To maintain economic growth amid global uncertainties, all concerned parties will need to work together. This has been said in the monthly report of the Finance Ministry released on Thursday. The country's GDP (gross domestic product) growth rate slowed down in the second quarter of the current financial year and came down to 5.4 percent.
The Finance Ministry, in its monthly economic review for November, said that after the slowdown in the second quarter of the financial year 2024-25, the outlook for the third quarter looks better. This is revealed by important data (GST collection, PMI etc.) for October and November.
It said that increase in Minimum Support Price (MSP) for Rabi crops, high water level in the reservoir and adequate fertilizer availability are good signs for Rabi sowing. Overall, industrial activities are likely to accelerate. According to the report of the Finance Ministry, the growth outlook in the second half of the financial year 2024-25 is better than the first half.
It said that the slowdown in demand could possibly be due to the monetary policy stance and prudential measures of the Central Bank.
According to the report, the good news is that the central bank reduced the cash reserve ratio (CRR) from 4.5 percent to four percent in its monetary review meeting in December 2024. This will help in boosting credit growth, which has slowed down somewhat in the financial year 2024-25.
According to the report, if we look at the financial year 2025-26, new uncertainties have emerged and global trade growth looks more uncertain than before. It also says that the high level of the stock market is creating a big risk. The strengthening of the dollar and reconsideration of policy rates in the US have put emerging market currencies under pressure.
This will make monetary policy makers in emerging economies think more deeply about policy rates. It says, … Overall, sustaining growth will require all stakeholders to work together and commit.
Regarding PMI, the report said that the figures for October and November show that new orders of companies are increasing and demand is strong. With this, they are expanding. The report says the expected increase in government capital expenditure is expected to support the cement, iron, steel, mining and power sectors. However, domestic growth is threatened by uncertainties and aggressive policies in many major economies.
Regarding the demand side, it has been said that rural demand remains strong. This can be estimated from the growth of 23.2 percent and 9.8 percent in sales of two-wheelers and three-wheelers and sales of domestic tractors respectively during October-November, 2024. Urban demand is increasing. In October-November, 2024, sales of passenger vehicles increased by 13.4 percent on an annual basis. Strong growth was recorded in domestic air passenger traffic.
According to the report, RBI has estimated consumer price index based inflation to be 4.8 percent for the financial year 2024-25. Whereas it is estimated to be 5.7 percent in the third quarter and 4.5 percent in the fourth quarter. It has been said that the outlook of the agriculture sector is optimistic. This gives hope that the pressure on food prices will gradually reduce.
