Sufficient food grain buffer stock and optimism for a healthy kharif harvest are likely to alleviate price pressures, a recent report by finance ministry said.
Ministry of Finance
Sufficient food grain buffer stock and optimism for a healthy kharif harvest are likely to alleviate price pressures, a recent report by finance ministry said.
In its Monthly Economic Review September, the ministry observed that, barring a sharp rise in the prices of a few vegetables, inflation appears well contained. It added that inflation expectations by households and businesses have been softening, as indicated by Reserve Bank of India and Indian Institute of Management, Ahmedabad surveys.
Moderation in urban demand amid softening consumer sentiments and limited footfall due to above-normal rainfall need watching, along with anecdotal reports of Artificial Intelligence displacing workers that are beginning to emerge, it added.
Advertisement
Escalating geopolitical conflicts, deepening geoeconomic fragmentation, and elevated valuations in some financial markets could cause negative wealth effects, impacting household sentiments and altering spending intentions on durable goods in India, the review warned.
On inflation, the report said the headline inflation rate, influenced as it is by a few food items, may not be the most accurate gauge of the underlying demand conditions in the economy.The inflation rate stood at 4.6 per cent in the first half of FY25, down from 5.5 per cent during the same period last year.
On urban demand, the monthly review stated that, going forward, the ongoing festive season and improvement in consumer sentiments may boost urban consumer demand, though early indications were not particularly promising. Increasing Fast Moving Consumer Goods (FMCG) volume sales and a rise in three-wheeler and tractor sales show that rural demand has continued to improve, it highlighted.
It mentioned that the heavy monsoon rains have also had a calming effect on mining and construction activity. The moderation in the services sector activity in Q2 FY25, particularly in road transport-related services.
Advertisement
