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India 5th largest recipient of FDI in April-June quarter: Finance Ministry

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As the fifth-largest beneficiary of FDI in the April-June quarter, India maintained its position as an appealing destination among a group of developed and developing countries, according to the Monthly Economic Report of the Department of Economic Affairs, Ministry of Finance.

The report issued on Saturday claims India received the fifth-highest amount of foreign direct investment (FDI) during the first quarter of 2022 among the defined group of established and emerging economies, thanks to a promising economic forecast, consistent progress in the ease of doing business, and helpful government policies. With FDI inflows of USD 16.1 billion, the pace continued into Q2 of 2022 as well.

Despite the continued global slump, India’s exports expanded at the second-highest rate in this quarter, indicating strong demand for Indian products.

In comparison to other economies, India had the third-largest foreign exchange reserves, which were sufficient to pay for imports for nine months. A reasonable buffer against the normalisation of monetary policy in advanced countries and the ensuing expansion of the current account deficit due to the geopolitical crisis has been supplied by high foreign exchange reserves, ongoing foreign direct investment, and robust export profits.

According to the analysis, India surpassed the UK to take the fifth-largest economy spot in the world in Q1 2022–23 thanks to robust economic growth following recovery from numerous waves of COVID-19 and the unfavourable effects of the Russia–Ukraine conflict. The real GDP for the first quarter of 2022–2023 is now almost 4% higher than the similar figure for 2019–20, signalling a strong start to India’s growth revival in the post-pandemic phase.

India’s real GDP must increase by (only) 5.4 per cent annually during the next three quarters in order to meet the RBI’s anticipated growth rate of 7.2 per cent in 2022–2023.

According to a forecast by the Department of Economic Affairs, the contact-intensive services sector is anticipated to be the main driver of development in 2022–2023 as a result of the release of repressed demand and the near universality of vaccination.

In the coming months, growth will be supported by substantially expanding private consumption, buoyed by surging consumer morale and rising employment.

The growth in private consumption and higher capacity utilisation in the current year, according to the report, have further reenergized the capex cycle, bringing the investment rate in Q1 of 2022–23 to one of its greatest levels in the previous ten years.

The government’s increased capital spending, which was 35% greater until August 2022–2023 than the same amount the previous year, has also helped to crowd in private investment.

Given that income growth is anticipated to stay robust for the remainder of the current year, the government’s spending on capital projects is likely to continue.

The strengthening of employment indicators during Q1 of 2022–23 is indicative of broad-based expansion in economic activity. When compared to the same period last year, EPFO’s net payroll additions increased by double that amount this quarter.

According to the Periodic Labour Force Survey (PLFS), the unemployment rate in urban areas fell for the fourth straight quarter to 7.6% in Q1 2022–2023—a figure that was lower than the corresponding pre–pandemic level. When compared to the same period in the previous two years, the amount of work demanded under MGNREGS has been declining since May and peaked in August 2022, suggesting that the unemployment rate in rural regions may be on the decline as well.

The Q2 of 2022–2023 continued the growth momentum of Q1, as did the strong performance of high-frequency indicators (HFIs) in July and August of 2022. In August 2022, India’s composite PMI increased to 58.2, indicating a rapid rate of expansion. Contrarily, with a slowdown mostly perceptible in advanced nations, the global composite PMI has entered the contractionary phase and is expected to decline to 49.3 in August 2022.

India’s growth has been strong, and inflation is under control, at a time when most of the world’s major countries are experiencing declining growth and high prices. Rapid vaccination coverage and well-calibrated short-term policy measures have successfully steered the economy through difficult times, laying the groundwork for a solid foundation on which to build a flourishing country in the coming years.

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