Union finance ministry on Tuesday said the Indian economy has been remarkably resilient amid a global slowdown, buoyed by solid domestic demand. In the monthly economic review for October, the ministry also pointed out that inflationary pressure has moderated.
"On the demand side, private final consumption expenditure (PFCE) has emerged as the strongest driver of India's growth so far in FY24. The festive season has further strengthened consumption demand," the ministry said in the review.
According to the review, accumulated savings and declining rates of unemployment constitute the underlying strength of consumption demand, the wealth effect emanating from rising real estate prices and growing capitalisation of equity markets may have also strengthened consumption. "Strong consumption has also been expressing itself digitally with the UPI transactions reaching an all-time high and crossing 11 billion milestone in October 2023. The digital imprint of consumption, also seen in the substantial volume growth in electronic toll collection, signals a behavioural shift towards a cashless economy," it added. Some reprieve has come on the merchandise exports during October 2023, registering the highest growth in 11 months, the review pointed out, adding that services exports continued to turn out strongly in October 2023 as well.
The review said the supply-side economy in FY24 reprieve vindicates the confidence. "In the agriculture sector, rapid progress in the procurement of wheat and rice has ensured a continuous increase in food buffers. Rural demand has sustained sequential momentum in Q2 of FY24 as incomes from foodgrain production have been stable and inflationary pressures moderate," it said.
"At the same time, increasing production and expansion in sales have been driving growth in the manufacturing sector. Services activity has also been expanding, driven by favourable demand conditions and a strong influx of new businesses. Despite rising input costs, overall sentiment in the services sector remains upbeat, driven, among others, by an upswing in the tourism and hotel industry as leisure and business travel pick up momentum," it added.
The ministry maintained that the inflationary pressures have also moderated. "Consumer price inflation (CPI) declined in October 2023, mainly due to the dip in core (non-food, non-fuel) inflation. The overall CPI-C inflation was at a four-month low, and its core component was the lowest in the last 43 months," it said. The trend in Wholesale Price Index (WPI) also suggests that the cost of principal inputs to production in the economy has declined overall, it pointed out. The review said Foreign Portfolio Investors (FPIs), which were net sellers in October 2023, have turned into net buyers in the first half of November 2023. Stability in the rupee and adequacy in forex reserves further support India's improving performance in the external sector, it added. The Central Government is on track to achieve the budgeted deficit target for the current fiscal year as well, according to the review. The ministry mentioned in the review report that the public capital expenditure has provided a fillip to private investment.
Major globally renowned rating agencies have also shown confidence in India’s economic strength. While one agency has retained India's economic growth at 6.7% for FY24, another has raised India's medium-term potential growth estimate by 70 basis points to 6.2%, the review said.