Economy ‘satisfactory’ in first half of fiscal year; Troubled waters ahead: Finmin report | Latest Indian News

India’s economy has performed well in the first half of the current fiscal year, according to the finance ministry’s monthly economic report released on Monday. However, the ministry warned of potential disruptions from “escalating” geopolitical conflicts, “deepening” geo-economic fragmentation and “increasing” valuations in the financial markets of some developed countries.

Expressing confidence in rural demand compared to urban consumption in the first half of FY25, the report claims that the Indian economy will grow by 6.5-7% in the current fiscal year. “Risks stem from global factors such as geopolitical conflicts, increasing geo-economic fragmentation, uncertainty regarding the trade policies of major economies and the subsequent reaction of financial markets,” the report said.

The Reserve Bank of India (RBI) has projected a more optimistic growth figure, projecting real gross domestic product (GDP) growth at 7.2% in 2024-25.

However, securities firm Nomura disputed this forecast in a report titled “India: Urban Demand Likely to Remain Weak” published on October 28. “We believe the Indian economy has entered a cyclical slowdown,” Nomura said. “Concurrent and leading growth indicators point to a further slowdown in GDP growth and the RBI’s forecast of 7.2% for FY25 is overly optimistic in our view.”

“We see growing downside risks to our own GDP growth forecasts of 6.7% in FY25 and 6.8% in FY26,” it said, citing “lower real wage growth, weakening deferred growth” as key factors. demand, high interest rates and tight lending conditions.” Reasons for the decline in urban demand.

The Treasury cited several factors affecting urban demand, including “softening consumer sentiment, limited footfall due to above-normal rainfall and seasonal periods during which people tend to hold off on new purchases.” Urban fast moving consumer goods (FMCG) sales growth declined from 10.1% in Q1 FY24 to 2.8% in Q1 FY25.

In terms of inflation, the report noted a rise in September, mainly due to the erratic impact of the monsoon on vegetable supplies. However, a finance ministry official, speaking on condition of anonymity, said: “While many countries are grappling with inflationary pressures, India has been successful in keeping inflation within manageable limits.”