The country’s retail inflation eased to a one-year low of 5.72 per cent in December 2022, from 5.88 per cent in November 2022. (Representational image)

If you placed all highlights of the economic data, released in the last few days both in India and the United States of America, as dots on a canvas to draw a picture, it would make for a happy smiley face. The New Year of 2023 indeed seems to be happier than most economists, and the general public, feared it could be. However, there are a few concerns, the biggest among them being creation of jobs.

One of the biggest positives for India is inflation. The country’s retail inflation eased to a one-year low of 5.72 per cent in December 2022, from 5.88 per cent in November 2022, and 5.66 per cent in December 2021. Given the political, and social, significance of price rise, this singularly gives a lot of cushion for Indian customers, and the economy.

Food prices, both wholesale and retail, are easing in India. Wheat output has been better than expected, giving the rural economy as well as the PDS lots of elbow room. The US inflation too cooled down to 6.5 per cent, which pumped markets into an upbeat mood after the December CPI data was released. The US data will help India stem pressure on the rupee, and pre-empt any major impact of imported inflation on the domestic economy.

The second good news is India’s industrial output, which rose by 7.1 per cent in November 2022, after contracting in October. Consumer spending, too, has improved, as is evident from record and consistently growing GST collections.

The good news from the US with Friday’s monthly employment report shows an increase in the number of workers on non-farm payrolls. There is also a slowing in wage growth, both of which are welcome news for the US central bank. If the Feds do not see any need to change interest rates and feel inflation can be managed without any monetary steps, it would be good news for the entire world economy. India will particularly benefit, especially the stock markets, with a higher flow of FII funds, and keep the indices high.

Beyond the two countries, the easing of Covid curbs in China will ease both price pressure and supply-side inflation on certain goods. It will, however, have to be seen for how long logistics and supply chains remain under-optimised which will be up until the overall global economic order resumes normalcy.

In India, like in the US, the business outlook has improved, but it is a matter of concern that the hiring outlook is still cautious. Recessionary fears linger, and unless the US economy continues growing, and the clouds clear, this cheer may not last too long.

The ICRA data says India’s fiscal deficit may rise marginally to Rs 14.8 lakh crores in FY24, compared to Rs 14.2 lakh crores in FY23. But it is hardly a big concern, especially given that an election year is ahead.

The most serious challenges, besides the US heading towards a possible recession, are geopolitical developments, including war, lower private sector investment and spending, and failure to create adequate numbers of jobs. That, coupled with too much of election-focused spending, could create mid-term problems ahead.