India's Macroeconomic Buffers Support Growth Amid Global Challenges

New Delhi, May 24 (PTI) Strong macroeconomic buffers of India should help the real sectors of the economy navigate challenges possed by geopolitical tensions and continue growth momentum during the current fiscal, said a finance ministry report released on Friday.

According to the report, formal jobs are rising, as indicated by the growing net payroll additions under the Employees' Provident Fund Organisation.

While the urban unemployment rate declined y-o-y during the quarter ending March 2024, the labour force participation rate and worker-to-population ratio have improved, it said.

Along with growth and employment, the other macroeconomic indicators are also improving, said the April edition of the monthly review by the Department of Economic Affairs.

"Retail inflation clocked 4.83 per cent in April 2024, the lowest in the past 11 months. On the external front, despite global challenges, India's foreign exchange reserves are comfortable, and the Indian rupee has been one of the most resilient vis-à-vis the US dollar in recent months," it said.

From the fiscal angle, it said, robust trends in the capital spending of the general government during April-February of FY24, combined with the fiscal consolidation plans reflected in the Budget for FY25, have laid to rest concerns about debt sustainability.

Thus, the major pillars of India's macroeconomic strength, including growth, price stability and fiscal management, are directionally positive and mutually reinforcing, it said.

"The unrelenting geopolitical tensions and volatility in global commodity prices, especially of petroleum products, present substantial multi-frontal challenges. Nonetheless, the expectation is that the macroeconomic buffers nurtured and strengthened during the post-Covid management of the economy will help the Indian economy navigate these challenges reasonably smoothly," it said.

The report also said that domestic manufacturing will likely receive stronger external support in the upcoming months.

Modestly improved economic activity and consumer sentiment in Europe and a steady US economy have aided India's exports in April, it said, adding, there are reports that show that the number of organisations in the US and Europe that are focusing on reindustrialisation has increased.

Factors like the ongoing recovery in the hotel and tourism industry, increased credit flow to transport and real estate segments, policy support and robust investments in physical and digital infrastructure and logistics will help the services sector, it said.

The strong export growth in April 2024 indicates that the momentum in services trade has been carried forward into FY25, it added.

On the future inflation path, the report said, government initiatives to stabilise the prices of essential food items, including their open market sale, stock monitoring and trade policy measures are helping to stabilize food prices.

The harvest for the rabi marketing season for 2024-25 is expected to temper the prices of key items like wheat and chana.

"The prediction of a normal southwest monsoon also augers well for food production and easing of price pressures. With the assumption of normal monsoon, the RBI forecasts a 4.9 per cent retail inflation for FY25's first quarter," it said.