Geopolitical tensions pose risks to India's economic stability: Finance Ministry
India's domestic economy showed resilience after a temporary slowdown during the monsoon months.
- Nov 25, 2024,
- Updated Nov 25, 2024 3:20 PM IST
The Ministry of Finance, in its Monthly Economic Review (MER) for October, has highlighted India's cautious economic optimism against a backdrop of global turbulence. While the United States has outpaced growth expectations, the report points to structural weaknesses in Europe, China's economic slowdown, and heightened geopolitical tensions as significant challenges for global growth.
India's domestic economy showed resilience after a temporary slowdown during the monsoon months. The MER notes a recovery in October, driven by steady demand growth. FMCG sales volumes improved in both urban and rural areas, with rural demand particularly strong, as evidenced by record-high tractor sales and robust two-wheeler growth. Manufacturing and services sectors remained buoyant, with positive Purchasing Managers' Index trends.
Inflation, however, remained a concern, with food prices rising due to heavy rains disrupting supply chains for vegetables like tomatoes, onions, and potatoes. Elevated global oil prices also added to price pressures. The report predicts a moderation in food inflation in the coming months, supported by a promising kharif harvest, favourable monsoon conditions, and strong rabi sowing prospects.
On the trade front, merchandise exports were subdued due to weak external demand, while strong domestic consumption drove higher imports, widening the trade deficit. Heightened geopolitical tensions, alongside developments in China, triggered significant outflows from Indian equities by foreign portfolio investors. However, foreign direct investment inflows grew steadily, and India’s forex reserves saw a $64.8 billion increase in 2024, ranking second globally after China.
The labour market showed mixed trends. While formal employment rose and manufacturing jobs surged by over 22 lakh compared to pre-pandemic levels, urban consumer sentiment regarding job prospects remained cautious.
The report warns that global factors, including the ongoing Russia-Ukraine conflict, could impact India's trade and inflation outlook. While India’s economy remains robust, the Ministry emphasizes the need for vigilance as global uncertainties persist.
The Ministry of Finance, in its Monthly Economic Review (MER) for October, has highlighted India's cautious economic optimism against a backdrop of global turbulence. While the United States has outpaced growth expectations, the report points to structural weaknesses in Europe, China's economic slowdown, and heightened geopolitical tensions as significant challenges for global growth.
India's domestic economy showed resilience after a temporary slowdown during the monsoon months. The MER notes a recovery in October, driven by steady demand growth. FMCG sales volumes improved in both urban and rural areas, with rural demand particularly strong, as evidenced by record-high tractor sales and robust two-wheeler growth. Manufacturing and services sectors remained buoyant, with positive Purchasing Managers' Index trends.
Inflation, however, remained a concern, with food prices rising due to heavy rains disrupting supply chains for vegetables like tomatoes, onions, and potatoes. Elevated global oil prices also added to price pressures. The report predicts a moderation in food inflation in the coming months, supported by a promising kharif harvest, favourable monsoon conditions, and strong rabi sowing prospects.
On the trade front, merchandise exports were subdued due to weak external demand, while strong domestic consumption drove higher imports, widening the trade deficit. Heightened geopolitical tensions, alongside developments in China, triggered significant outflows from Indian equities by foreign portfolio investors. However, foreign direct investment inflows grew steadily, and India’s forex reserves saw a $64.8 billion increase in 2024, ranking second globally after China.
The labour market showed mixed trends. While formal employment rose and manufacturing jobs surged by over 22 lakh compared to pre-pandemic levels, urban consumer sentiment regarding job prospects remained cautious.
The report warns that global factors, including the ongoing Russia-Ukraine conflict, could impact India's trade and inflation outlook. While India’s economy remains robust, the Ministry emphasizes the need for vigilance as global uncertainties persist.