Days before the beginning of the new Fiscal Year,  a Finance Ministry report says India looks forward to a bright outlook for the Financial Year 2024-25 (FY25), which will start from April 1.

Various agencies have estimated India’s growth to be between 6.5 to 7 per cent. While the Reserve Bank of India has projected a growth rate of 7 per cent for the next fiscal, the government is also expecting a growth rate of over 7 per cent. According to the second advance estimate by the Statistics Ministry, the growth rate during the current fiscal year is estimated at 7.6 per cent.

The Monthly Economic Review, prepared by the Economic Affairs Department of the Finance Ministry, said that improving global investor confidence in India has started reflecting in foreign portfolio investment flows. The announcement by Bloomberg that India would be included in its bond index from January 2025 should bolster inflows, buoyed by the fiscal prudence the government has demonstrated over the years. Bond investors will base their investment decisions on their perception of its persistence. Overall, “India looks positively towards the dawn of FY25,” the report said.

This remark was made when the general election process had just begun, and the ruling party was strongly claiming a better growth scenario. At the same time, it highlighted that inflation has seen moderation. Other high-frequency economic indicators are also showing positive signs.

Inflation outlook

The report said India‘s inflation outlook for the upcoming months is positive. Core inflation is trending downwards, indicating a broad-based moderation in price pressures. The pick-up in summer sowing is likely to help reduce food prices. Further, Retail inflation remained stable and within the target range for the sixth consecutive month. 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 helped the cause of price stability,” it said.

On the external front, the narrowing merchandise trade deficit and rising net services receipts are expected to improve the current account balance in FY24.“Strong growth accompanied by stable inflation and external account and progressive employment outlook help the Indian economy close the current financial year on a positive note,” the report said.

However, the report has also cautioned about some developments. It said that In FY25, however, the current account deficit will bear watching. An increase in domestic household savings will be necessary to finance the private sector’s capital formation in the economy. “There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade,” the report reminded.