“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,” the monthly review said.
Higher agriculture output to make inflation outlook “benign”
The government also said that “bright agricultural production prospects” could be beneficial for lower prices, making the future inflation outlook “benign”. This is despite the existing inflationary pressures in select food
items.
India’s year-on-year Consumer Price Index (CPI) inflation last month reached 6.21%, higher than CNBC-TV18’s poll estimate of 6% and significantly above September’s rate of 5.5%.
The inflation rate was driven by a sharp rise in food prices, with the Consumer Food Price Index (CFPI) reaching a provisional 10.87% in October, highlighting an intensified pressure on household expenses.
Early November trends show moderation in food inflation
According to the October economic review, “Early November trends signalled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains.”
Last month, the surge in food costs was primarily led by rising prices of essential items such as vegetables, fruits, and oils and fats, with top vegetables—tomatoes, onions, and potatoes—remaining costly throughout the month. Conversely, notable declines in inflation were observed in pulses, eggs, sugar, and spices.
Export recovery to confront hurdles amid demand slowdown
On the external front, the Finance Ministry cautioned that India’s export recovery could face challenges on the back of softening demand in developed markets. “However, trade in the services sector is sustaining momentum,” it said.
“Apart from the emerging indications of domestic growth and stability, the dynamics of global interest rates, earning growth and valuation, geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows.”
The Russia-Ukraine war factor
The escalating conflict between Russia and Ukraine have triggered major turbulence in the financial markets globally, with investors therefore rushing to safe-haven assets such as US Treasuries and gold.
“Geopolitical conditions remain fragile,” the Finance Ministry warned.
Also Read : Nifty 50 jumps over 300 points, Sensex returns to 80,000 as markets extend rally
