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India’s economic momentum remains “intact” on the back of expansion in manufacturing and services sectors, the finance ministry said in its monthly economic report, while exuding hope of food inflation cooling down with monsoons replenishing water levels in reservoirs.
“As of now, the projection of real GDP growth of 6.5%-7% for FY25, made in the economic survey for 2023-24, seems appropriate,” the report said Thursday.
It noted that the resilience of domestic activity is also reflected in the strong performance of the manufacturing and services sector purchasing managers’ indices. “The manufacturing growth has been driven by expansion in demand conditions, a rise in new export orders and growth in output prices,” it added.
The report said steady progress of the southwest monsoon had supported kharif sowing.
“Replenishing water levels in reservoirs bodes well for the current kharif (summer-sown) and upcoming rabi (winter-sown) crop production,” it said, adding that this will further aid in reducing food inflation in the coming months.
Retail inflation fell to a near five-year low of 3.54% in July, largely due to a base effect as food prices eased from previous highs.
The report said the FY25 budget has laid out a glide path of fiscal consolidation. Supported by strong revenue collection, discipline in revenue expenditure and robust economic performance, the fiscal deficit is projected to decline.
At the same time, it said, capital expenditure is maintained at high levels, supporting the fledgling private investment cycle.
Tax collections, especially indirect taxes, which reflect transactions, are growing healthily and so is bank credit, it said.
“Inflation is moderating and exports of both goods and services are doing better than they did last year. Stock markets are holding on to their levels. Foreign direct investment is looking up as gross inflows are rising,” it said.
The report said stronger global demand had boosted India’s goods exports but imports had also risen due to strong domestic demand. India’s goods trade deficit was $23.5 billion in July.
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