The report noted that global economic factors, including shifts in interest rates, earnings growth, and geopolitical developments, will significantly influence trade and capital flows.
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”.
It also added that the geopolitical tensions, especially the ongoing conflict between Russia and Ukraine, have added to financial market uncertainty. Safe-haven assets like U.S. Treasuries and gold have seen increased demand as investors look for stability.
These fragile conditions continue to weigh on global markets and could impact India’s trade environment.
It said “Recent developments in the ongoing conflict between Russia and Ukraine have caused some concern in financial markets with safe-haven assets such as US Treasuries and gold finding a bid”.The report also noted that India’s export growth may encounter hurdles in the coming months due to weakening demand in developed markets.While the global slowdown poses challenges for merchandise exports, the ministry noted that the services trade continues to maintain its strong momentum.
It said “On the external front, India’s export recovery may encounter challenges due to softening demand in developed markets. However, trade in the services sector is sustaining momentum”.
Despite these external challenges, the report outlined that the India’s domestic economic outlook remains cautiously optimistic. Agriculture, in particular, is set to benefit from favorable monsoon conditions, higher minimum support prices, and sufficient input supplies.
Strong agricultural production prospects are expected to keep inflation in check, despite existing price pressures in some food items. Early November trends have already shown a moderation in key food prices. However, geopolitical risks could still affect domestic inflation and supply chains.
The report highlighted that the high-frequency indicators of economic activity in India have shown signs of recovery after a brief slowdown during the monsoon months.
In October, indicators such as the Purchasing Managers’ Index (PMI), E-way bill generation, and metrics of rural and urban demand exhibited a positive rebound. The formal employment sector is also seeing growth, with an expanding workforce in manufacturing and a significant inflow of young workers into organized sectors.
These trends signal a strengthening domestic economy, even as India navigates a challenging global environment.