NEW DELHI: India's stagflation risk is minimal, but growth is decreasing, the Finance Ministry said. Unlike the rest of the globe, India faces a lower danger of widespread stagflation due to its prudent stabilisation efforts, the Finance Ministry mentioned in its May Monthly Economic Review on Monday.
However, just as the global economy is likely to slow, India's growth is expected to decline as well, it said. Global GDP predictions have been downgraded due to rising commodity costs and lingering supply chain bottlenecks in a context where global central banks are withdrawing pandemic-era measures. While the Indian economy is projected to be hit, the ministry believes it will be more so than the economies of other emerging markets.
The Centre slashed excise rates on diesel and petrol to ease the burden on consumers in a high-inflationary environment, posing an upside risk to the budgeted level of gross fiscal deficit. "It has thus become vital to rationalise non-capex expenditure to minimise budgetary slippage," it said.
The successful implementation of the Production Linked Incentive (PLI) scheme, the development of renewable energy sources while diversifying import dependency on crude oil, and the strengthening of the financial sector will fuel economic growth in the medium term, the ministry expects.
FM set to review govt banks' financials today