In its monthly economic report for April, the ministry said the industrial activity is rising and fixed investment is gathering strength on the back of elevated government capital spending that is also crowding in private investment.
“Major pillars of India’s macro-economic strength, including growth, price stability and fiscal management, are directionally positive and mutually reinforcing,” it said.
Commodity shock
The report cautioned that unrelenting geopolitical tensions and volatility in global commodity prices, especially of petroleum products, “present substantial multi-frontal challenges”.
“Nonetheless, the expectation is that the macro-economic buffers nurtured and strengthened during the post-Covid management of the economy will help the Indian economy navigate these challenges reasonably smoothly.” The positive farm sector outlook, backed by normal monsoon and easing of food prices, should also help India “firewall against any adverse pressures” that may arise from global commodity price shocks, it said.
Manufacturing, services outlook
Manufacturing outlook remains bright on the back of increased capacity utilisation and expected stronger external support following a modest improvement in European demand and a steady US economy that could prop up exports. The services sector will get a leg-up from the ongoing recovery in the hotel and tourism industry and increased credit flow to transport and real estate, the report added. High-frequency indicators like the GST collections, e-way bills, electronic toll collections, sale of vehicles, purchasing managers’ indices and the value and number of digital transactions attest to the growing strength of the economy, the report said.
Inflation and rural demand
The ongoing Rabi harvest, it added, could temper prices of key items like wheat and chana, and the forecast of a normal monsoon season also augurs well for food production and easing of inflation. Retail inflation was 4.83% in April, the lowest in 11 months. While investment remains strong, consumption is being propelled by consistent growth in urban demand and a resurgence in rural demand, it said. As per Nielsen IQ data, FMCG sales volume in rural markets rose 7.6% in the March quarter from a year before, outpacing urban demand for the first time in five quarters. Even two and three-wheeler sales increased by 14.2% on year in FY24.
Employment scenario
The job market trends, the report said, are “reassuring.” The urban unemployment rate dropped 10 basis points to 6.7% in the March quarter from a year earlier, and the labour force participation rate and worker-to-population ratio have improved. Formal jobs are rising, it said, pointing at the growing net payroll additions under EPFO.
Content Source: economictimes.indiatimes.com