The finance ministry, in its monthly economic report for February, stated it expects broad-based moderation in inflationary pressures. The pick-up in summer sowing is likely to help reduce food prices.

“Core inflation is trending downwards, indicating a broad-based moderation in price pressures… Driven by strong domestic growth and benign global commodity prices, core inflation is declining continuously. Timely and multi-frontal supply-side measures by the government have also aided price stability,” the review released on Friday said.

Retail inflation, based on the Consumer Price Index (CPI), has been declining since December and was at 5.09 per cent in February.

The monthly economic report emphasised bolstering domestic household savings to fund private investment, amid reports that net savings hit a five-year low in the financial year 2022-23. The household savings rate plummeted to a five-decade low of 5.1 per cent in the financial year 2022-23 from 11.5 per cent in the financial year 2020-21, according to a Reserve Bank of India report.

The report mentioned that the current account deficit would need monitoring in the financial year 2024-25 despite a narrowing trade deficit and rising net services receipts.

“An increase in domestic household savings will be necessary to finance private sector capital formation in the economy,” the finance ministry’s report stated.

India is looking forward to a bright outlook for the financial year 2024-25 despite headwinds like hardening crude oil prices and global supply chain bottlenecks to trade, the monthly economic report added.

It noted that strong growth accompanied by stable inflation and external account and a progressive employment outlook would help the Indian economy close the current financial year on a positive note.

The finance ministry expects that the announcement by Bloomberg that India would be included in its bond index from January 2025 should bolster inflows. “Improving global investor confidence in India has started reflecting in foreign portfolio investment flows.”

The monthly report stated that burgeoning air passenger traffic and the sale of passenger vehicles, digital payments, and improved consumer confidence indicate that private consumption demand has strengthened. “India’s strong economic performance, borne out by recent data releases, stands out amidst sluggish global growth,” the report remarked.

It highlighted the increased demand for residential properties in tier-2 and tier-3 cities, auguring well for further construction activity.

Regarding employment, the report highlighted the latest results of the Periodic Labour Force Survey, indicating a decline in the unemployment rate and an increase in labour force participation in 2023.

The report observed that non-farm employment has revived, improving the capacity to absorb labour leaving agriculture. “The ascent of the manufacturing sector employment is expected to be marked by the upscaling of enterprises and sunrise sectors emerging as catalysts for generating quality employment.”

First Published: Mar 22 2024 | 4:45 PM IST