With strong growth surpassing 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 (goods and services tax) 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 in its report said government initiatives, including the open market sales, monitoring of stocks, import of pulses, and export restrictions were expected to help stabilise food prices.
While the forecast of a normal monsoon bodes well for food production and could alleviate price pressure on food items, the finance ministry’s review cautioned the ongoing geopolitical tensions could drive up international commodity prices and disrupt supply chains.
Assuming a positive monsoon, the Reserve Bank of India has predicted a 4.9 per cent retail inflation rate for the first quarter in FY25.
“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 ministry noted with capacity utilisation in the manufacturing sector rising above the long-term average, the increase in new investment announcements by the private sector was 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 said organisations in the US and Europe that were focusing on reindustrialisation with an eye on enhancing supply chain resilience could benefit India’s manufacturing firms as part of the China Plus One strategy.
Union Finance Minister Nirmala Sitharaman had recently said 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 said the services sector would be aided by ongoing recovery in the hotel and tourism industry, increased credit flow to the transport and real estate segments, policy support and robust investments in physical and digital infrastructure and logistics.
Better economic outlook
Industrial activity gaining momentum with improved capacity utilisation
Job market trends reassuring in March 2024 quarter
Retail inflation at 4.3% in April 2024, which is lowest in 11 months
Foreign exchange reserves comfortable and rupee resilient against dollar
Growth, price stability and fiscal management in positive direction and are mutually reinforcing
 "After strong FY24, economic growth momentum to stay in Q1FY25: FinMin")
