to maintain a balance between economic growth and inflation.

What is your take on falling Indian currency?

The ongoing depreciation of the Rupee is another worry as it would make India's energy imports expensive and lead to further fuel inflation along with a widening trade deficit. 

The risk of imported inflation has only gone up with the rupee plunging to record levels. The main reasons for the declining value of the Rupee are strengthening US Dollar, tightening monetary policy by advanced economies, and foreign capital outflows.  

However, as compared to other pear economies, the depreciation of the Rupee is relatively less, which also indicates that the Rupee has become strong against other currencies in 2022. 

Do you think in the last few years, growth has been insufficient for the kind of jobs we need? 

India’s economic growth trajectory has increased from steady during the 1960s to 1990s to strong in the 2000s and fastest in the 2010s, which indicates the promising nature of India’s economy. 

Over these years, the string of economic reforms has enhanced socio-economic growth and development as well as provided a conducive and promising business environment and labour market. 

However, the year 2020 was marked as a difficult year for the Indian economy due to the daunting impact of the COVID-19-led economic crisis. The pandemic has resulted in severe disruptions in industrial production and growth by severely undermining the supply chains and employment opportunities. 

Nevertheless, the immediate containment measures and extent of effective policies of the Government, along with the calibrated measures by the RBI, and untiring efforts of the industry shifted the path of India’s economic growth trajectory to the growing side again. 

According to the national and international agencies, India is a bright spot in the global ecosystem and India’s growth is looking very lucrative in the coming years. So, on the growth front, India is doing quite well, however one of the reasons behind the unemployment scenario in the recent few years could be the uneven recovery among sectors. 

The International Monetary Fund (IMF) has sharply slashed its growth forecast for the fiscal year 2023 to 7.4 per cent from 8.2 per cent it had estimated in April. Your take on this?

The main reason behind the slashing of India’s growth outlook by the IMF could be less favourable external conditions and more rapid policy tightening by other advanced economies. India’s growth is majorly being impacted by external factors and global economic conditions. 

However, even after the revised growth outlook, India’s position is much better than the other economies that have witnessed a sharp decline in their growth projections by the IMF.

There are murmurs of possible stagflation, do you agree with this?

With the world economy still recovering from the pandemic Covid-19, the Russia-Ukraine crisis has created another roadblock in the recovery process, negatively impacting the sentiments of stakeholders regarding the socio-economic development of the many economies. 

Along with inflicting immense suffering and humanitarian crisis, the Russia-Ukraine war has threatened global peace and stability. The entire global economy will feel the effects of slower growth and faster inflation, due to this geo-political distress, therefore creating a big risk for stagflation. 

However, the risks of stagflation are low in India compared with the rest of the world. Though inflation is high, the economic demand is slowly recovering and the pace of employment and hiring process by the companies is also improving. 

Also, the pace of India’s economic activity is expected to remain strong on the back of various structural reforms undertaken by the Government during the last 2 years.

What are the major steps the central government needs to take as far as economic growth is concerned? Are there any shortcuts?

At this juncture, continued handholding by the government is required to mitigate the impact of recent geo-political developments while maintaining a balance between inflation and economic growth. India is currently witnessing cost-push inflation, therefore, the supply side measures from the government will substantially support containing inflationary pressures.

It is highly appreciable that the central government has recently taken the decision to reduce the excise duties on petroleum products to curb inflation. 

Few states have also followed the central government’s steps and reduced taxes. At this juncture, more States should come forward to reduce the excise duties where there is price escalation. 


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