In January 2023, the following key frequency indicators highlighted improved performances:

• Private consumption stood at 59.5% of the nominal GDP in Q2 of FY23 the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel, and transport, which registered sequential growth of 16% in real terms in Q2 of FY23 compared to the previous quarter.
• The growth in the agriculture sector continues to remain buoyant, with healthy progress in Rabi sowing, with the area sown increased by 4.37% from 594.62 lakh hectares in 2021-22 to 620.62 lakh hectares in 2022-23 (as of 23-12-2022). To further boost production and support farmers’ income, higher Minimum Support Prices (MSPs) have been announced for the upcoming Rabi Marketing Season (RMS 2023-24) in the range of 2.0 to 9.1%.
• CPI inflation eased slightly in March 2023 to 5.6% from 6.4% in February 2023, with a decline in both food and core inflation.
• PMI Services witnessed an uptick and expanded to 57.3 in March 2023.
• The consumption of petroleum products during April-Mar 2023 with a volume of 222.3 MMT reported a growth of 10.2% compared to the volume of 201.7 MMT during the same period of the previous year.
• The Index of Industrial (Production IIP) from April-February 2023 stood at 137.1.
• In FY23 (from April-February 2023), the combined index of eight core industries stood at 144.6.
• Cargo traffic handled at major ports stood at 712.4 million tonnes during April-February 2023.
• Railway freight traffic growth stood at 1,512.1 MT from April-March 2023.
• During April-March 2023, air freight movement increased by 0.4% as compared to Apr-Mar 2022. reaching 3.2 million tons compared to the previous year, indicating that the increase in air freight and traffic activity has been maintained.
• 96.1 crore e-way bills were raised during April-March 2023.
• India registered a broad-based expansion of 9.7% during the first half of FY 23, supported by robust domestic demand and upbeat investment activity. Sectoral analysis reveals that growth was driven by demand from the services sector, enhanced agriculture exports, and robust construction activity aided by increased infrastructure investment. Private consumption reached its highest among all second quarters during the past 11 years at 58.4% of GDP. The investment rate also rose to be the highest among all the second quarters since 2012-13 at 34.6% of GDP, hinting at the beginnings of an investment cycle.
• Domestic economic activity remains robust even as a global economic slowdown materialises, as evident in the GST collections of Rs. 1.6 lakh crore (US$ 19.5 billion) in January and March 2023. GST collections have now remained above the Rs. 1.4 lakh crore (US$ 17.1 billion) mark for 12 successive months.
• In April 2023, the Indian basket of crude oil reached US$ 84.3 a barrel, compared to US$ 78.54 in March 2023.
• During April-March 2023, UPI volume stood at 83.75 billion transactions worth Rs. 139.2 trillion (US$ 1,700.9 billion).
• Merchandise exports during April-March 2023 stood at US$ 446.9 billion.
• Average daily absorptions under the liquidity adjustment facility (LAF) moderated to Rs. 1.4 lakh crore (US$ 17.1 billion) during February-March 2023 from an average of Rs. 1.6 lakh crore (US$ 19.5 billion) in December-January 2023.
• As of April 21, 2023, reserve money stood at Rs. 4,421,292 crore (US$ 540.4 billion).
• As of March 24, 2023, currency in circulation (CIC) registered Rs. 3,455,403 crore (US$ 422.3 billion).
• Rupee strength reached Rs. 82.3/US$, as of March 2023.
• During April-January 2023, India received Net Foreign Direct Investments worth US$ 26.5 billion.
• As of April 14, 2023, India’s foreign exchange reserves stood at US$ 586.4 billion.

• According to RBI:
  • Bank credit stood at Rs. 134.5 trillion (US$ 1.64 trillion) as of February 24, 2023.
  • Credit to non-food industries stood at Rs. 134.1 trillion (US$ 1.63 trillion) as of February 24, 2023.

India’s economy grew faster during the first half of FY 23 than other economies, driven by strong demand and investment. Inflationary pressures have been moderating since October, with CPI inflation tempering to an eleven-month low in November. On top of that, it has fallen below the RBI’s upper target band for the first time in 2022, mainly driven by the decline in food inflation. Furthermore, inflation expectations have also moderated in the November round of the RBI’s Households’ Inflation Expectations Survey. This bodes well for augmenting consumption in rural and urban regions in the upcoming months. Improvement in business and consumer sentiment is also likely to bolster discretionary spending. The real investment rate during Q2 of FY 23 prevailing at a high level of 34.6% demonstrates the Government’s continued commitment towards asset creation.

An overall rise in Rabi coverage with adequately filled irrigation reservoirs plays a pivotal role in the agricultural output growth in 2022-23. An increase in minimum support prices for both Kharif and Rabi crops in 2022-23 and progress in rice procurement have already been supplementing rural incomes in the country. Higher incomes have further resulted in an increase in sales of passenger vehicles, two and three-wheelers, and tractors by a good year-on-year margin in Oct-Nov. The rise in GST collection, robust e-way bill generation, and increased e-toll collection reaffirm the resilience of economic activity.

In addition, steady growth momentum in service activity continues with expansion in PMI Services during Oct-Nov, attributing to the growth in output and accommodative demand conditions, leading to a sustained upturn in sales. The growth impetus in rail freight and port traffic remains upbeat, with further improvement in the domestic aviation sector. Strong growth in fuel demand, domestic vehicle sales, and high UPI transactions also reflect healthy demand conditions.

Continuous capital spending by the central government during the first seven months expanded by 61.5%, amounting to Rs. 4.1 trillion (US$ 49 billion) which totals up to 54.6% of the available budget.

The Union Budget FY24 focuses on four key areas: (i) Sustaining Growth in agriculture, industry, and services besides the green economy; (ii) Inclusive Growth of women, children, and deprived and disadvantaged sections of the society for broad-based development of the economy; (iii) Stimulating Growth through capital expenditure, employment generation, and exports; and (iv) Financing Growth by strengthening the banking and in general, the financial sector.

With stable foreign direct investment inflows, resurgent FPI inflows, and adequate foreign exchange reserves providing an import cover of 9 months, the external front remains resilient. This has resulted in the Indian Rupee performing well as compared to other EMEs (Emerging Market Economies). As per the data released by the National Statistical Office (NSO), irrespective of the deterioration in global economic activities, Indian exports have registered a growth sequentially as well as yearly in the 2nd Quarter of the Financial Year 2022-23.

As we head into 2023, global economic developments are expected to complicate the outlook further, and therefore continued vigilance is a critical aspect in maintaining India’s external resilience. Going forward, India needs to focus on medium-term challenges such as securing technology and resources for energy transition and skilling its youth for the 21st century economy, while staying the course on fiscal consolidation at the general government level. With continuous efforts during the last several years, a strong platform has been erected on which the superstructure of a middle-income economy can be constructed.

Note: The conversion rate used for January 2023 (as of January 03, 2023) is Rs. 1 = US$ 0.012