Key economic indicators present positive outlook: India's DEA

Goods and services tax (GST) collections in the first four months of FY25 surged, manufacturing and services sectors have shown strong performance, perceived employment conditions show mixed signals and overall growth indicators suggest sustained momentum as FY25 progresses, according to the review document.

Manufacturing has witnessed growth due to increased demand, new export orders and higher output prices. According to the Reserve Bank of India’ (RBI) Order Books, Inventories and Capacity Utilisation Survey (OBICUS), there is an expansion in capacity utilisation within the manufacturing sector.

Capital expenditure remains high, supporting private investment. Merchandise exports and imports in FY25 have exceeded previous year levels, indicating a recovery in global demand, especially from India’s export partners, boosting exports.

Additionally, strong domestic demand has led to an increase in imports, widening the merchandise trade deficit.

Net foreign direct investment (FDI) inflows increased in the first three months of FY25 due to higher gross inflows. Consequently, foreign exchange reserves reached $675 billion by August 2, sufficient to cover 11.6 months of imports.

Retail inflation was at 3.5 per cent in July, the lowest since September 2019, largely due to moderated food inflation.

Labour market indicators have shown positive trends recently, though two perception surveys by RBI indicated weakening sentiments. The quarterly urban unemployment rate was stable at 6.6 per cent in Q1 FY25 compared to Q1 FY24.

Overall, India’s economic momentum seems steady, the review document noted. Manufacturing and services sectors are growing, tax collections and bank credit are increasing, and inflation is moderating. Exports of goods and services have improved compared to last year, it added.

ALCHEMPro News Desk (DS)