“Looking ahead, the outlook for inflation trajectory is positive as benign core inflation, good monsoon, and healthy sowing progress of Kharif crops are likely to keep inflation under control,” said the Finance Ministry in the document.
Retail inflation in August inched up to 3.65%, though vegetables and pulses witnessed price rise in double digits, according to official data. The retail inflation based on the Consumer Price Index (CPI), however, remained below the Reserve Bank’s median target of 4% for the second month in a row. It was at a five-year low of 3.6% in July. The headline inflation was 6.83 in August 2023.
“Major items of food inflation, such as cereals, meat & fish, milk, sugar and spices, saw a decline in inflation. The inflation rate in vegetables increased in August due to the elevated inflation rate in potatoes and onions. Food inflation in August stood at 5.7 per cent, a modest increase from July, yet notably lower than the 8.9 per cent experienced in Q1 of FY25. Inflation in the fuel & light group continued to remain in the deflationary zone for the 12th consecutive month,” said the document.
Commenting further, the ministry said the skewed spatial distribution of rain may have an impact on farm output in a few regions. However, in the absence of any serious adverse climate shocks, rural incomes and demand should get stronger, and food inflation will be milder.
Nirmala Sitharaman-led ministry in the review said as public expenditure picks up and the rural economy strengthens, the overall growth is expected to remain steady in the subsequent quarters.Ministry flags slowdown in urban consumption
While the report retained the nation’s GDP growth projection of 6.5%-7% for the current fiscal year, it said urban consumption was showing some signs of weakness, evident in declining auto sales between April and August.
High transport costs are a key constraint for Indian businesses in increasing exports, the report said.
Indian goods exports in August fell for a second straight month, which traders blamed on rising shipping costs, an economic slowdown in China and recessionary trends in Europe and the United States.
The current slowdown in auto and fast-moving consumer good (FMCG) sales in urban areas, the ministry said in its monthly economic review for August, may turn out to be transient with the advent of the peak festive season but these “signs of weakness” in urban demand warrant monitoring. The economy has expanded 27% between FY21 and FY24, more than offsetting the pandemic-induced slump, it said. The June quarter growth of 6.7%, too, was driven by a broad-based rebound in non-farm sectors.