3 Jan 2023

India's Economy: What Are Challenges And Expectations In 2023? Will Recession In West Affect India?

Mumbai: Western countries are heading towards severe recession. It is going to be increasingly difficult for India to maintain its growth rate.

Although some economists say that in 2023, the world will look towards India for the global growth rate and the World Bank has also revised India's GDP estimate to 6.9 percent due to better economic activities.

But it is not that Asia's third largest economy is untouched by the impact of the global recession.

Domestic consumption has given support to economy: However, till now India's domestic consumption has given a big support to the economy.

Exports are likely to fall: India's exports, which alone contribute 20 per cent to the country's GDP, are already in a weak state and the global slowdown will only further weaken them.Thus exports are likely to continue to decline.

Global recession will affect the export sectors like engineering goods, jewellery, textiles and pharmaceuticals which are labour-intensive industries.

At this time India is spending more than its income. The persistence of high inflation despite softening global prices of food, energy and other consumer goods over the past few months has made the situation more difficult.

Dependence on import of petroleum products: Dependence on import of petroleum products is a major 'risk factor' for India as its price is fluctuating due to war between Russia and Ukraine and disruption in the global supply chain.

RBI can further hike interest rates: However, after increasing interest rates for four consecutive times, there has been a slight relief in inflation and the Reserve Bank has indicated that it will not hold back from increasing interest rates if needed.

This will not only make home loans and personal loans costlier for common Indians but will also affect corporate loans.

Will pvt sector investment pick up?: Both the government and the RBI are hoping that in 2023 private sector investment will pick up and this will increase the growth rate.

Although there have been some initial signs of fresh investment by a section of India's corporate world, it is yet to translate into figures.

Factory production declined: According to the Index of Industrial Production (IIP), factory production reached a 26-month low in October 2022. But the opportunities are constantly increasing.

Rohit Ahuja, Head of Research and Outreach, said in his November report, "The year 2024 can bring a boom in India's manufacturing sector."

With the help of more and more trade agreements, India will use its full strength to increase its reach in the growing global market.

After the trade agreement with Australia and UAE, India is in talks with the UK, European Union and Gulf Cooperation Council.

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