Nirmala Sitharaman, the minister of finance, anticipates high growth and lower inflation for the coming year as the central bank works to maintain economic stability in the face of challenging external conditions. Sitharaman stated that “external variables were quite powerful in the inflation targeting exercise.” She added that these factors were out of the government’s and the Reserve Bank of India’s control. “We anticipate that currency volatility will decrease naturally.” In October, annualized consumer price increases dipped below 7% for the first time in the previous three months.
At a monetary policy review the following week, the RBI, which has increased its benchmark rate by 190 basis points this year, is anticipated to maintain its hawkish stance. This month, rate setters wrote a letter to the government outlining a plan for bringing prices back to goal and explaining why they had been unable to keep inflation between 2% and 6%.
Sitharaman declined to discuss specifics from the letter but noted that “development, health, and education” will be the government’s top three goals in 2023. Capital spending, according to the finance minister, is a crucial factor in driving growth. In order to take advantage of the need to diversify operations away from China, the government is providing incentives to companies that expand manufacturing in India, she continued. According to Sitharaman, “We are on track to meet the capex objective for this year.” “States have demonstrated outstanding capacity for absorbing the funds and using them to purchase capital assets.
Because that is the only fine way to provide the multiplier that the economy needs, that is the only way we believe we can sustain our growth. Sitharaman also justified the use of foreign exchange reserves to deal with the currency’s volatility, which recently hit record lows. We all believe that deploying reserves to reduce volatility as it has been was the proper course of action, she said. When asked if India will join the price restriction on Russian oil, Sitharaman responded that India stands on the side of its own interests. “India must protect its own energy interests and must have affordable, sustainable oil.”