How will the election period affect India's economic indicators?

In a recent episode of the State of the Economy podcast, BusinessLine's Shishir Sinha spoke with EY's Chief Policy Advisor TK Srivastava, focusing on recent data releases, particularly the GST numbers and the PMI manufacturing index, both of which showed substantial growth.

Srivastava interprets these indicators as reflections of the buoyancy of the Indian economy, with manufacturing PMI at 59.1 in the last quarter of FY2024 and GST collections rising to Rs 1.78 lakh crore in March 2024. At 7.6%, potential outperformed, indicating strong economic performance.

As the conversation shifts to the upcoming election quarter, there is an expectation of increased demand, especially in the MSME sector, driven by election-related spending. This is expected to further boost GST numbers and sustain economic buoyancy in the first quarter of FY25.

However, concerns are being raised about the potential impact of weather forecasts indicating high temperatures and heat waves. While this may pose challenges to the agriculture sector, which has been relatively depressed in recent quarters, it could put pressure on inflation, primarily through food prices.

Inflation-related expectations remain steady, with projections indicating a range of 5 to 5.4%. Despite the downward trend in core inflation, heavily influenced by constrained energy prices, the overall inflation outlook remains stable.

In terms of monetary policy, Srivastava recommends a cautious approach where the monetary policy committee can maintain interest rates at current levels, given a balanced inflation and growth scenario. Any policy adjustment is expected to be gradual, in the second half of FY25, after assessing the fiscal policy stance following the budget.

READ  America's economic plan will affect the global economy and global stock markets

In conclusion, the Indian economy is poised to continue expanding amid favorable growth projections for FY25, at 7 to 7.5%, driven by election-driven demand and expected post-monsoon infrastructure spending.

(Producer: Shishir Sinha, Producers: Anjana PV & Amita Rajkumar)

Dodaj komentarz

Twój adres e-mail nie zostanie opublikowany. Wymagane pola są oznaczone *