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Risks to growth arise from escalating geopolitical conflicts, deepening geoeconomic fragmentation and elevated valuations in financial markets in some advanced economies.
Sustaining India’s growth momentum is essential to turn these positive sentiments into actual direct and portfolio investments in the country, says the finance ministry.
The finance ministry on Monday said the performance of the Indian economy has been satisfactory during the first half of FY25, supported by strengthened rural demand, enhanced agricultural activity, an improving services sector and a stable external sector. It said inflation appears well contained, except a sharp rise in the prices of a few vegetables.
However, the ministry also said risks to growth arise from escalating geopolitical conflicts, deepening geoeconomic fragmentation and elevated valuations in financial markets in some advanced economies. “Their spillover effects on India could cause negative wealth effects, impacting household sentiments and altering spending intentions on durable goods,” the finance ministry said in its latest ‘Monthly Economic Review September 2024’.
On inflation, it said, “Barring a sharp rise in the prices of a few vegetables, inflation appears well contained. In the medium term, favourable factors, such as rejuvenated reservoir levels, healthy kharif crop sowing brightening the agriculture output prospects and ample food grain stocks, would help contain price pressures. Also, inflation expectations by households and businesses have been softening, as RBI and IIMA surveys indicated. In this context, the headline inflation rate, influenced as it is by a few food items, may not be the most accurate gauge of the underlying demand conditions in the economy.”
Sentiment towards India among international direct and portfolio investors is positive. Sustaining India’s growth momentum is essential to turn these positive sentiments into actual direct and portfolio investments in the country, it added.
