After strong growth that surpassed market expectations in FY24, early indications suggest a continuation of the economic momentum in the first quarter of FY25, the monthly economic review for April 2024 by the Ministry of Finance said on Friday.
“The emerging robust trends in important high-frequency indicators of growth like the GST collections, e-way bills, electronic toll collections, sale of vehicles, purchasing managers’ indices, and the value and number of digital transactions attest to the growing strength of the economy,” the review said.
The Ministry of Finance (FinMin) in its report said that going forward, government initiatives, including the open market sales, monitoring of stocks, import of pulses, and export restrictions, are expected to help stabilise food prices.
While the forecast of normal rainfall for the Southwest Monsoon 2024 bodes well for food production and could alleviate price pressure on food items, the finance ministry’s review cautioned that the ongoing geopolitical tensions could potentially drive up international commodity prices and disrupt supply chains.
Assuming a positive monsoon, the RBI has predicted 4.9 per cent retail inflation for FY25’s first quarter.
“The future inflation path will be shaped by several elements. The positive indications in the farm sector should help India firewall against any adverse pressures that may arise from geopolitical tensions and global commodity prices,” the April review said.
The finance ministry also noted that with the manufacturing sector capacity utilisation rising above the long-term average, the increase in new investment announcements by the private sector is positive for growth. “Domestic manufacturing will likely receive stronger external support in the upcoming months. The industrial and service sectors of the Indian economy are performing well, backed by brisk domestic demand and partially by tentative external demand,” the report said.
It also said that reports suggesting that organisations in the US and Europe focusing on reindustrialisation with a focus on enhancing supply chain resilience can benefit India’s manufacturing firms as part of the China Plus One strategy.
Finance minister Nirmala Sitharaman had recently said that India must ramp up its manufacturing sector to increase its share in global value chains and become self-reliant, with the help of government policies.
“Much against the advice given by some economists that India should no longer be looking at manufacturing or ramping up manufacturing, I would like to highlight the fact that manufacturing must increase… We need to have greater sophistication in our product manufacturing,” Sitharaman said.
The April review also said that the services sector will be aided by the ongoing recovery in the hotel and tourism industry, increased credit flow to transport and real estate segments, policy support, and robust investments in physical and digital infrastructure and logistics.
First Published: May 24 2024 | 6:24 PM IST
