India set for strong growth and Macro-Stability in FY24

NEW DELHI : India is expected to end FY24 with strong growth and macroeconomic stability, although inflation and the impact of external factors on the rupee could pose risks, the finance ministry said in its latest monthly economic review released on Tuesday.

In its economic review for October, the ministry said a fuller transmission of the monetary policy may also temper domestic demand, although the review noted India’s growth in FY24 should continue to be a positive outlier compared to other major economies.

At its latest rate-setting bi-monthly meeting in October, the Reserve Bank of India (RBI) kept the repo rate unchanged for the fourth consecutive time at 6.5%.

A higher repo rate makes debt and debt-servicing more expensive, thus slowing down economic activity. The rupee has depreciated 1.81% against the dollar in the last 12 months, making foreign currency borrowings and imports more expensive.

The latest economic review said policy measures by the government and the transmission of monetary policy tightening has helped rein in inflation. “Inflationary pressures have also moderated. Consumer price index (CPI) declined in October 2023, mainly due to the dip in core (non-food, non-fuel) inflation,” the review said. “The trend in Wholesale Price Index (WPI) also suggests that the cost of principal inputs to production in the economy has declined overall.”

Retail inflation fell to a four-month low of 4.87% in October as food prices and core inflation eased, thus remaining within the RBI’s comfort zone of 2-6% for the second consecutive month.