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Informist, Thursday, Aug 22, 2024

--Fin min: Svcs sector sentiment upbeat amid high business expenses 
--Fin min: Steel demand, cement output show increasing housing demand 
--Fin min: FY25 GDP growth aim of 6.5-7% seems appropriate as of now 
--Fin min: Energy transition, AI pdts' demand to aid trade growth 2024 
--Fin min: Recovery in global demand giving a boost to India exports 
--Fin min: See external sector trend reversal in FY25 

--Fin min: Replenishing water levels to aid in lowering food inflation 

--Fin min: India econ momentum intact despite erratic monsoon 
--Fin min: With moderate core inflation, CPI inflation outlook positive 

--Fin min: Capex, total spending seen picking up in remainder of FY25 

--Govt: Budget announcements to give boost to MSME, mfg, svcs sectors 

--Fin min: Production, orderbook, jobs, export sentiment moderated Jul 
--Fin min: Consumer confidence low in current econ situation 

 

NEW DELHI – The projection of real GDP growth of 6.5-7.0% for 2024-25 (Apr-Mar), made in the Economic Survey for 2023-24, seems appropriate as of now, the finance ministry said. "India's economic momentum remains intact," the ministry said in the Monthly Economic review for July released today. The government's projection for GDP growth in 2024-25 is lower than the Reserve Bank of India's projection of 7.2%. 

 

Beating Street estimates, the GDP growth for 2023-24 was 8.2%. Continuing the past trend, the ministry today said that the manufacturing sector is showing "strong performance", driven by expansion in demand conditions, a rise in new export orders, and growth in output prices. "This expansion, driven by buoyant demand conditions and a surge in production volumes, bodes well for the overall health of the economy," the ministry said. 

 

Though the finance ministry cited July data, which was stronger than expected, data released today showed that India's private sector activity slowed down slightly in August compared with the previous month because of a slower expansion in the manufacturing sector. The HSBC Flash India Composite Purchasing Managers' Output Index, compiled by S&P Global, eased to 60.5 in August from the final print of 60.7 in July.

 

On the demand side, the increase in steel consumption and cement production is substantially induced by continuously strengthening housing demand, as reflected by a rise in housing sales in Apr-Jun compared to the same period last year, "....reflecting positive consumer sentiments about real estate investments on the back of strong macroeconomic fundamentals," the finance ministry said. 

 

As far as the external sector is concerned, the ministry said there was evidence of a trend reversal in 2024-25, with merchandise exports and imports surpassing their previous year's level. "Recovery in global demand across India's major exporting partners has given a boost to exports, while a strong domestic demand has encouraged imports." India's merchandise exports grew 4.1% and imports increased 7.6% in the first four months of 2024-25.

 

Additionally, rising demand for products related to energy transition and artificial intelligence is expected to contribute to trade growth in 2024, the monthly economic review said.

 

Besides manufacturing, the services sector is also doing well, the ministry noted. Despite a rise in wages and material costs which pushed up business expenses, overall sentiment in the services sector remains upbeat, with contact-intensive sectors being the major growth drivers, the ministry said. 

 

Overall, India's economic momentum is intact despite an erratic monsoon, the report said. Since Jun 1, India has received 650.8 mm of rainfall as of Wednesday, 4?ove the normal of 627.4 mm for the period, the estimate from the India Meteorological Department showed. 

 

"Despite a somewhat erratic monsoon, reservoirs have been replenished," the report said. This is likely to give impetus to crop production and lower food inflation, the report added. India's food inflation fell to 5.42% in July from 9.36% in June.

 

"With moderate core inflation and positive progress in monsoon, the headline inflation outlook is positive," the ministry said. Core inflation, which strips out fuel and food items, rose to 3.4% in July from a record low of 3.1% in June. This was the first time core inflation has risen in 20 months.

 

The government's capital expenditure and total expenditure are expected to pick up in the remainder of the year, the report said. The government's total expenditure was down 7.7% on year as of June, of which capital expenditure fell 35%. "Going forward, the measures announced in the Union Budget FY25 for the MSMEs (micro, small, and medium enterprises), manufacturing and services sectors are expected to give a big boost to the sectors," the report said.

 

However, there are some concerns with respect to consumer confidence, the report said. Production, order books, employment, and export sentiments have moderated, it said. Consumption demand has been a concern for the government for some time now. It was at a 4.0% in 2023-24, the lowest since the pandemic-hit year of 2020-21.

 

"Both the consumer and the industrial outlook surveys need to be monitored for future trends," the ministry said. The statistics ministry on Aug 31 will release data on the GDP growth for Apr-Jun, which will also give detail on consumer demand growth.   End

 

US$1 = 83.95 rupees

 

Reported by Krity Ambey and Priyasmita Dutta

Edited by Tanima Banerjee

 

 

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