Risk of stagflation low in India due to prudent policies: Finance Ministry

Risk of stagflation low in India due to prudent policies: Finance Ministry

The Finance Ministry in its Monthly Economic Review for the month of May has said that while the rest of the world is looking at a distinct possibility of widespread stagflation, the risk of India facing one is low, owing to its prudent stabilization policies.

Rising commodity prices and lingering supply chain bottlenecks in an environment where the global central banks are withdrawing pandemic-era measures have led to a downgrade in global growth forecasts. And India too is set to witness slowing growth, the ministry said.

“Going forward, global growth is expected to witness headwinds with rising commodity prices, supply chain bottlenecks and faster than the projected withdrawal of monetary accommodation. Various international agencies have projected a slowing of global economic growth. India’s economy is also expected to witness slowing growth, though still higher than the other emerging market economies,” it said.

The ministry expects that in the medium term, the successful launch of the Production Linked Incentive (PLI) scheme, the development of renewable sources of energy while diversifying import dependence on crude oil, and the strengthening of the financial sector will drive the economic growth.

The challenges for policymaking in the ongoing fiscal include the high-wire balancing act between maintaining growth momentum, restraining inflation, keeping the fiscal deficit within budget and ensuring a gradual evolution of the exchange rate in line with underlying external fundamentals of the economy. Successfully pulling it off will require prioritising macroeconomic stability over near-term growth, the ministry said.

“The reward for such a policy discipline will be the availability of adequate domestic and foreign capital to finance India’s investment needs and economic growth that fulfils the employment and quality of life aspirations of millions of Indians,” it added.

On the employment front, data shows that the demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) saw a rebound in May 2022 after witnessing a sharp decline in the month before.

In May 2022, the total persons demanding work under MGNREGS stood at 4.3 crore, 11.2% higher year-on-year & 22% higher than the most recent pre-pandemic level (May 2019).

“The recent rise in work demanded can be attributed to slack in farm activities, heat wave and resulting crop damage and rising inflation compelling people to search for complementary jobs,” the ministry said in its report.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

Download The Economic Times News App to get Daily Market Updates & Live Business News.

Read More

Write a comment

Your email address will not be published. All fields are required