Kharif Harvest
New Delhi: Showing resilience in India's economy after even a temporary slowdown during the monsoon months, India is cautious about economic optimism against a backdrop of global turbulence. However, Inflation remained a concern, with food prices rising due to heavy rains disrupting supply chains for vegetables like tomatoes, onions, and potatoes. But the government expects the food inflation to calm down in the next few months on the likelihood of a bumper kharif harvest, the finance ministry said in its monthly economic review for October on Monday.
As per the report, India’s retail inflation jumped to 6.21 percent in October, a 14-month high, driven by elevated food inflation in a few vegetables. "The right agricultural production prospects make the inflation outlook benign, despite existing price pressures in select food items. A bumper kharif harvest is expected to lower food inflation in the coming months," it said, adding that a favourable monsoon, adequate reservoir levels and higher minimum support prices are likely to boost rabi sowing and production.
Amidst a global economic turbulence, the report further said that many high-frequency indicators of economic activity domestically have shown a 'rebound' in October amid a clouded global economy and a brief period of softening momentum over the monsoon months. "The indicators include rural and urban demand and supply side variables like Purchasing Managers’ Index and e-way bill generation," the report added.
With regard to the external front, the report said that India's export recovery may encounter challenges due to softening demand in developed markets. However, trade in the services sector is sustaining momentum. Net foreign direct investment inflows registered remarkable growth in the first five months of FY25.
Supported by stable capital inflows, India's forex reserves increased by $64.8 billion so far during 2024, the second-largest increase after China amongst major forex reserve-holding countries," it added.
Despite the emerging indications of domestic growth and stability, the report also pointed out that elevated global oil prices also added to price pressures as well. "Also, the dynamics of global interest rates, earning growth and valuation, geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows," the report said.
The report further said that recent developments in the ongoing conflict between Russia and Ukraine have caused some concern in financial markets with safe-haven assets such as US treasuries and gold finding a bid and geopolitical conditions remain fragile. While the United States has outpaced growth expectations, the report points to structural weaknesses in Europe, China's economic slowdown, and heightened geopolitical tensions as significant challenges for global growth.
( Source : Deccan Chronicle )
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