07/04/2025
The GST department reported a significant monthly collection change, with a YoY increase of 17.98% and a MoM increase of 12.3%, totaling Rs. 2.1 Lakh Crores in Apr-24, compared to Rs. 1.87 Lakh Crores in Apr-23 and Rs. 1.78 Lakh Crores in Mar-24.
The Indian economy is anticipated to achieve growth exceeding 7% in 2024-25, as per the National Council of Applied Economic Research (NCAER), citing robust high-frequency indicators, an above-normal monsoon forecast, and a favorable global outlook.
The IMD’s forecast of a June-September southwest monsoon surpassing the long-term average, reaching 106% of the 50-year average of 87 cm rainfall, is instrumental in shaping expectations for agricultural productivity and food prices. The anticipated rise in rainfall could ease food prices, potentially moderating inflationary pressures.
India’s food inflation, a significant portion of the overall consumer price basket, increased by 8.52% in March, slightly lower than the previous month’s 8.66% rise, highlighting the importance of stable agricultural production in curbing inflation.
NCAER expects India to gain further momentum from improving global GDP growth, creating demand for Indian goods.
However, concerns persist despite expectations of global headline inflation moderation. Geopolitical tensions, exemplified by recent events in West Asia, pose risks. Elevated crude oil prices adversely affect India’s economy, pressuring its currency and foreign capital inflows, potentially leading to rating downgrades and hindering rate cut prospects.
Rising geopolitical tensions prompt investor risk aversion, potentially triggering capital outflows, particularly detrimental to the Indian share market. Supply chain disruptions globally exacerbate import-export imbalances, further straining the Indian rupee.
The Indian economy faces vulnerability to these challenges, particularly disruptions in the global oil market, impacting supplies and prices across sectors like automobiles, transportation, aviation, and chemicals. As geopolitical tensions escalate, the Indian economy navigates the delicate balance of sustaining growth amidst external uncertainties, highlighting the need for vigilant risk management and policy responses.
Furthermore, rising crude oil prices pose a dual challenge for India, as both a major importer of oil and home to oil-dependent industries. Higher oil prices increase import bills and raise production costs for domestic industries, leading to inflationary pressures and reduced competitiveness.
Rising global commodity prices could exacerbate inflation in India. While the Reserve Bank of India (RBI) may take steps to control inflation, this could potentially slow down economic growth in the short term.
Recent data indicate inflation persisting above the US central bank’s 2% target in the first quarter, alongside GDP expansion exceeding potential at 2.4% for January-March, according to an Atlanta Fed tracker. With Fed officials cautious about the timing of rate cuts, uncertainties loom. The European Central Bank maintains its rate cut and inflation outlooks, yet ECB President Christine Lagarde’s recent conference raised questions about potential policy divergence from the Fed’s policies amid persistent US inflation.
Despite resilience, global growth remains sluggish, with a medium-term outlook of just 3.1% forecasted by the IMF for five years from now. India’s robust GST collection and optimistic growth forecasts underscore economic resilience. However, challenges like geopolitical tensions and oil price volatility warrant vigilant risk management and policy responses for sustained growth amid global uncertainties.