BackGrowth on track despite recent oil spike: FinMin
Indian government confident of 6.5% economic growth this fiscal year despite rising oil prices and stock market risks.
PremiumNew Delhi: The government is confident of the Indian economy growing 6.5% this fiscal year despite rising oil prices and the risk of a stock market correction affecting investment, a finance ministry report showed.
While vegetable prices that drove retail inflation have cooled, crude oil touched a 10-month high earlier this week. On Friday, oil traded at $94.85 per barrel, up 6.1% from a year earlier.
“The recent run-up in oil prices is an emerging concern. But, no alarms yet," the ministry’s monthly economic review for August said.
India is the world’s third-largest energy buyer, depending on imports for most of its oil and gas requirements, and any increase in oil prices will increase its import bills.
Overall, the government expects economic activity to maintain momentum and private sector investments to pick up going ahead. “The private sector is in good health as data on advance tax payments for the second quarter confirm," the report said. “Therefore, in sum, the baseline estimate for India’s economic growth in FY24 is 6.5%, at 2011-12 prices," it added.
The review said the risks of a stock market correction and geopolitical developments could affect investment sentiment in the second half of FY24. However, the government does not expect these developments to hamper underlying economic activity.
The review also expressed confidence about the state of business. “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 Q1 of FY24. 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 utilization, employment and foreign trade," it added.
The economic review stated that inflation eased in August, with the government’s intervention helping bring down 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 government intervened with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidized distribution," it added.
Consumer inflation eased to 6.83% in August from a 15-month high of 7.44% in July as vegetable prices cooled, offering a measure of relief to the 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, the latest data statistics ministry data showed.
The fall in inflation was led by vegetables, besides clothing and footwear, housing and miscellaneous items. Core inflation stood at 4.8% in August, in line with market expectations.
Last month, the Reserve Bank of India (RBI) left the repo rate unchanged at 6.50%, attributing the recent spike in vegetable prices to a demand-supply mismatch.
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