Economic outlook for next fiscal positive, Fin Min Monthly Economic Review

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In its latest Monthly Economic Review for February 2024, the Finance Ministry noted that the economic outlook for FY25 is looking bright owing to uptick in private investment, strong growth and robust fundamentals. It noted that headwinds such as hardening crude oil prices and global supply chain bottlenecks cannot be written off totally.

The report noted that inclusion of Indian bonds in Bloomberg bond index from January 2025 should bolster inflows.

The ministry has a positive outlook when it comes to retail inflation in the country.

“Core inflation is trending downwards, indicating a broad-based moderation in price pressures. The pick-up in summer sowing is likely to help reduce food prices,” it said.

In its  released on March 22, the ministry noted that the ongoing disruptions in the Red Sea could lead to a rise in oil prices, thereby posing upside risks to inflation and, consequently, to growth.

“The continued focus on public investment seems to have crowded in private investment,” said the February edition of the review by Department of Economic Affairs.

The National Statistical Office (NSO) has revised upwards the GDP growth estimate for current fiscal to 7.6 per cent from 7.3 per cent.

India grew above 8 per cent for three consecutive quarters, reaffirming its position as a standout performer amid sluggish global growth trends. Various agencies echo a similar sentiment revising the FY24 growth estimates of India closer to 8 per cent, the ministry said.

The report noted that India needs to see an increase in domestic household savings in order to finance private sector’s capital formation in the economy.

“The narrowing merchandise trade deficit and rising net services receipts are expected to result in an improvement in the current account balance in the ongoing financial year,” the report said. However, the current account deficit will bear watching in FY25, the report highlighted.

It said increased demand for residential properties in tier-2 and tier-3 cities augurs well for furthering construction activity.
Non-farm employment has revived, improving the capacity to absorb the labour leaving agriculture.

“The ascent of manufacturing sector employment is expected to be marked by upscaling of enterprises and sunrise sectors emerging as catalysts for generating quality employment,” it added.

It said strong growth accompanied by stable inflation and external account and progressive employment outlook will help the Indian economy close the current financial year on a positive note.

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