India’s economy has been steadily recovering from the pandemic-induced slowdown. The country’s GDP growth rate rebounded to 8.4% in Q2 of FY 2021-22, after contracting for two consecutive quarters. The government has projected a GDP growth rate of 10.5% for FY 2021-22, with some estimates suggesting that it could even reach 11%. However, with the emergence of new variants and the possibility of further waves of infections, there are uncertainties around the growth trajectory.

The Indian economy is expected to maintain its growth momentum in FY 2022-23, albeit at a lower pace. The IMF has projected a growth rate of 6.9% for India in 2022, while the World Bank has projected a growth rate of 7.5%. The government’s own projection for FY 2022-23 is a growth rate of 8%.

The key drivers of economic growth in the upcoming financial year are expected to be a rebound in consumer demand, increased investment activity, and a push for export-led growth. The government has announced a slew of measures aimed at boosting investment and exports, including a new scheme to incentivize manufacturing, the PLI (Production Linked Incentive) scheme, and a new export policy aimed at doubling India’s exports by 2025.

However, there are also several challenges that the economy faces in the upcoming financial year. One of the biggest challenges is inflation, which has been rising steadily over the past few months. The RBI has projected an inflation rate of 5.1% for Q4 of FY 2021-22 and expects it to remain elevated in the first half of FY 2022-23. High inflation could dampen consumer demand and increase input costs for businesses, thereby affecting their profitability and growth prospects.

Another challenge is the increasing burden of non-performing assets (NPAs) on the banking sector. The pandemic has led to a sharp increase in NPAs, particularly in the retail and MSME segments. This could have implications for the availability of credit and the health of the banking sector, which in turn could impact investment and growth.

Finally, there is the risk of further waves of infections and the emergence of new variants, which could disrupt economic activity and affect growth prospects. The government and businesses will need to remain vigilant and take appropriate measures to mitigate these risks.

India’s economic growth outlook for FY 2022-23 is positive, with the economy expected to maintain its growth momentum. However, there are several challenges and uncertainties that could affect the growth trajectory, and the government and businesses will need to remain vigilant and take appropriate measures to mitigate these risks.