India’s economic momentum remains strong despite a somewhat erratic monsoon, with the Finance Ministry projecting real GDP growth of 6.5-7% for the current fiscal year, according to a report released Thursday.
The Monthly Economic Review for July indicates that the Indian economy has maintained its momentum in the first four months of FY25. Goods and Services Tax (GST) collections have risen due to an expanded tax base and increased economic activity, the report stated.
The report highlighted that domestic economic resilience is reflected in the robust performance of manufacturing and services sectors. Manufacturing growth has been driven by increased demand, higher new export orders, and rising output prices.
On the fiscal front, the Union Budget for FY25 outlines a path toward fiscal consolidation. Supported by strong revenue collection, disciplined revenue expenditure, and solid economic performance, the fiscal deficit is expected to decrease. At the same time, high levels of capital expenditure are bolstering the nascent private investment cycle.
Retail inflation fell to 3.5% in July 2024, the lowest since September 2019, largely due to a reduction in food inflation. The report noted that steady progress in the southwest monsoon has supported kharif sowing. Replenished reservoir levels are expected to benefit current kharif and upcoming rabi crop production, potentially reducing food inflation further in the coming months.
Overall, the report asserts that India’s economic momentum remains intact. Despite the monsoon’s irregularities, replenished reservoirs and expanding manufacturing and services sectors contribute to economic stability. Tax collections, particularly indirect taxes, and bank credit are growing healthily.
“Inflation is moderating, and exports of both goods and services are doing better than they did last year. Stock markets are holding on to their levels. Foreign direct investment is looking up as gross inflows are rising,” it said.
The Finance Ministry’s report supports the Economic Survey’s projection of 6.5-7.0% real GDP growth for FY25, deeming it an appropriate forecast.
(With PTI inputs)