The Ministry of Finance has claimed that inflation in July 2023 is expected to ease out compared to June 2023 mainly due to reduction in POL prices in recent weeks.
In its ‘Monthly Economic Update & Outlook’ for July, the ministry said that the recent decrease in administered prices of petrol and diesel will be transmitted into lower domestic prices of essential items by impacting the transportation cost.
It added that the declining international commodity prices are expected to offset the inflation spikes that emerged due to domestic supply shocks. The report mentioned that the benchmark index of international food commodity prices declined again in June 2023 led by price decreases for major cereals and most types of vegetable oils.
The report said that the timely measures taken by the government to boost the agriculture sector (Kissan Package) would result in a better crop outlook and smoothen the domestic supplies, moreover, the expected political stability and stable exchange rate would help to achieve price stability. The inflation for 2023 is expected to remain in the range of 25-27 percent.
Current account deficit
The report noted that despite the decline in workers’ remittances, a significant decline in trade deficit reflected in the surplus of the current account for the last two quarters of FY23. For FY24, it is expected that both exports and imports will gradually increase in the coming months. Taking other factors into account, the current account deficit will remain within sustainable limit in FY24.
The report highlighted that the fiscal front has seen an important improvement, with the primary deficit reducing significantly from Rs. 945.3 billion last year to Rs. 112 billion during Jul-May FY23. It said that the fiscal deficit is expected to decline from the previous year, largely due to a 12 percent reduction in non-markup spending.
The report said that in FY24, the government is gearing towards achieving higher growth of 3.5 percent through various measures like the Kissan package, industrial support, export promotion, encouragement of the IT sector, and resource mobilization.