‘India's growth faces headwinds from global slowdown, high interest rates'

livemint.com:

Mint, adding that the current account deficit (CAD) is expected to fall during the current fiscal from last year. Going forward, India will see higher growth on the back of infrastructure creation, strong investment, and the efficiency gains from harnessing digital infrastructure, he said. Edited excerpts from an interview.

We believe that growth will slow. Last year we were at 7.2% and this fiscal we are at 6%. There are two broad reasons for this.

One is that the global economy is slowing. It is spilling over to our exports, and via exports to the sectors that service exports. Manufacturing will face external headwinds.

But domestic demand is reasonably strong. We expect pretty good GDP numbers for the first quarter (April-June 2023) and 6% growth is easily achievable. The second headwind comes from monetary policy.

If interest rates are somewhat higher than what they were two years ago, some impact will be felt. These two factors will slow down the economy to 6%. But even at 6%, India will be the fastest-growing G20 country.

Food is one of the most volatile components of inflation. (Rising) food prices are putting pressure on overall inflation. The worry on the food front is that cereals, pulses and vegetables are seeing sustained pressure.

It has to be monitored. The monsoon hasn’t played out completely. You can see food inflation rising during normal monsoons.

So it's not just the monsoon. Our fingers are crossed on the food inflation front. It is the only threat to inflation this year.