Good Rains To Ease Inflation Concerns Ahead, Says Finance Ministry
The Department of Economic Affairs credited the government and the RBI's efforts to combat inflation through policy rates, strengthening food buffers, and easing imports for inflation management.
An above-normal monsoon, as widely predicted, can ease inflation in the months ahead as it signals a good harvest, the Finance Ministry said in a report.
The Indian Meteorological Department had forecast above-normal levels of rains this year, on the back of favourable La Nina conditions.
India's headline retail inflation rate eased to a 10-month low of 4.85% in March and the current fiscal's CPI inflation estimate is seen at 4.5%. The RBI bulletin, however, continues to maintain a cautionary note on domestic inflation with extreme hot weather conditions ahead.
Thursday's report, prepared by the Department of Economic Affairs, credited the government and the RBI's efforts to combat inflation through policy rates, strengthening food buffers, and easing imports for inflation management.
In its March Monthly Economic Review, the ministry also conveyed optimism about India's robust economic performance in the face of ebbing recessionary trends globally.
"India continues to be the fastest-growing major economy, with positive assessments of the growth outlook for the current financial year by international organisations and RBI," it said.
The Reserve Bank estimates GDP growth forecast of 7.6% for the previous fiscal and a 7% forecast for the current fiscal, with first quarter at 7.2%; second quarter at 6.8%, third quarter at 7% and fourth quarter at 6.9%.
The report said the IMF, too, has positively revised its growth estimate for India to 7.8% from 6.7% in January 2024, and 6.3% in October 2023.
Resilient growth, robust economic activity indicators, price stability, and steady external sector performance continue to support India’s promising economic performance amidst uncertain global conditions.March Monthly Economic Review, Department of Economic Affairs
RBI Estimates Q4 GDP Growth At 7.3%, Says India Must Grow At 8-10% To Reap Demographic Dividend
The report has also maintained that global recovery is punctuated with disparities among major economies and downside risks include continued geopolitical conflict.
Though major economies like Japan, UK and US exhibit positive momentum, economic activity remains subdued in the Euro area and China, which continue to be watched.
Capital inflows in India witnessed a turnaround in FY24, according to the report, with foreign exchange reserves reaching an all-time high in March 2024, sufficient to cover 11 months of projected imports and more than 100% of total external debt.
India is also looking to ride the wave of better global trade in FY25 as the World Trade Organisation forsees an Asia-led rebound.