The issue of price rise and dwindling employment opportunities has deservedly moved into the House. On Monday, Opposition parties confronted the government in Parliament over the state of the economy, arguing that life for the aam aadmi had become difficult with “spiraling prices, lack of jobs and poor state of governance and policy”. In turn, Finance Minister Nirmala Sitharaman launched a strong defence, saying that the country’s “macroeconomic fundamentals are perfect,” and that India was in a better position than its neighbours. Sitharaman, who marshalled a range of data to make her point, asserted that there was “no question” of the economy stumbling into a recession or stagflation. Sitharaman is correct — it is unlikely that India will slip into a technical recession. But the Opposition is right too — the economy is going through a difficult period.
However, the global macroeconomic environment is fast changing. In its latest update of the world economic outlook, the IMF has lowered its forecast for global growth in 2022 by 0.4 percentage points, while cutting projections for world trade volume (both goods and services) by 0.9 percentage points. It is likely that these forecasts will be pared down further. Slowing global output and slower world trade are likely to have a bearing on India’s exports. Coming at a time when there are questions over the capacity of the other drivers of growth to spur economic activity over the medium term, this will make the task of returning to a higher growth trajectory more difficult.
