The benign outlook for global commodity prices is a positive, the ministry said in its monthly economic review for February.
Private sector investment, banking on the resilience of the Indian economy and its steady growth prospects, would “overpower the risks to the growth outlook considerably,” the review said.
“It is essential that industry recognises the mutual endogeneity of its investment spending and consumption demand,” the review said, adding that hiring and compensation in the private sector will considerably influence household consumption and balance sheets.
Fixed investments will grow 6.1% in FY25, against 8.8% in the previous year, according to the government’s second advance estimate. The latest Economic Survey has projected FY26 growth at 6.3-6.8%.
The personal income tax relief announced in the budget will increase the disposable income of the middle class and aid consumption. The 25-basis point policy rate cut in February can also bolster growth momentum, the review said.
Strong Q4 performance
Already, high-frequency economic indicators suggest improved growth momentum in the March quarter, the review said. E-way bills have shown a double-digit increase, PMIs remain in the expansionary zone and the services sector continues its robust performance.
“The growth in Q4 is likely driven by improved export growth, pick-up in government capital expenditure post-elections and impetus to economic activity associated with Kumbh Mela,” it said.
Trade risks
Tariff-related developments in multiple countries, the ministry’s review said, have heightened trade-related risks, affecting investment and trade flows globally.
Over the longer term, persistent policy uncertainty could result in structural adjustments in global value chains, manufacturing capabilities, and export capacities.
Content Source: economictimes.indiatimes.com