India’s Economic Performance Review for July 2022

India witnessed an overall upturn in economic activities during July 2022 backed by rising manufacturing activity and a more-than-expected industrial growth, though inflationary pressures continue to impact demand-supply balance. India’s central bank, the Reserve Bank of India (RBI), has responded by raising repo interest rates three times since May 2022 to tackle the inflation challenge and is expected to continue intervening until the inflation rate comes below the target ceiling of 6%. The predicted “normal” monsoon this year is expected to accelerate agricultural growth. While food inflation is moderating in response to policy measures, the problems of non-food inflation and a high trade deficit (the most important component of current account deficit) are constraining greater economic activity. The Indian rupee dived to its lowest point ever against the US Dollar in July and foreign exchange reserves also dipped due to a higher import bill. That said, the business sentiment so far seems positive on news of softening oil prices globally, though it remains uncertain due to continuing disruptions from the Russia-Ukraine conflict and COVID, and the onsetting of global recessionary pressures.