India’s economy shows resilience, despite inflation concerns

The July economic review by the NCAER highlights a robust economic outlook for India, with several positive indicators. The Business Confidence Index improved significantly, rising from 138.2 in the January-March quarter to 149.8 in the June quarter, reflecting enhanced business sentiment. The review notes that the FY25 budget focuses on capital expenditure and maintaining fiscal discipline, projecting a fiscal deficit of 4.9% of GDP, down from 5.1% in the interim budget. The nominal GDP growth projection remains at 10.5%.

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High-frequency gauges indicate that the economy is still robust. The Business Confidence Index also showed improvement in the June quarter compared to the preceding three months, according to the July economic review published by the National Council of Applied Economic Research (NCAER).

The NCAER-NSE Business Confidence Index rose from 138.2 in the January–March quarter to 149.8 in the June quarter, “indicating improvement in business sentiments,” according to the report.

As per NCAER, the entire FY25 budget prioritises capital expenditure and fiscal prudence. The fiscal deficit is projected to be 4.9% of GDP for FY25, down from the interim budget level of 5.1%, while the nominal GDP growth projection is kept at the interim budget level of 10.5%.

NACER reported that industrial production increased, the Purchasing Managers’ Index for manufacturing and services continued its expansionary momentum, and the Goods and Services Tax collections continued to be strong. May 2024 saw a 20.8% annual increase in bank outstanding credit, according to the NCAER review.

It also indicated that June retail inflation would increase to 5.08% from 4.80% in May and that the growth of the core infrastructure sector would decline to 6.3% from 6.7% in April.

While some industries, such as travel and hospitality, banking, and retail, increased hiring, employment indicators showed contradictory patterns. The Naukri JobSpeak Index moderated in June compared to the same month last year. While demand under the Mahatma Gandhi National Rural Employment Guarantee Act eased in June compared to a year earlier, the number of net new subscribers under the Employees’ Provident Fund Organisation increased.