Govt Report Maintains Economic Growth Forecast But Flags Global Risks

The government’s monthly economic report, released on Monday, has maintained its growth forecast for India while highlighting significant global risks to the economy. The report identifies geopolitical conflicts and uncertainties regarding trade policies in major economies as key concerns.

“Growth risks stem from escalating geopolitical tensions, increasing geoeconomic fragmentation, and high valuations in financial markets in certain advanced economies,” the report states. It warns that these factors could negatively influence household sentiment in India, potentially impacting consumer spending on durable goods in the country, which is the world’s fifth-largest economy.

The Indian government has projected economic growth for the current fiscal year to be between 6.5% and 7%, a decrease from the previous year’s 8.2% due to rising geopolitical risks. However, the report maintains a positive outlook for the Indian economy, citing a favorable agricultural outlook and anticipated increased demand during the festive season.

While rural demand is on the rise, urban demand seems to be slowing, attributed to softening consumer sentiments, reduced foot traffic from above-average rainfall, and seasonal periods when consumers typically hold off on new purchases. The report emphasizes the need to monitor underlying demand conditions closely.

Additionally, it notes that retail inflation remains largely controlled, except for the potential for a sharp increase in vegetable prices. “The near-term trajectory of food inflation will depend significantly on the price trends of tomatoes, onions, and potatoes in the coming months, highlighting the need for focused efforts to manage these prices in the short term,” it concludes.

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