In its monthly economic assessment report for February, the Union finance ministry said that inflationary pressures had broadly moderated and that India's growth in FY 25 had been strong. However, it also recommended that domestic family savings be encouraged to finance private investment.
According to the finance ministry's assessment, "a rise in domestic household savings will be necessary to finance private sector capital formation in the economy." Furthermore, as per the RBI analysis, the household savings rate fell from 11.5% in 2020–21 to 5.1% in 2022–23, a five-decade low.
In addition, the finance ministry's assessment stated that even with a declining trade deficit and increasing net services revenues, the current account deficit would need to be closely watched in FY25. According to the research, there should be a general slowdown in inflationary pressures as summertime planting is expected to contribute to lower food costs.
Core inflation is on the decline, suggesting a general relaxation of pricing pressures. Strong domestic growth and stable global commodity prices are the main drivers of core inflation's ongoing decline. Price stability has also benefited from the government's prompt and multifaceted supply-side actions, according to the evaluation published on Friday.
Based on the Consumer Price Index (CPI), retail inflation has been declining since December and was at 5.09 percent in February. The monthly economic report further stated that despite obstacles like rising crude oil prices and trade bottlenecks in the global supply chain, India is looking forward to a promising FY25.
Strong growth, stable inflation, a steady external account, and a solid employment outlook, according to the report, would enable the Indian economy to end the current fiscal year with a flourish. The government anticipates that more inflows would result from Bloomberg's declaration that India will be included in its bond index starting in January 2025.
