Economic Survey 2022-23

Abstract

The Economic Survey 2022-23 comes when global uncertainties are rife. Barely had the pandemic receded, and the war in Ukraine broke out in February 2022. Prices of food, fuel and fertiliser rose sharply. As inflation rates accelerated, central banks of advanced countries scrambled to respond with monetary policy tightening. Many developing countries, particularly in the South Asian region, faced severe economic stress as the combination of weaker currencies, higher import prices, the rising cost of living and a stronger dollar, making debt servicing more expensive, proved too much to handle. In the second half of 2022, there was a respite for governments and households. Commodity prices peaked and then declined. In the near term, the acute pressure was relieved, although prices of some commodities (e.g., crude oil) remain well above their pre-pandemic levels. For countries dependent on imports, priced and payable in dollars, a global slowdown led by the United States (US) offers a triple relief. Commodity prices decline, and US interest rates peak, as does the US dollar. Capital and current account imbalances abate. As 2023 rolled in, China opened up rather swiftly, reversing its Zero-Covid policy. An unexpectedly warm winter that has spared households from a debilitating increase in fuel prices that would have dented their disposable income significantly hasstirred hopesthat the Eurozone economies would narrowly avoid a recession.Asthe headline inflation rate declines in the US, policy rates are set to rise more slowly. In anticipation, bond yields have come down, and there are faint hopes of the US avoiding a recession altogether, barring any unexpected financial system stress.