Amid a mixed global economic background, India quietly holds its ground, according to a latest monthly update from the Finance Ministry. After a brief moderation over the monsoon months, economic activity firmed up in October. Demand continues to grow steadily as indicated by improving FMCG sales volumes in Q2 FY25 in both urban and rural areas. Rural demand has been particularly striking as reflected in the robust growth of two-wheeler sales and record-high tractor sales in October 2024. On the supply side, the Purchasing Managers' Index for manufacturing and services indicated strong activity in the secondary and tertiary sectors.
Domestic retail inflation rose in October driven by elevated food inflation in a few vegetables. Supply disruptions from heavy rains in major producing states contributed to price pressures in tomatoes, onions, and potatoes, while elevated global prices drove up oil and fat inflation. A bumper kharif harvest is expected to lower food inflation in the coming months. Favourable monsoon, adequate reservoir levels and higher minimum support prices are likely to boost rabi sowing and production.
The Ministry noted that as 2024 draws to a close, the global economy reveals a mixed outlook. Structural weaknesses in parts of Europe and China's slowdown continued to weigh on growth. In contrast, the US economy has surpassed earlier expectations, maintaining steady expansion. Narrowing output gaps and declining commodity prices have prompted central banks worldwide to shift their policies and adopt more accommodative monetary stances. Against this backdrop, the IMF has maintained its global growth projections for 2024 and 2025 at 3.2 per cent.
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