Inflation is well contained, economic indicators in the first half of the year are satisfactory: report of the Ministry of Finance

Latest update:Oct 28, 2024 04:23 PM IST

Risks to growth arise from escalating geopolitical conflicts, deepening geo-economic fragmentation and rising financial market valuations in some advanced economies.

Maintaining India’s growth momentum is necessary to translate this positive sentiment into actual direct and portfolio investment in the country, the finance ministry said.

The Finance Ministry on Monday said the performance of the Indian economy in the first half of FY25 was satisfactory, supported by stronger rural demand, strengthening agricultural activities, improving services sector and external sector stability. It said inflation appeared to be well contained, with the exception of sharp increases in the prices of some vegetables.

However, the ministry also said risks to growth arise from escalating geopolitical conflicts, deepening geo-economic fragmentation and rising valuations in financial markets in some advanced economies. “Their spillover effects on India could cause negative welfare impacts, affect household sentiment and change intentions to spend on durable goods,” the finance ministry said in its latest Monthly Economic Review, September 2024.

On inflation, the report said: “Apart from sharp increases in the prices of some vegetables, inflation appears to be well contained. Over the medium term, favorable factors such as restoration of reservoir levels, healthy kharif crop planting improving agricultural production prospects and adequate food grain stocks will help contain price pressures. In addition, RBI and IIMA surveys have shown that inflation expectations of households and businesses are declining. In this context, the headline inflation rate, which is affected by some food items, may not be the most accurate indicator of underlying demand conditions in the economy.”

Sentiment towards India among international direct and portfolio investors is positive. Maintaining India’s growth momentum is necessary to translate this positive sentiment into actual direct and portfolio investment in the country, they added.