Indian economy remains in bright spot: Ministry of Finance

In contrast to the global scenario, the Indian economy continues to exhibit strong economic performance with broad-based growth across sectors, the Ministry of Finance asserted.

"The optimism regarding growth prospects is also reflected in consumer and investor perceptions," according to the Monthly Economic Review report of the Department of Economic Affairs under the Finance Ministry.

Many international organisations assert India's pivotal role in determining the growth path of Asia in the coming years, the review report said.

Reserve Bank of India also, in its latest Monetary Policy Committee meeting, noted the strong growth momentum in the economy and projected real GDP growth for 2024-25 at 7 per cent, driven by a pickup in rural demand and sustained momentum in the manufacturing sector.

The International Monetary Fund in its latest report forecasted India's growth at a high of 6.8 per cent in 2024-25 and 6.5 per cent in 2025- 26, based on its assessment of continuing strength in domestic demand and a rising working-age population.

"As per the latest consumer confidence survey, households' sentiments on the general economic situation and employment prospects recorded notable improvements for both the current period as well as the upcoming year," said the monthly review report of the finance ministry.

It further added that the manufacturing sector is also expected to maintain its momentum on the back of sustained profitability and pick-up in rural demand. On inflation, it said the government's efforts in managing retail inflation in 2023-24 have been highly successful.

Inflation measured by the Consumer Price Index declined from 6.7 per cent in 2022-23 to 5.4 per cent in 2023-24, which is within the upper tolerance level of the inflation-targeting framework. 2023-24 ended with an inflation rate of 4.85 per cent in March 2024, which is the lowest inflation rate recorded in the last 10 months.

However, inflation continues to remain the main concern for the Reserve Bank of India's monetary policy committee members before it goes ahead and loosens its stance on key interest rates.

In the minutes of the latest monetary policy meeting released recently, there have been several mentions of uncertainties around inflation. Going ahead, food price uncertainties would continue to weigh on the inflation outlook, according to the minutes.

Retail inflation in India is in RBI's two-six per cent comfort level but is above the ideal 4 per cent scenario. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. Looking ahead, the RBI monetary policy committee sees food price uncertainties weighing on the inflation outlook.

"While a record Rabi crop will help in moderating cereal prices, the increasing occurrence of weather shocks poses an upside risk to food prices. Geopolitical tensions and their effect on oil prices add to this risk. However, Kharif crop prospects look bright at this early stage with the IMD's prediction of an above-normal monsoon this year," the finance ministry's monthly review said.