MUMBAI (Reuters) – A sharp recovery in consumer spending and an increase in employment will sustain India’s economic growth in the coming months, the government said in its August monthly economic review published on Saturday.
She said that increased private consumption and high rates of capacity use helped private sector capital spending reach one of its highest levels in the past decade.
The report said that investment in the business sector was encouraged by government spending, which rose by 35% in April-August compared to the same period last year, adding that the growth of government tax revenue was booming.
The report also stated that high levels of foreign exchange reserves, persistent foreign direct investment, and strong export earnings have provided a reasonable buffer against monetary policy normalization in advanced economies and widening current account deficits caused by geopolitical conflict.
The Reserve Bank of India on Friday forecast the country’s current account deficit to remain in the range of 3% of GDP in the current fiscal year to March 2023 and said it is “eminently bankable”.
India is in a better position to calibrate its liquidity levels without a sudden halt in growth, the report said, adding that inflationary pressures in the country appear to be declining.
But she also said that in the winter months, geopolitical tensions could escalate amid a growing international focus on energy security and that could test India’s “smart handling of its energy needs thus far”.
“In these turbulent times, it may not be possible to stay complacent and sit for long periods. Eternal macroeconomic vigilance is the price of stability and sustainable growth,” she added.