India is set to be among the fastest-growing major economies in the world: Mckinsey

As per Mckinsey & Company’s report released in April, despite earlier real GDP forecasts being downgraded, India is set to be among the fastest-growing major economies in the world, contributing some 15% of global growth. Demand conditions in India remain sanguine with urban consumption rising and rural demand indicators improving.

Monetary policy measures have helped to moderate inflation with headline CPI inflation gradually declining from its peak of 7.8% in April 2022 to 5.7% in March 2023; it is projected to ease further to 5.2 per cent in Q4 2023–24, according to the Reserve Bank of India (RBI), which expects growth to be supported by the upcoming harvest season, infrastructural investments laid out in the budget, and increased corporate investment in certain sectors. RBI revised its real GDP projections for 2022–23 to 6.5%, well above the IMF’s updated projection of 5.9%.

The key RBI policy rate (repo rate) stands at 6.5%. Inflation further slowed in March to 6.12% (6.4% in February), remaining higher than the upper limit of the RBI target range of 2–6%. While inflation for fuel and light moderated to 8.9% (from 9.9% in February), food-price inflation stood at 5.11% during the month of March.

Total passenger vehicle sales have not seen a recovery since February, with numbers ticking slightly upwards in March to 292,030 from 291,928 units in February. Gas pricing initiatives are expected to support the industry’s growth.

Industrial production growth has followed an upward y-o-y trend since January with growth in electricity output (8.2%), mining (4.6%), and manufacturing (5.3%). However, the pace has slowed: February witnessed a –6% decline m-o-m.

The purchasing managers’ index (PMI) for manufacturing remains solidly in expansion territory at 56.4 in March (55.3 in February); India’s manufacturing PMI has been in the expansionary zone for 21 months in a row. The services PMI saw a decline in March to 57.4 (59.4 in February).

Exports decreased –9.1% on an annual basis in March, totaling $38.38 billion, amid global demand challenges. March’s exports figure represents a 14% increase over February’s total of $33.8 billion, indicating growth momentum. At $58.11 billion, imports were down –4% from last year’s level (though recovering from February’s $51.3 billion). The trade deficit increased.

According to the Centre for Monitoring the Indian Economy, the unemployment rate climbed to 7.8% in March (7.5% in February), resulting in a m-o-m increase of 5%. The urban unemployment rate was 8.5% (7.9% in February), while rural unemployment was 7.5% (7.2% in February).

The annual rate of inflation based on the Wholesale Price Index (WPI) for March is 1.34% (versus 3.85% in February). The decline in the rate of inflation for March 2023 is primarily attributable to a fall in prices of basic metals, food products, textiles, non-food articles, minerals, rubber and plastic products, crude petroleum and natural gas, and paper and paper products.

Financial markets observed a rise in both the NSE and BSE, by 4% and 3.3% respectively, on a monthly basis (as of 24 March 2023). The rupee fluctuated slightly against the dollar over this period; however, it depreciated significantly against the euro, trading at 82.03 per dollar and 90.14 per euro on April 24. Central bank reserves increased to $586 billion as of 14 April 2023 ($579 billion as of 24 March 2023).