Despite sluggish growth in the most recent quarter, KPMG expects India to be "one of the major beacons of growth" in 2023, driven by strong domestic demand and government spending, according to its recently released report.

The effects of the global economic slowdown caused by high inflation and the ongoing conflict between Russia and Ukraine are also seen to be affecting India's economic performance.

The country's real gross domestic product (GDP) growth in fiscal 2022-23 is expected to be 7%, down from 9.1% in the previous fiscal.

The strong capital expenditure push provided by the union budget, with a raised outlay of 37.4 per cent in comparison to this fiscal, is expected to drive growth, investments and job creation, the company said in the report.

The last union budget’s efforts to improve disposable income of taxpayers is expected to boost consumption via an increase in discretionary spending, it noted.

The government’s reduction of over 39,000 compliances and decriminalisation of over 3,400 legal provisions will also foster the ease of doing business in the country, it noted.

Core inflation is expected to be affected by the continued transfer of input costs to output prices, particularly in the services sector. However, input costs and output prices are expected to ease in the manufacturing sector, it said.

However, external challenges, such as a slowdown in the global economy and monetary tightening in advanced economies, are factors that could affect the country’s growth, the report by KPMG, headquartered in Amstelveen in the Netherlands, added.