With uncertainties linked to higher food and energy prices persisting amid geopolitical tensions, the Finance Ministry in its monthly review has said that risks of recession may reappear in 2024.
Global trade numbers are expected to be under pressure owing to a declining world merchandise trade volume, which was reflected in the WTO’s October 2023 Global Trade Outlook and Statistics. Higher value imports and lower exports dragged India’s trade deficit in October to a record high.
India’s October gold imports surged 60% from a year earlier to a 31-month high, news agency Reuters reported.
The Finance Ministry in its October Review said that higher growth in imports relative to exports has resulted in an increase in the overall merchandise trade deficit compared to the corresponding period last year.
“Gold and silver imports almost doubled in October 2023 compared to October 2022, signalling the robust demand during the festival season. Yet, cumulative estimates for the trade deficit, on the back of slowing merchandise and service imports, show a considerable decline in April-October 2023 over the corresponding period of 2022,” it said in the report.
A decline in international crude oil prices and continued moderation in core inflation are likely to control India’s inflationary pressures going forward, it said.
On the rural demand front, the ministry said sequential momentum in the second quarter. “Rural demand has sustained sequential momentum in Q2 of FY24 as incomes from foodgrain production have been stable and inflationary pressures moderate.”
The ministry said that private final consumption expenditure, or PFCE, has emerged as the strongest driver of India’s growth so far. The festive season only strengthened this growth, the ministry said. Yet, a fuller transmission of the monetary policy may temper domestic demand, it said.
The overall sentiment in the services sector remained upbeat, despite the rising input costs. This was driven by an upswing in the tourism and hotel industry as leisure and business travel picked up momentum.
