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GDP
The 5 trillion dollar economy target has been extended by two years. In the Employment Meet organised in October 2022, PM Modi stated that the Indian economy has jumped from the 10th position to the 5th position, overtaking Britain. Continuing his statement, the PM stated that India is still suffering from issues like inflation and unemployment because of the impact of the pandemic. Currently, the GDP of India is 3.12 trillion Dollars, i.e. ₹232 lakh crore.
Now let us consider the GDP growth rates for 2022. The figure below shows the quarter-wise GDP growth rate year on year based on the data provided by RBI. In the figure, it can be observed that the growth rates first increase and then start decreasing. Since the data is year-on-year, we can see the reasons behind it by considering the pandemic waves. During the April-June quarter of 2021, India was facing the Second wave of the pandemic, and in the subsequent quarters, the recovery period started. Though we have reasons to justify the changes, still the economy is not doing so well. Some of the cause for the bad performance of the economy is the COVID-19 Pandemic, the Russia-Ukraine War, the global recession, and the economic and financial policies of the Central and State governments.
Figure 1
The above-mentioned causes have led to a decrease in the estimated GDP growth rate. From agencies like Moody’s to the Reserve Bank of India, all agencies have reduced the estimated GDP growth rate. The RBI has revised the estimated GDP growth rate from 4.6% to 4.2%; despite the change in the GDP growth rate, India is still the fastest-growing economy.
Inflation
Currently, India is in a situation where the GDP growth rate is decreasing, recession alerts are coming up from everywhere, and inflation is rising instead of decreasing. The prices of all household things have increased; for example, there has been a rise of ₹21 in CNG, LPG saw a rise of ₹200 and the price of milk has risen by ₹9. Gas, vegetables, and food grains have gotten expensive.
RBI is responsible for keeping a check on inflation. As per the instructions from the Central Government, inflation should be in the 4% range, if it decreases, then it should not be less than 2%, and if it increases, then it should not be above 6%.
During 2022, inflation was never in the 4% range, and from January to October, inflation was above 6%. Based on the data by RBI from June to November, the below graph shows the retail inflation rates.
Figure 2
To control this inflation, RBI increased the Repo rates four times over the year, making the current repo rate 6.25%. This step was taken to reduce the cash flow in the market. An increased repo rate indicates high returns on investments like FD, but on the other hand, it also increases the interest rates on loans. The reasons for the inflation have been elaborated in a report submitted to the Government of India by the RBI, but the GoI has refused to make the report public.
Exports and Imports
Due to the Russia-Ukraine war, the cost of a barrel of crude oil rose above $180. Apart from this, the value of Rupees decreased by 11% in 2022, and by October 2022, $1 became equivalent to ₹83. All these factors had an impact on India’s foreign currency reserves. There was a relief once the oil prices came down to the normal $80 per barrel, and the discounted oil was purchased from Russia.
According to the figures given by the Ministry of Commerce and Industry, from April to October 2022, there were imports of $543.26 billion and exports of $444.74 billion, showing that India had a loss while international trading. Another issue in the exports and imports is that there has been an increase in the exports from China. Even after the Galwan incident, the increase in exports continue. India does the same amounts of exports from the USA and China, the difference being that India does profitable business from the USA, whereas there is a loss on the Chinese front.
There were good events in the international trade field too. India signed free trade agreements with the UAE and Australia, and the third one with the United Kingdom is at the final stage.
Employment
A total of 9,79,327 jobs are empty across 78 departments of the GoI, out of which the maximum jobs are empty in the Indian Railways. The count keeps on increasing as employees retire. In 2022 the unemployment rate was above 7% on average, and according to the CMIE report the unemployment rate crossed 8%.
Conclusion
2022 was not a great year in terms of finance, but not bad either. India launched its digital currency, and the share market saw a good recovery. Sri Lanka, Russia, Tajikistan, Cuba, Luxembourg, and Sudan have agreed to use Indian National Rupees for the trade settlement mechanism. This will help reduce the trade deficit.
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