The state of the Indian economy: 2022 Roundup

On December 6, 2022, the World Bank revised its forecast for India’s GDP growth in 2022-23 from 6.5% to 6.9%, based on economic strength in Q2. The World Bank also said the country is “well positioned” to weather any global crisis in 2023.
India’s economy has proven to be resilient in the face of global challenges thanks to key economic policies that prioritize other emerging markets.
Here’s a look at the economy in 2022, what makes India grow in 2023.
2022 – The Year of Enlightenment
There was no shortage of cyclones throughout the year, affecting India’s economic recovery. The year started with the threat of the Omicron version of the coronavirus. Fortunately, the threat was minimized, without affecting the economy in any way. The only problem was that this storm was replaced by Russia’s invasion of Ukraine in mid-February, which caused further international disruption.
The next development that affected the economy was the decision of several major banks, especially the US Federal Reserve, to change their monetary policy. The negative effects of policy enforcement were felt around the world. The RBI was not far behind in strengthening its stance, when the first interest rate hike was announced in May.
Some of the major economic factors that deserve special mention are:

Indian GDP
In the first half of the financial year, India’s GDP grew by 9.7%, compared to 13.7% a year ago. Gross Value Added (GVA) also increased, although below the level seen at the same time last year, at 9% against a growth of 12.8% a year ago. GDP growth picked up sharply at the end of June-end despite the RBI’s lower expectations, rising to 13.5%. This growth was driven by rising fixed income and business spending.
Some stabilization was seen at the end of September, with GDP growth slowing to 6.3%, led by lower mining and manufacturing sectors, as well as higher inflation, lower exports and higher input prices.
Rising prices

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Inflation, as reflected by the Consumer Price Index, remained above the RBI’s upper limit of 6% for 10 consecutive months until November, when it eased slightly to 5.88%. Commercial inflation hit an eight-year high in April, with rural inflation rising to 8.4% and urban inflation to 7.1%.
This increase was attributed by experts to a sharp increase in food price inflation, which showed a 17-month increase of 8.4% in April. The rise was largely driven by rising global oil prices, which affected not only food and commodity prices but also communication and transport costs.
Rising Interest Rates
Although the Monetary Policy Committee (MPC) of the RBI left the interest rate unchanged at 4% in April, it unanimously voted to increase the repo rate at its mid-term meeting in May. As a result, the repo rate rose 40 basis points to 4.40%. The MPC has raised rates at each of its three meetings this year, raising the repo rate by 50 basis points each time, until rates rose 5.9% in September.
As recently as December when the RBI decided to moderate its hike, raising the repo rate by 35 basis points to 6.25%.
Indian Stock Market
It has been an eventful year for the Indian market. The first blow came from the Russia-Ukraine war, which caused the Sensex to drop 2,702 points on February 24, the day Russia annexed Ukraine. But both the Sensex and the Nifty bounced back quickly, led by a better-than-expected corporate climate in Q1, coupled with lower global inflation and rising domestic prices.
Investor sentiment also got a boost from the return of FIIs to the Indian market, sending the Sensex and Nifty to new highs. With the rapid political and economic developments around the world, the Sensex has seen more than 1,000 rallies, with its biggest one-day gain coming on February 15, when it surged 1,736 points. On the upside, the Sensex also saw major crashes, with the index falling by at least 1,000 points in a single day at least 14 times in a year.
Nifty, India’s financial bellwether, remained volatile throughout the year, recording a gain of around 3%. Although the biggest winners in the Covid era, pharma and IT, did not fare well in 2022, the financial sector looked unusual, with the Nifty Bank index rising nearly 18% at the end of December, led by rising interest rates. , a reversal of the demand for debt and a significant decrease in non-performing assets.
Looking Ahead to 2023
The new year brings optimism for continued growth in India, supported by steady domestic demand, according to a recent report by Morgan Stanley. Furthermore, the OECD expects India to become the second fastest growing economy among the G20 countries in FY2022-23, after Saudi Arabia. This is expected despite the fact that the global financial crisis will slow down, inflation and the expansion of economic policies.
Credit Suisse’s Global Equities Strategy Group has also upgraded India from “Underweight” to “Benchmark” for 2023, based on the country’s economic strength. In financial terms, the sectors expected to perform best include financial services, banking, insurance, capital goods, real estate, defense, construction and railways.
Having said that, investment decisions cannot be based on optimism. It is important to continue to exercise caution in order to make informed investments.

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