In its India’s economic outlook – July 2022 report, leading consultancy Deloitte India said that as 2021 was coming to a close, there was optimism in the air but the optimism received a jolt early this year as a wave of Omicron infections swept through the country and Russia’s invasion of Ukraine happened in February.
“These events aggravated the pre-existing challenges such as surging inflation, supply shortages, and shifting geopolitical realities across the world with no definite end in sight.
“And the subsequent confluence of headwinds such as surging commodity prices and disruption in trade and financial transactions quickly deteriorated economic fundamentals that were trending up a few months back,” the report said.
Rising commodity prices, surging inflation, supply shortages, and shifting geopolitical realities across the world weigh on the growth outlook. Still, India will likely reign as the world’s fastest-growing economy, it noted.
“India is expected to grow by 7.1–7.6 per cent in 2022–23 and 6–6.7 per cent in 2023–24. This will ensure that India reigns as the world’s fastest-growing economy over the next few years, driving world growth,” the report said.
Reserve Bank of India (RBI) has projected a GDP growth of 7.2 per cent for the current fiscal ending March 2023.
Deloitte India said that it expects inflation and supply chain disruptions to remain entrenched for some time.
The domestic currency will likely recover some lost ground against the US dollar, but not before early next year. India’s relatively strong recovery and the global slowdown will improve INR’s strength, it added.
The rupee depreciated by 3 paise to close at a record low of 79.62 (provisional) against the US currency on Wednesday.
“The desire of global businesses to look for more resilient and cost-effective investment and export destinations during difficult times, among other factors, could work in India’s favour,” Rumki Majumdar, Economist at Deloitte India, said.
The report also said that uncertainties in the global business ecosystem will pose significant risks.