New Delhi [India], April 4 (ANI): Asian Development Bank on Tuesday said India’s GDP is expected to moderate to 6.4 per cent in 2023-24 from 6.8 per cent growth in 2022-23 due to tight monetary conditions and elevated oil prices.
The Indian economy is expected to grow at 6.7 per cent in 2024-25, ADB said.
According to ADB’s publication, Asian Development Outlook (ADO) April 2023, released on Tuesday, said rising food and fuel prices pushed inflation up beyond the central bank’s target.
Growth will moderate slightly this year and rise next year, buoyed again by private consumption and investment as the global economy improves, ADB said in the report. Inflation will be on a downward trend as global price pressures moderate. Improving states’ financial management is necessary to increase needed public investment.
“Headline inflation exceeded the inflation target range of 2 per cent – 6 per cent, averaging 6.8 per cent in the first 10 months of 2022-23. At its highest, it reached 7.8 per cent in April 2022. Global prices for oilseed, fertiliser, and fuel were elevated by the Russian invasion of Ukraine, an Indonesian ban on palm oil exports, a shortfall in global production of edible oil, and such domestic factors as disappointing wheat production and an unseasonably hot March spiking vegetable prices,” the report said.
“These factors pushed food inflation to an average of 6.9 per cent in the first 10 months of 2022-23, while fuel inflation remained in double digits, averaging 10.6 per cent. Inflation in both rural and urban areas was high in January 2023,” it added.
Bank credit growth nevertheless picked up in 2022-23, according to the ADB report.
Excluding public sector loans for buying crops from farmers, growth in bank credit almost doubled from 8.7 per cent year-on-year in March 2022 to 16.7 per cent in January 2023, exceeding expected nominal GDP growth at 15.2 per cent.
Bank credit for agriculture and allied activities grew by 14.4 per cent and for services by 21.5 per cent, but for industry by only 8.7 per cent.
The report also said personal loans grew by 20.4 per cent, pushing up growth in consumption. However, continued double-digit contraction of export credit reflected weakening exports.
ADB report said non-performing loans (NPLs) declined to a 7-year low of 5 per cent of all loans and advances at the end of September 2022. The decline is attributed to earlier regulatory reform undertaken by the government: enacting and implementing the Insolvency and Bankruptcy Code in 2016 and reforming public sector banks starting in 2018, according to the report.
A publicly owned asset-reconstruction company set up in 2021 aims to reduce NPLs on banks’ balance sheets by acquiring stressed assets from banks and speeding their resolution. High nominal GDP growth helped reduce corporate debt stress by accelerating growth in corporate revenue and thus making it easier for them to service debt. Stress tests conducted by the central bank indicate that NPLs may decline to 4.9 per cent by September 2023, ADB said in the report.
Unemployment fell to 4.1 per cent in 2021/2022, further below the pre-pandemic rate. The report said the unemployment rate improved despite an increase in the average labour force participation rate from 53.5 per cent in 2019/2020 to 55.2 per cent in 2021/2022, indicating improved job creation. Labour force survey data indicated that labour market conditions improved further during 2022-23.
Urban unemployment fell further in December 2022 and rural real wages resumed growth in November after declines in earlier months. However, the share of organised labour in employment has not increased, which could impede growth in worker productivity across the Indian economy, the report stated.
According to the ADB report, the current account deficit (CAD) is expected to equal 2.9 per cent of GDP in 2022-23, its widest since 2012-13. ADB said the main reasons are rising oil prices and a slowdown in global demand.
Growth in goods exports moderated to 7.5 per cent in the first 10 months of 2022-23, slowing consistently since second quarter (Q2) of 2022-23. The report said the decline spanned commodities and most manufactures, reflecting slowing global demand and, later in the year, moderation in commodity prices.
The report said exports of electronics, on the other hand, grew sharply in 2022-23, reflecting the impact of India’s production incentive scheme and other policy measures undertaken to induce investment into electronics.
Imports of goods grew by 21.9 per cent in the first 10 months, but growth moderated from September 2022 in line with moderation in commodity prices, according to the report.
As import growth outpaced that of exports, the goods trade deficit widened by 54 per cent in first 10 months of 2022-23 over the corresponding period in 2021.
ADB also added the trade surplus in services, by contrast, grew by 27.7 per cent in the first 9 months of 2022-23 despite global economic uncertainty, reflecting India’s continued competitiveness in services. (ANI)