13/01/2025
In its recent monthly economic review, the finance ministry highlighted the promising forecast of an above-normal monsoon for 2024, signaling potential relief from India’s inflation concerns. The India Meteorological Department’s (IMD) projection of above-average monsoon rainfall is anticipated to bolster agricultural output, crucially dependent on summer rains. This positive outlook has spurred optimism, especially considering the challenges posed by erratic rainfall in the preceding year.
The IMD’s announcement last week indicated that the June-September southwest monsoon is expected to surpass the long-term average, reaching 106% of the 50-year average of 87 cm rainfall. Such forecasts are instrumental in shaping expectations for agricultural productivity and, consequently, food prices. The finance ministry noted that the anticipated rise in rainfall could lead to a welcomed easing of food prices, potentially contributing to a moderation in inflationary pressures.
India’s food inflation, constituting a significant portion of the overall consumer price basket, increased by 8.52% in March, albeit slightly lower than the previous month’s 8.66% rise. This underscores the importance of stable agricultural production in mitigating inflationary trends.
Furthermore, the finance ministry foresees a reduction in India’s trade deficit in the coming years, propelled by initiatives like the production-linked incentive (PLI) scheme aimed at bolstering manufacturing across various sectors. The anticipated decline in the merchandise trade deficit, from $265 billion to $240 billion, reflects positive trends in export performance and resilient remittances.
Despite these optimistic projections, the finance ministry remains cautious about global inflationary pressures, which have persisted despite stabilizing or declining in some regions. It emphasized the need for continued vigilance, particularly regarding core inflation indicators.
On the global front, the International Monetary Fund (IMF) recently revised India’s FY25 GDP growth forecast upward, aligning with similar revisions by other international organizations. This underscores the potential for India’s economy to rebound, supported by conducive domestic policies and external factors like favorable monsoon forecasts.
Looking ahead, the positive influence of a robust monsoon on agricultural production is expected to play a pivotal role in driving economic recovery and stability. However, challenges such as managing inflation and navigating global economic uncertainties will require proactive measures and careful monitoring by policymakers to ensure sustained growth and resilience in India’s economy.