Finance Ministry’s Monthly Economic Review – Update (February, 2022)

On the basis of several efforts taken by the government in Budget 2022-23, the Indian economy is expected to grow at the fastest rate among the large nations, according to the Finance Ministry’s Monthly Economic Review.

Overview:

Agriculture will boost food stocks as it continues to rise via crop diversification and the net sown area which in turn will benefit farmers through large volumes of purchases made at remunerative minimum support prices and income transfers under the PM KISAN scheme.

The review added that India is still the only major and large country listed by the IMF whose growth projection has been revised upwards in FY 2022-23, despite IMF’s January 2022 update lowering its global growth estimate for 2022.

According to the report, the Budget of 2022-23 has reinforced the economic direction set by the previous year’s budget.

The CAPEX budget, which is 35.4 percent higher than the current year’s budget estimates and rises to 4.1 percent of GDP when grants-in-aid to states for capital works are considered, will power Gatishakti’s seven engines, reducing the infrastructure gap and helping private investment in the country.

The report said, considering the third wave of COVID-19, overall economic activity remained strong as seen by the strong performance of numerous high-frequency indicators such as electricity consumption, exports, PMI manufacturing, and e-way bill generation.

In 2022-23, the Budget has set a nominal GDP growth target of 11.1%, with a GDP deflator of 3.0-3.5%. This indicated real growth component of just over 8% is similar to the prediction in the Economic Survey for 2021-22, as well as the 7.8% predicted by RBI’s Monetary Policy Committee (MPC) during the meeting that was held on February 2022.

The MPC’s accommodative approach, together with the unchanged repo and reverse repo rates, prioritizes growth during these uncertain times and strengthens the budget’s focus on investment.

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