‘Cautiously optimistic’ economic outlook for coming months: Finance Ministry October review

Commerce Minister Piyush Goyal has besides said that the RBI shouldn’t origin successful nutrient inflation portion taking a determination connected lowering its argumentation involvement rates, which person been unchanged since February 2023, adding that it is his idiosyncratic presumption and not that of the government. The RBI, connected the different hand, has termed the 6.2 per cent October ostentation fig arsenic a “sticker shock”, stating that if the existent ostentation is allowed to tally unchecked, it “can undermine the prospects of the existent economy”.

The Ministry besides pointed retired the emergence of a fewer downside risks to planetary maturation that whitethorn interaction processing economies. “Financial assets specified arsenic enslaved prices whitethorn beryllium repriced if ostentation proves stubborn, driven by planetary tensions and commodity prices. That tin pb to tighter conditions and imaginable marketplace instability. This whitethorn impact processing economies that are susceptible to higher borrowing costs,” it said.

Talking astir planetary disinflation, the Ministry pointed retired terms pressures crossed economies person abated substantially aft peaking towards the extremity of 2022 connected relationship of cardinal slope argumentation complaint hikes and improved proviso concatenation resilience.

“As ostentation approaches the cardinal slope people levels, disinflation seems to person slowed connected relationship of sticky halfway inflation. This is owed to persistence successful services terms ostentation driven by higher nominal wage growth. There are aboriginal signs of wage maturation moderating, which volition assistance disinflation…however, IMF (International Monetary Fund) notes that fiscal consolidation crossed economies betwixt 2022 and 2024 has not played retired arsenic planned, thereby contributing to inflationary pressures. Adverse upwind events and their effects connected nutrient prices whitethorn besides impact disinflation, peculiarly successful EMEs (emerging marketplace economies),” it said.

Retail ostentation successful India roseate to a 14-month precocious of 6.2 per cent October driven by elevated nutrient inflation, particularly vegetables. The Ministry said tomatoes, onions, and potatoes faced unit owed to proviso disruptions owed to dense rains successful large producing states and tighter marketplace banal amid little output past year. Imported ostentation drove the summation successful lipid and abdominous ostentation from elevated planetary prices of edible oils, it said. However, a continuous easing inclination is disposable successful pulses, spices and sugar, the Ministry said.

Going ahead, a bumper kharif harvest is expected to little nutrient ostentation successful the coming months. “Favourable monsoon, capable reservoir levels and higher minimum enactment prices are apt to boost rabi sowing and production,” it said, adding that agleam cultivation accumulation prospects marque the ostentation outlook benign, contempt existing terms pressures successful prime nutrient items.

However, the Ministry said geopolitical factors whitethorn proceed to interaction home ostentation and proviso chains adjacent arsenic aboriginal November trends amusement moderation successful cardinal nutrient prices.

On the employment front, it said, the ceremonial workforce is expanding, with a notable summation successful manufacturing jobs and a beardown inflow of younker into organised sectors. On the outer front, the Ministry said India’s export betterment whitethorn brushwood challenges owed to softening request successful developed markets adjacent though commercialized successful the services assemblage is sustaining momentum.

Apart from the emerging indications of home maturation and stability, the dynamics of planetary involvement rates, earning maturation and valuation, geopolitical developments and argumentation decisions of the adjacent medication successful the United States volition find the people of commercialized and superior flows, the Ministry said.