Economy well prepared to absorb any external shock, says Finmin

New Delhi, Mar 15 (UNI) India’s economy is well prepared with adequate foreign exchange reserves to absorb any upcoming external shocks in terms of capital outflows induced by an uncertain geopolitical environment, said the Ministry of Economics’ Monthly Economic Review. Finance released Tuesday. The review report indicates that foreign exchange reserves continue to be at an all-time high and are large enough to fund more than 12 months of imports. He added that foreign investors have remained largely invested in the economy as the exchange rate depreciates on a flatter path shaped by exceptional export growth. He noted that the external sector is showing signs of resilience with robust growth in merchandise exports reaching $374.8 billion between April 2021 and February 2022, covering 93.7% of the target set for 2021-22. The review report says the second advance GDP estimates reaffirmed the full recovery of the Indian economy, with real GDP in the financial year 2021-22 estimated to exceed output in the last pre-pandemic year of 2019-20 . “In addition, real GDP estimates for the third quarter of 2021-22 point to strong growth momentum, aided by rapid immunization coverage as well as accommodative monetary and fiscal policy support. High-frequency indicators for the quarter in prices point to a sign of economic activity picking up as Omicron-induced restrictions are mitigated by lower numbers of new cases,” the monthly review report said. It said increased capital spending will spur more growth and employment through a multiplier effect Highlighting the upward revision of growth forecasts for FY23 by rating agencies, the report indicates that the recent increase in the price of crude oil, if it holds until the start of the new fiscal year, would present downside risks to these estimates.Crude oil prices rose sharply in February 2022 due to the mismatch of supply and demand and geopolitical tensions between Russia and Ukraine. The price of the Indian crude basket increased by 43.8% from April 2021 to February 2022. The February average price stands at $93.1 per barrel. High oil and gas prices are expected to have a cascading effect on other elements where they are used as a key input. This would mean that the level of inflation would rise further. “Going forward, high energy and commodity prices could pose an upside risk to the inflation outlook in the short to medium term. Given the inherently unsustainable nature of high prices, prices International commodity markets are expected to stabilize quickly with an increase in supply outside the crisis zone,” says the Ministry of Finance’s February review report. (CPI-C) or retail price inflation for the month of February 2022 rose to 6.1% from 6% in January 2022. Meanwhile, the consumption component of aggregate demand remained robust thanks to to improving consumer sentiments amid a recovering economy.The personal loan segment continued to show strong growth in January 2022, growing 11.6% year-over-year. was pulled by the a growth in loans for consumer durables, loans on jewellery, advances to individuals on stocks/bonds and advances on term deposits. The report notes that national policies aimed at boosting capital spending are well suited. “Capital expenditure increased by 22.0% year-on-year between April 2021 and January 2022 and amounted to Rs 4.4 lakh crore in April-January 2021-22, compared to Rs 3.6 lakh crore during the corresponding period last year,” the report said. UNI NK