Economic Survey 2022-23: Risks Remain From Monetary Tightening

The Economic Survey 2022-23 has stated that one of the risk to the outlook originates from the ongoing monetary tightening exercise. "While the pace of rate hikes has slowed, major central banks have reaffirmed their hawkish stance on inflation.

Entrenched inflation may prolong the tightening cycle, and therefore, borrowing costs may stay 'higher for longer'. In such a scenario, global economy may be characterised by low growth in FY24. However, the scenario of subdued global growth presents two silver linings - oil prices will stay low, and India's CAD will be better than currently projected. The overall external situation will remain manageable," the economic survey has stated.

On the external front, risks to the current account balance stem from multiple sources, the economic survey has stated. "While commodity prices have retreated from record highs, they are still above pre-conflict levels. Strong domestic demand amidst high commodity prices will raise India's total import bill and contribute to unfavourable developments in the current account balance. These may be exacerbated by plateauing export growth on account of slackening global demand. Should the current account deficit widen further, the currency may come under depreciation pressure," the report has highlighted.