IGI Logo

The Finance Ministry in its Monthly Economic Review report has said that the Indian economy is well prepared to absorb any upcoming external shock in terms of capital outflow induced by an uncertain geo-political environment, however inflation remains a concern. The report said India has adequate forex reserves to absorb any upcoming external shock. As per the report, ‘Notwithstanding global developments, India’s forex reserves also stood at record high and large enough to finance more than 12 months of import’. It said despite the challenges, India’s external sector exhibits signs of resilience with robust growth in merchandise exports, which increased to $374.8 billion during April 2021 - February 2022. However it warned that high energy and commodity prices may pose upside risk to the inflation outlook in the near- medium term.

The report said ‘Recent increase in prices of food and energy commodities and metals warrants continued vigil on the inflation front’. It added that ‘The sustained rise in Capex is expected to pump prime private investment and demand. This is evident from capacity utilisation recovering to 68.3 per cent in Q2:2021-22, as compared to 60.0 per cent in the previous quarter’. Capital expenditure increased by 22.0 per cent YoY during April 2021-January 2022 and stood at Rs. 4.4 lakh crore in April-January 2021-22 compared to Rs. 3.6 lakh crore in the corresponding period last year.