India’s economy is forecast to register 7% growth in FY23, despite global headwinds, whilst retail inflation would moderate along with wholesale inflation, which plummeted to a 25-month low in January.

The country’s current account deficit is forecast to decline in FY23 and FY24, according to the Finance Ministry, bolstered by gains from high services exports, oil price moderation and the drop in consumer demand.

The ministry’s Monthly Economic Review also stated that this would provide a buffer to India’s external sector and ensure the country’s external finances are not a key reason for concern.

The rise in net service exports over the last year is a crucial development as India boosts its market share in IT and non-IT services, with demand having been fuelled by the pandemic, the report states.

“With a manageable current account deficit and a growth rate highest among the major economies in FY23, the Indian economy has shown a new-found resilience in sailing through the turbulence caused by the pandemic and geopolitical stress,” it said.

In addition, macroeconomic stability will likely receive an additional boost in FY23 as the current account deficit is forecast to narrow from the estimates at the beginning of the year, Mint reports.

In terms of growth, the report said real GDP estimates for Q3 2022-23 reassert the economy’s ability to grow thanks to its strong domestic demand, despite the increase in global uncertainties resulting in a global output slowdown.

India’s economy registered 4.4% growth in the quarter ending December 2022, whilst growth momentum from Q3 2022/23 will likely continue in Q4, as shown in the High-Frequency Indicators’ performance for January/February 2023, the report went on to say.

In addition, in regard to inflation, it will moderate in India in FY24 compared to the year before and will likely stay within the 5% to 6% range.