Even as the global economy faced considerable uncertainty in 2022 due to the Russo-Ukraine war, a spike in oil prices and the impact of COVID-19, the Indian economy has shown resilience. The year 2022 witnessed a revival in the country’s GDP growth as well as an easing of inflation in December 2022.
“Despite geopolitical uncertainty and fears of a slowdown in global growth, India’s economy has shown resilience. In fact, Q2 2323 GDP growth held up alongside Saudi Arabia (8.6% y-o-y) among major economies… That said, there are pressure points and the Indian economy still has ground to cover, which was lost due to COVID. -19,” India Ratings said in a report.
Economic growth in India in 2022
India’s economy grew 13.5 percent in June 2022 (Q1FY23), the fastest growth in a year, as the country’s GDP grew 4.1 percent in the previous quarter (Q4FY22), 5.4 percent in the December 2021 fiscal quarter 22 and 8.4 percent in September 2021. In June 2022, the major global economies of the US and the UK witnessed contraction. Also in September 2022, India’s GDP grew by 6.3 percent.
Earlier this month, RBI Governor Shaktikanta Das, while presenting the RBI’s bi-monthly monetary policy statement, said, “In a…hostile international environment, the Indian economy remains resilient and draws strength from its macroeconomic fundamentals. Our financial system remains robust and stable. Banks and businesses are healthier than before the crisis. Bank loans have been growing in double digits for eight months. India is widely seen as a bright spot in an otherwise gloomy world.”
Inflation in India in 2022
In the first months of this year, 2022, inflation rose sharply due to supply constraints caused by the Russia-Ukraine war, reaching as high as 7.79 percent in April, an eight-year high. Retail inflation was 7.04 percent in May, 7.01 percent in June, 6.71 percent in July and 7 percent in August. In September, inflation accelerated to a five-month high of 7.41 percent.
However, retail inflation eased to a three-month low of 6.77 percent in October. Now in November, inflation has also seen a decline, easing to an 11-month low of 5.88 percent, with food prices cooling sharply.
However, India Ratings said that while headline inflation is below RBI’s target, sticky core inflation needs constant monitoring.
Global Uncertainties in 2022
Deep turmoil and unprecedented uncertainty continue to mar the global economy. In early 2022, just as the COVID-19 pandemic was winding down, the war in Ukraine engulfed the world in a black swan moment and fundamentally changed the global economic outlook.
Major economies around the world, including the UK, the US, Italy and France, were struggling with skyrocketing inflation. The US and UK have also seen their GDP growth decline for two consecutive quarters, meeting the textbook criteria for a recession.
Oil prices in the world reached up to 140 dollars per barrel in February after the outbreak of the Russian-Ukrainian war. Prices reached $100 per barrel for the first time since 2014.
Mixed signals emerge from the geopolitical situation and the volatility of financial markets. The sharp rise in food and energy prices and shortages of basic foodstuffs have hit the poor all over the world hard. Although international prices for food, energy and other commodities have fallen slightly recently, inflation remains high and broad-based.
While no country is spared the adverse effects of such major shocks, emerging market economies (EMEs), especially those dependent on food, energy and commodity imports, have been the worst affected.
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