India’s Finance Minister, Nirmala Sitharaman, has warned that the largest threats to India’s economic growth could come from external factors. She stated that higher oil prices and the impact of Russia’s war in Ukraine could pose significant risks.
These factors could have a greater impact than any internal issues, she said during an interview in Washington on Saturday. She also noted that possible recessions in developed countries such as the US could harm India’s exports, particularly in manufacturing.
Sitharaman was in the US to attend the International Monetary Fund’s Spring Meetings and to co-chair the Group of 20 finance chiefs’ gathering, alongside Reserve Bank of India Governor Shaktikanta Das. India’s $3.2 trillion economy is displaying signs of fatigue due to high-interest rates, which are affecting both domestic and foreign demand. In the October-December period, growth slowed to 4.4 per cent, down from 6.3 per cent in the previous quarter.
The IMF has lowered its growth outlook for India to 5.9 per cent for the current fiscal year, down from the 6.1per cent forecast in January. However, Sitharaman remains confident, stating that the buoyancy of the economy will continue due to policy reforms in recent years and digitization.
The turmoil in the global banking sector and concerns over weakening growth led the Reserve Bank of India earlier this month to pause its most aggressive tightening cycle in a decade. Sitharaman believes that some countries can begin to decouple from the Federal Reserve’s lead in global interest rate hikes to curb inflation. A pause in tightening “can help growth momentum” in certain countries, she said.
India’s inflation is also easing, with consumer prices rising 5.66 per cent in March from a year earlier, the slowest pace in 15 months as growth in food costs moderated. The country’s weather office has predicted a normal monsoon, which could reduce grain and oilseed prices and slow inflation.
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