India’s economic momentum remains strong, with real GDP growth projected at 6.5-7 percent for the fiscal year 2024-25, according to a recent report from the finance ministry. Despite some concerns about the monsoon, the economy has shown resilience in the first four months of the fiscal year.
One of the key indicators of economic health is tax collections, particularly indirect taxes, which reflect transactions in the economy. The report highlights that tax collections have been growing healthily in the first four months of FY25. This growth is attributed to the widening of the tax base and increased economic activity.
The report also points out the strong performance of the manufacturing and services sectors, as indicated by the purchasing managers‘ indices. Manufacturing growth has been driven by expanding demand conditions, a rise in new export orders, and growth in output prices. This is a positive sign for the overall health of the economy.
On the fiscal front, the Union Budget for FY25 has laid out a path for fiscal consolidation. Strong revenue collection, disciplined revenue expenditure, and robust economic performance are expected to help reduce the fiscal deficit. Additionally, capital expenditure remains high, supporting private investment and economic growth.
In terms of inflation, retail inflation decreased to 3.5 percent in July 2024, the lowest since September 2019. This decrease was driven by moderation in food inflation. The steady progress of the southwest monsoon has supported kharif sowing, which bodes well for crop production and food inflation in the coming months.
Overall, the report paints a positive picture of India’s economic outlook. Despite challenges such as an erratic monsoon, the economy is on a steady path of growth. Tax collections, manufacturing, services, fiscal consolidation, and inflation are all moving in the right direction. The projection of real GDP growth at 6.5-7 percent for FY25 seems appropriate based on the current economic indicators.
In conclusion, India’s economic momentum remains intact, with various sectors showing positive growth trends. The government’s focus on fiscal consolidation and investment in key sectors is expected to support continued economic growth in the coming months.