Inflation outlook benign: FinMin

Amid a mixed outlook for the world economy, India quietly holds its ground and economic activity has firmed up in October after a brief moderation over the monsoon months, and food inflation which spiked consumer prices at a 14-month high pace of 6.2% last month is expected to cool off in coming months, the Finance Ministry said on Monday.

“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,” the ministry’s economic affairs department said in its monthly review of the economy for October.

In its last monthly economic review, the ministry had acknowledged emerging concerns of softening consumer sentiments and faltering demand, particularly in urban India, as well as a moderation in industrial momentum in recent months.

Asserting that 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 latest review said early November trends suggest a moderation in key food prices. “Bright agricultural production prospects make the inflation outlook benign, despite existing price pressures in select food items,” it noted, adding that geopolitical factors may continue to impact domestic inflation and supply chains.

Although the labour market is showing signs of growth, the review conceded that Reserve Bank of India surveys paint a more cautious picture of urban consumers’ perceptions of employment conditions and manufacturers’ hiring sentiments.