NEW DELHI: The Indian economy remains resilient in the face of rising global crude oil prices, finance ministry said in a monthly economic review for August. Despite a few risks to the economic outlook including the monsoon deficit, which could impact both Kharif and Rabi crops, and the possibility of a slump in stock market due to an overdue global recession, the economic outlook remains positive, with a baseline estimate of 6.5% real GDP growth for the financial year 2023-24 (FY24), the report said.
While acknowledging concerns over the oil price hike, the ministry stated that there is no need for alarm bells yet. Additionally, the review noted that certain food items that had previously contributed to inflation, such as Tur Dal, will see relief once imports enter the market.
The review pointed to encouraging signs of economic activity, citing high-frequency indicators like record e-way bill generation and electronic toll collections. It also highlighted a 4.2% increase in capital goods imports, suggesting that higher public capital spending is stimulating private investment.
The ministry emphasised the good health of the private sector, supported by data on advance tax payments for the second quarter, indicating increased business investments. It also noted that while risks such as a potential stock market correction and geopolitical developments could impact investment sentiment, the overall effect on India’s economic activity should be relatively contained.
Regarding monsoon and inflation, the review acknowledged the impact of the monsoon deficit on crop production but found September’s rains to be heartening as they partially offset the deficit.