India's GDP growth slowed down to 4.4 per cent for the October-December quarter. while inflation has been above the Reserve Bank of India's tolerance level of 6 per cent for two months.
As global headwinds are expected to take a toll on India, Finance Ministry has predicted a 7 per cent GDP growth rate for India in FY23.
Inflation also set to fall
As the fiscal year is slated to end this month, the government added that retail inflation will fall in line with wholesale inflation for January, which was lowest in 25 months.
It also forecast a drop in fiscal deficit, as services exports are expected to rise further, while consumption which relies on imports will be dropping.
The data sees this as support for India's external sector, in the face of further rate hikes by the US Federal Reserve.
Changing headwinds could have an impact
But after the banking sector fiasco following SVB and Signature Bank's fall, the US Fed is expected to go slow on repo rate hikes.
According to the ministry, macroeconomic stability will also be strengthened giving a further boost to the GDP.
It also maintained that weather conditions such as El Nino and the global fluctuations in commodity rates will also determine India's inflation trajectory.
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