Finance Ministry ‘cautiously optimistic’ on India’s economic outlook; geopolitical fragility remains a concern

India's economic outlook for the coming months will be ‘cautiously optimistic’, with the agriculture sector benefiting from favourable monsoon conditions, according to the Monthly Economic Review for October 2024 released by the Ministry of Finance's Department of Economic Affairs.

The ministry also highlighted that an increased minimum support price and adequate input supply will support their outlook approach. 

“Moving forward, India's economic outlook for the coming months is cautiously optimistic, with agriculture likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs,” said the Finance Ministry in the Monthly Economic Review for October 2024.

According to the ministry, even though the agricultural production expectations are positive for controlling inflation, fragile geopolitical conditions and factors may continue to impact domestic inflation and supply chains.

India's consumer price index (CPI) inflation rose to 6.2 per cent in October 2024, fuelled by the rising prices of vegetables, oil, and fats. 

The price pressure continued to exist in tomatoes, onions, and potatoes due to a supply disruption caused by heavy rainfall in major producing states and less stock in the market along with lower output from last year, according to the report.

The higher international edible oil prices drove the domestic oil and fat inflation up in the month, while inflation on the pulses, spices and sugar tend to be easing, the spice inflation still remains in the negative territory, according to the Ministry of Finance.

India Export Challenges

While mentioning the export situation, the Ministry of Finance said that the recovery of exports may face challenges due to falling demand in the developed market.

“On the external front, India's export recovery may encounter challenges due to softening demand in developed markets,” said the ministry. “However, trade in the services sector is sustaining momentum.” 

The ministry cited factors like the dynamics of interest rates globally, earning growth and valuation, geopolitical developments, and the new United States government's policy decisions that will determine the course of trade and capital flows for the country. 

Merchandise exports saw moderate growth during the first seven months of the financial year 2025 due to weak external demand and a fall in international commodity prices. The merchandise import, on the other hand, performed well, driven by robust domestic demand, as per the monthly economic review.

According to the Finance Ministry, a larger increase in imports than exports widens the trade deficit.