India’s growth story to continue, forecast of good rains easing inflation concerns: FinMin

Despite global headwinds, India has a pivotal role in supporting the global growth trajectory, says a Finance Ministry report. Forecast of a good monsoon eases inflationary concerns, it said.

These remarks come at a time, when various domestic and global agencies have raised India’s growth estimate for the current fiscal. Last week, the International Monetary Fund (IMF) upped its growth projection for India by 30 basis points to 6.8 per cent for the current fiscal year.

Earlier, the Asian Development Bank (ADB) revised its projection to 7 per cent from 6.7 per cent for the current fiscal. The RBI estimates growth at 7 per cent.

“India continues to be the fastest-growing major economy with positive assessments of the growth outlook for the current financial year by international organisations and the RBI,” said the Monthly Economic Review (MER), prepared by the Economic A airs Department of the Finance Ministry.

GROWTH UPGRADES

It also took note of the revision in projection for the just

Nirmala Sitharaman

ended fiscal year (2023-24 or FY24). The IMF, in its April 2024 World Economic Outlook (WE), revised upwards its estimate of India’s real GDP growth for FY24 to 7.8 per cent from 6.7 per cent in its January update and 6.3 per cent in its October 2023 WEO.

“Resilient growth, robust economic activity indicators, price stability, and steady external sector performance continue to support India’s promising economic performance amidst uncertain global conditions,” the FinMin report said.

INFLATION ISSUE

It dealt with the issue of inflation in detail. It mentioned that global inflation remains contained overall and has declined in most regions, but the recent uptick in inflationary pressures across nations along with persistence in core inflation warrant attention.

In India, the government and the RBI’s e orts to combat inflation, including calibrated policy rates, strengthening food bu ers, and easing imports, have ensured e ective inflation management.

Consequently, “retail inflation in FY23-24 witnessed a significant decline, reaching its lowest level since the Covid-19 pandemic, with core inflation dropping to 3.3 per cent in March. Further, a predicted above-normal monsoon in 2024 bodes well for a good harvest, easing inflation concerns,” the report said.

ROBUST FOREX FLOWS

On foreign exchange inflows, it said that FPI (Foreign Portfolio Investor) flows saw a significant turnaround in FY24. Supported by rising economic growth, a favourable business environment, and strong macroeconomic fundamentals, India witnessed robust FPI flows in FY24.

Net FPI inflows stood at $41 billion during FY24, as against net outflows in the preceding two years. This is the second-highest level of FPI inflow after FY15. India received the highest equity inflows among emerging market peers during the year.

“The imminent inclusion of India’s sovereign bonds in global indices is likely to spur demand for exposure to India further,” it said. Though owing to a rise in repatriation/ disinvestment, net FDI moderated to $25.5 billion in the first ten months of FY24 from $36.8 billion a year ago, the forex reserves reached an alltime high $645.6 billion as on March 29. This is “su¬cient to cover 11 months of projected imports and more than 100 per cent of total external debt,” it said.