India’s economic outlook for the coming months remains “cautiously optimistic,” with the agriculture sector expected to benefit from favourable monsoon conditions, increased minimum support prices, and a steady supply of inputs, the finance ministry said in its October Monthly Economic Review on Monday.
The report highlights strong prospects for agricultural production, which is expected to ease inflationary pressures despite existing price hikes in certain food items.
“Bright agricultural production prospects make the inflation outlook benign,” it said, noting early trends in November pointed to moderation in key food prices, although geopolitical factors may continue to affect domestic inflation and supply chains.
A bumper kharif harvest is anticipated to lower food inflation in the coming months, while a favourable monsoon, adequate reservoir levels, and higher minimum support prices are expected to support rabi sowing and production, the report added.
Despite a clouded global environment and a brief period of slower momentum over the monsoon months, India’s high-frequency economic indicators showed a rebound in October. These indicators included signs of increased rural and urban demand and supply-side metrics, such as the Purchasing Managers’ Index and E-way bill generation.
On the employment front, the report noted the formal workforce is expanding, with notable increases in manufacturing jobs and a significant inflow of youth into organised sectors.
However, India’s export recovery may face challenges due to reduced demand from developed markets, although the services sector continues to perform well. The report also indicated that net foreign direct investment (FDI) inflows grew significantly in the first five months of FY25.
India’s foreign exchange reserves increased by USD 64.8 billion in 2024, the second-largest rise among major forex reserve-holding countries, after China, bolstered by stable capital inflows.
While the report pointed to emerging signs of domestic growth and stability, it cautioned that global factors—such as interest rate dynamics, earnings growth, and geopolitical tensions—will influence trade and capital flows.
The ongoing conflict between Russia and Ukraine has contributed to financial market uncertainty, with safe-haven assets like US Treasuries and gold seeing increased demand.
Globally, the report noted a mixed outlook as 2024 ends. Structural weaknesses in parts of Europe and China’s economic slowdown continue to weigh on growth, while the US economy has exceeded expectations and maintained steady expansion.
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