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Economic Survey 2022-23 Highlights inflation risks and Rupee depreciation pressure on Indian Economy

The Economic Survey 2022-23, released today, has flagged threats to the Indian economy, even as it forecasts a GDP growth rate of 6.5% for the next fiscal year. The survey has said that the challenge of the Indian rupee depreciating remains. "However, the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Fed". What this means is that if the Federal Reserve in the United States continues to hike its key interest rate then outflows of money from India may continue, weakening the rupee further. This has the potential to fan inflation. 

The survey highlights another risk to inflation. "The widening of the CAD may also continue as global commodity prices". Global commodity prices have remained elevated since the beginning of 2022 because of the Russian invasion of Ukraine. India, being a net importer of commodities like oil, coal, fertilizer and metals, ends up paying more, thus widening the Current Account Deficit (CAD). A widening deficit adds to pressure on the rupee to depreciate. The survey adds that, "The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year".
   
Against this backdrop, the survey projects a baseline GDP growth of 6.5 percent in FY 2023-24, making India the fastest growing large economy. The actual outcome for real GDP growth will probably lie in the range of 6 percent to 6.8 percent, depending on the trajectory of economic and political developments globally. 2022.

The Economic Survey is an annual document released by the Finance Ministry a day before the Union budget. 

Please click here to read the survey