Lok Sabha Question No. 544 (UNSTARRED), answered on 2023-02-06
Subject: Impact of Global Recession on Indian Economy
Ministry: FINANCE
Asked by: Janardan Singh Sigriwal, K. Subbarayan

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION No. 544 TO BE ANSWER ON 06 FEBRUARY 2023

## Impact of Global Recession on Indian Economy

## 544. SHRI JANARDAN SINGH SIGRIWAL: SHRI SUBBARAYAN K.:

Will the Minister of FINANCE be pleased to state:

- (a)  whether the Government has taken note of various reports published in media and the warning given by IMF Managing Director regarding global recession which is expected to occur in 2023;
- (b) if so, the reaction of the Government thereto;
- (c)  whether  the  Government  has  made  any  assessment  on  impact  of  global recession in India;
- (d) if so, the details and the findings thereof; and
- (e)  the  corrective  measures  taken/to  be  taken  by  the  Government  to  counter  the same?

## ANSWER

## MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

(a)-(b):  The  government  has  taken  note  of  the  January  2023  update  of  the World Economic  Outlook  (WEO),  which  has  projected  global  growth  to  decline  from  an estimated 3.4 percent in 2022 to 2.9 percent in 2023. The WEO also projects global inflation to fall from 8.8 percent in 2022 to 6.6 percent in 2023. The government is further  aware  of  the  downside  risks  to  these  projections  from  uncertain  outcomes associated with the reopening of the Chinese economy and persisting war in Europe. The government is therefore of the view that countries around the world will continue to face policy challenges to navigate their respective economies.

(c)-(d): Following the war in Europe, global supply chains were disrupted resulting in the increase of global commodity prices. To restrain the consequent inflation, major central banks around the world undertook monetary tightening. High global inflation and  monetary  tightening  have  together  slowed  global  growth.  The  government recognises the impact of slowing global growth on the Indian economy. The impact was seen in the first half of 2022-23, in the widening of the current account deficit (CAD),  uptick  in  retail inflation, the outflow  of portfolio  investments,  and  the appreciation of the US$ against the ₹. In the second half of 2022-23, retail inflation has fallen below the tolerance ceiling, portfolio investments have started to return, the ₹ has stabilized against the US$, but export growth has declined with the slowing of  global  growth.    The  current  account  deficit  thus  needs  to  be  closely  monitored. India has a solid cushion of forex reserves to finance the CAD and intervene in the forex market to reduce the excess volatility in the Indian rupee. The Indian economy, however, as per the January 2023 update of WEO, was the fastest-growing major economy  in  2022  and  will  be  so  in  2023  as  well.  This  reflects  India's  underlying economic resilience and strong macroeconomic fundamentals.

(e):  Government of India has implemented several measures to limit the impact of external factors on India's inflation and growth. The price situation of major essential commodities  is  monitored  by  the  Central  Government  on  a  regular  basis  and corrective action is taken from time to time. Several supply-side measures have been taken by the Government to address inflation. These include inter alia ,  reduction in excise duty by Rs. 8 per litre on petrol and Rs. 6 per litre on diesel on May 21, 2022, prohibition  of  export  of  wheat  products  under  HS  Code  1101,  imposition  of  export duty on rice, reduction in import duties and cess on pulses, maintenance of buffer stock  for  onion  and  pulses,  rationalisation  of  tariffs  on  edible  oils,  oil  seeds,  and inputs used in manufactured products.

To boost growth, a series of measures have been announced in the Union Budget 2023-24, including an increase in capital investment outlay for the third year in a row by 33 percent to ₹10 lakh crore (3.3 percent of GDP); the enhanced outlay for PM Awas  Yojana,  launch  of  Aspirational  Blocks  Programme  covering  500  blocks  for saturation  of  essential  government  services;  increase  in  agriculture  credit  target  to ₹20 lakh crore with a focus on animal husbandry, dairy and fisheries; and setting up of Agriculture Accelerator Fund to encourage agri startups by young entrepreneurs in rural areas, among  others. Direct capital investment by the Centre is also complemented by the provision made for creation of capital assets through Grantsin-Aid to States. The 'Effective Capital Expenditure' of the Centre is budgeted at 13.7 lakh crore (4.5 per cent of GDP) for 2023-24. The newly established Infrastructure Finance Secretariat will oversee the increase in private investment in infrastructure. Further, to improve logistics performance, one hundred critical transport infrastructure  projects,  for  last  and  first  mile  connectivity  for  ports,  coal,  steel, fertilizer, and food grains sectors, have been identified and will be prioritised.

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