Signaling Growth with Macroeconomic Stability

IN THE PREVAILING domestic and international economic environment, formulating the budget was riddled with several complexities. 

- M.Govinda Rao

After the shocks created by the pandemic in two successive years, the economic disruptions caused by the Russian invasion of Ukraine and the sanctions following it, the Indian economy has had to meet the challenge of unsustainable levels of deficit and debt and declining trends in investments.

In fact, the investment-GDP ratio of the country has shown a steady decline from 39 per cent in 2011-12 to 32 per cent in 2019-20. Although the economy has shown a remarkable recovery from the series of shocks and is one of the fastest-growing large economies after the pandemic and crossed the level of incomes that existed in 2019-20, it is still 7 per cent below the pre-pandemic growth trajectory.

Global Growth Seen Slowing

Internationally, the excess liquidity during the pandemic and the Russia-Ukraine war has led to sharp increases in prices and interest rates in the advanced economies, and continued restrictions in China have caused serious supply disruptions. The IMF has estimated the global growth for 2013 at 2.9 per cent and at least a third of the global economy is facing recession. The pressure of imported inflation combined with the withdrawals from foreign institutional investors have put greater pressure on exchange rates and prices.