With the uptick in private investment and inflation trending down, the Finance Ministry on Friday said that India’s outlook for the next fiscal looks positive.
The country’s strong economic performance, borne out by recent data releases, stands out amid sluggish global growth, it said.
It highlighted that there are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25.
In its Monthly Economic Review, the ministry also said that the inclusion of Indian bonds in the Bloomberg bond index from January 2025 should bolster inflows.
Building on the momentum from the previous two quarters, India’s economic growth surged to a six-quarter high in the third quarter of FY24, exceeding 8% for the third consecutive time.
The higher second advance estimate for economic growth in FY24, released after about eight weeks from the first estimate incorporating more updated information on the recent economic dynamics, has bolstered the optimism about the economy.
It said that many non-governmental expert agencies have also upped their growth projections. While consumption remained steady, robust investment activity is driving growth. The continued focus on public investment seems to have crowded in private investment.
Strong aggregate demand has stirred manufacturing and construction activities and accompanying professional, financial and real estate services.
“The ascent of manufacturing sector employment is expected to be marked by upscaling of enterprises and sunrise sectors emerging as catalysts for generating quality employment,” it added.
It said strong growth accompanied by stable inflation and external account and progressive employment outlook will help the Indian economy close the current financial year on a positive note.
The report highlighted that the services exports remain strong, resulting in an increase in net services receipts. Supported by India’s strong macroeconomic fundamentals, foreign portfolio investors have turned net buyers in February while foreign direct investment inflows are still awaiting momentum.
The number of new project announcements remained stable, keeping India among the top 5 destinations for global greenfield projects. Retail inflation remained stable and within the target range for the sixth consecutive month.
Driven by strong domestic growth and benign global commodity prices, core inflation is declining continuously. Timely and multi-frontal supply-side measures by the government have also helped the cause of price stability, the Finance Ministry said in its report.
Highlighting the data showcasing positive numbers for India, the report said the latest results of the Periodic Labour Force Survey indicate a decline in the unemployment rate coupled with rising labour force participation in 2023.
RBI’s KLEMS database updated up to 2021-22 points to a revival of the structural transformation of the Indian labour market, with the buoyant non-farm sector being able to absorb the labour force freed from farm operations.
In the organised manufacturing sector, the results of Annual Survey of Industries for FY21 and FY22 showcased the Indian manufacturing sector’s resilience and its turnaround in employment post the pandemic.
The report said the increased demand for residential properties in tier-2 and tier-3 cities augurs well for furthering construction activity.
The latest Household Consumption Expenditure Survey (HCES) 2022-2023 results suggest inclusive growth in the past decade, also reiterating improved rural demand scenarios.