BackEconomic outlook bright but high oil prices a concern: FinMin
The government expects economic activity to maintain momentum and private sector investments to pick up going ahead.
PremiumNew Delhi: India's economic outlook for FY24 remains bright, with economic activity maintaining its momentum and food prices cooling down. However, rising oil prices remain a concern, the finance ministry said in its monthly economic review for August.
Oil prices rose to 10-month highs earlier this week on extended production cuts from key suppliers. As of Friday, oil prices stood at $94.85 per barrel, up 6.1% annually.
"Recent run-up in oil prices is an emerging concern. But, no alarms yet," the government's monthly economic report said.
India, which depends on international markets for most of its energy needs, is the world's third-largest energy importer.
Overall, the government expects economic activity to maintain momentum and private sector investments to pick up going ahead.
"Private sector is in good health as data on advance tax payments for second quarter confirm," the survey said. “Therefore, in sum, the baseline estimate for India’s economic growth in FY24 is 6.5 per cent, at 2011-12 prices."
The latest economic review pointed out that the risks of a stock market correction and geopolitical developments could potentially hurt investment sentiment in the second half of the financial year.
However, it said that the impact of these developments on underlying economic activity should be relatively contained.
The economic review stated that inflation eased in August, with the government's intervention helping lower prices of certain items.
"Vegetable inflation increased in July and August due to a sudden increase in the prices of tomatoes and other food items due to crop specific and weather-related factors," the report said.
"The Government intervened with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidised distribution," it added.
Retail inflation moderated to 6.83% in August from a 15-month high of 7.44% in July due to easing vegetable prices, offering a measure of relief to the Indian central bank and bond investors.
Food inflation, which accounts for nearly half of the overall consumer price basket, slowed to 9.94% in August from 11.51% in July, according to data released by the ministry of statistics and programme implementation (MoSPI) last week.
The cooling of inflation was led by vegetables amid some moderation in prices of clothing and footwear, housing and miscellaneous items.
During August, core inflation stood at 4.8% and remained in line with the market’s expectations.
Last month, the Reserve Bank of India (RBI) left the repo rate unchanged at 6.50% after terming the recent spike in vegetable prices to be a demand-supply mismatch.
Interestingly, the government expects businesses and economy to strengthen across sectors in the coming quarters.
"The business situation is expected to strengthen across sectors, as indicated by RBI’s Industrial Outlook Survey and Services and Infrastructure Outlook Survey conducted during Q1of FY24," it said.
"The survey results show an improvement in investment sentiment, demand conditions and job creation, as reflected in their improved expectations on production, order book, capacity utilisation, employment and foreign trade," it added.
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