Country’s economic performance satisfactory, demand needs to be monitored: Finance Ministry report

New Delhi| According to a report by the Finance Ministry, the performance of the Indian economy during the first half of the current financial year was satisfactory, but there remains concern about the further demand situation. The report said the outlook for the Indian economy is good, helped by a stable external sector, a positive agricultural outlook, expected improvement in demand due to the festive season and an increase in government expenditure. This will also boost investment activities.

However, the September edition of the monthly economic review released by the Department of Economic Affairs on Monday said that the demand situation in the economy should be monitored. Urban demand appears to be declining due to soft consumer sentiment, limited customer numbers due to above normal rainfall, and people avoiding new purchases during seasonal periods.

Additionally, increased geopolitical conflicts in some advanced economies, deepening geo-economic fragmentation and higher valuations in financial markets are posing risks to growth. It says that their impact on India can have negative property impacts, affect domestic sentiments and change the intention to spend on durable goods. After two months of low inflation, consumer price inflation rose in September, mainly due to the impact of irregular monsoon on the supply of some vegetables.

The report said that except the sharp increase in the prices of some vegetables, inflation is completely under control. The report said that in the medium term, increase in water in reservoirs and good sowing of Kharif crop will increase the possibilities of agricultural production. Apart from this, adequate food grain reserves will be helpful in controlling price pressure.

It said sentiment towards India among international direct and portfolio investors is positive. It has also been said that to convert these positive sentiments into real direct and portfolio investment in the country, it is necessary to maintain the pace of development.

Foreign investors, however, have continued to sell in the Indian market and pulled heavily from equities this month at Rs 85,790 crore (about USD 10.2 billion) due to Chinese stimulus measures, attractive share valuations and high pricing of domestic equities.

October is becoming the worst month ever in terms of selling by foreign investors. In March 2020, FPI has withdrawn Rs 61,973 crore from equity. The recent sell-off, after the highest investment in nine months of Rs 57,724 crore in September, showed. According to the report, the performance of the external sector continues to be good, indicated by rising capital inflows, stable rupee and comfortable foreign exchange reserves.

Foreign exchange reserves surpassed the USD 700 billion mark at the end of September 2024, placing India among the top four countries with reserves of over USD 700 billion. The report said that jobs in the manufacturing sector continue to increase. The results of the annual survey of industry for 2022-23 indicate that.

“The net payroll under the Employees’ Provident Fund Organization (EPFO) has increased”, the report said. Formal job creation has increased. However, there have been reports of job losses due to the use of artificial intelligence (AI). It needs to be monitored.”

According to the report, total inflation excluding food items has moderated. “We believe the Indian economy will grow between 6.5 and 7.0 percent in the current fiscal year”, the report said.