Economic indicators positive, but worries remain

India began this year with optimism and ends with some satisfaction and hope tinged with some anxiety.

The successful vaccination of substantial number of our people raised hopes of robust economic revival in the beginning of this year despite the spread of Omicron, a relatively mild variant of Covid-19. The government stepped up public investment to make up for anemic private investment. Exports showed strong growth with global demand compensating for weak domestic consumption. 

The Russian invasion of Ukraine pushed up the prices of food, fuel, fertilizers, and other commodities. 

The developed countries imposed severe financial sanctions against Russia but kept the oil trade open. India refused to condemn Russia and in return, got crude oil at discounted prices.

The developed countries started withdrawing Covid-19 induced stimulus by tightening money supply and raising interest rates to try and bring down high inflation. That strengthened the US dollar against many currencies but the Indian rupee weakened much less vis-à-vis the US dollar compared to many other currencies. The timely actions of our monetary and fiscal authorities helped prevent runaway inflation while nurturing the growth impulses. That is sufficient cause for a sense of relief and satisfaction amongst businesses and administrators. 

The government extended the Foreign Trade Policy 2015-20 till the end of this fiscal year and pushed ahead with trade agreements with some countries. Windfall tax was imposed on export of some items to ensure sufficient availability in the domestic markets at reasonable prices. More items came under the import monitoring system. In general, protectionist measures like hike in import duties went up to help domestic producers. 

More items were covered under the scheme for Remission of Duties and Taxes on Exported Products (RoDTEP). 

The Customs pushed ahead with faceless, paperless, contactless assessment of imported and export goods. The Production Linked Incentive scheme is encouraging private investments and greater output and exports.  

The initiative that is likely to positively affect the competitiveness of the exporters, imp­orters, and the trade in general is the government’s focus on reducing the logistics costs significantly. The new logistics policy and the GatiShakti programme aim to significantly improve the transport infrastructure and achieve quick last-mile delivery, save time and money of producers and traders, prevent wastage of agro products, and help tourism industry.  

The most heartening development is the emergence of young technology savvy entrepreneurs willing to try new ideas and easier availability of venture capital and government support for them. The increased adoption of technology by the governments, businesses, and consumers is bringing about a revolution that will help propel India towards the near-term goal of a $5-trillion economy quickly. 

So, there are enough reasons to be satisfied by our performance and trends. However, worries of tepid export performance have emerged due to global economic slowdown, especially in developed countries. It is too early to say that inflation has been controlled.  

Domestic consumption and private investment are yet to pick up. Land acquisition problems have not gone away. 

Although the government revenues have gone up in nominal terms, the overall fiscal deficit is still high. The monetary authorities have not ruled out further tightening of money supply to control inflation. New variants of Covid-19 have emerged. Despite these anxieties, India ends this year with hopes of better performance in the coming years. 

email: tncrajagopalan@gmail.com