Contact-intensive services sector likely to drive growth in FY23: Fin min report

New Delhi: The contact-intensive services sector is likely to drive growth in 2022-23 building on the release of pent-up demand and near universalization of vaccination, said a Finance Ministry monthly report released on Saturday.
The report said that sharply rebounding private consumption backed by soaring consumer sentiments and rising employment will sustain growth in the months ahead.
The monthly economic review for August prepared by the Department of Economic Affairs (DEA) said that in times when slowing growth and high inflation are afflicting most of the major economies of the world, India’s growth has been robust and inflation in control.
“A rapid coverage of vaccination and well-calibrated short-term policy measures have skilfully navigated the economy through turbulent times, preparing a strong foundation to build a prosperous nation in the years ahead,” it said.
The report noted that downside risks to growth will persist insofar as India is integrated with the rest of the world.
“Nor is there room for complacency on the inflation front as lower crops-sowing for the Kharif season calls for deft management of stocks of agricultural commodities and market prices without unduly jeopardising farm exports,” it said.
The report further said that for all the hawkish central bank rhetoric, the balance sheet of the Federal Reserve has yet to begin contracting.
“It is expanding more slowly. When it actually starts shrinking, it may herald a new phase of risk aversion in capital markets, impeding global capital flows,” the August edition of the report said.
The report also said that with its bright growth prospects, India’s imports are growing faster and, therefore, financing them comfortably will have to be accorded high priority.
“In winter months, heightened international focus on energy security in advanced nations could elevate geopolitical tensions, testing India’s astute handling of its energy needs so far. In these uncertain times, it may not be possible to remain satisfied and sit back for long periods. Eternal macroeconomic vigilance is the price for stability and sustained growth,” the report said.
It stated that watchful and prudent fiscal management and credible monetary policy will remain essential for India to fulfil its growth aspirations.
“Both these pillars of public policy will enable benchmark borrowing costs for the government and the private sector to decline, facilitating public and private sector capital formation. Vigorous pursuit of asset monetisation at all levels of government will help lower debt stock and hence debt servicing costs. That would cause risk premium to drop and credit rating of India to improve,” said the latest economic review.

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