The Finance Ministry acknowledged emerging concerns about weakening consumer confidence and faltering demand, especially in urban India, as well as a moderation in industrial momentum in recent months, even as it maintained that the economy will grow between 6,000 and 2025 between 2024 and 2025. 5% and 7% will grow.
The Finance Ministry on Monday (Oct 28, 2024) acknowledged emerging concerns over softening consumer sentiment and faltering demand, especially in urban India, as well as a moderation in industrial momentum in recent months, even as it continued to maintain that the economy is between the 6.5 and 6.5 percent will grow. % and 7% through 2024-25.
In contrast to rural demand, which has been boosted by the favorable monsoon, the ministry’s latest monthly economic review pointed to signs of a slowdown in urban demand, as reflected in the performance of several indicators during the first half of financial year 25.
The Ministry of Economic Affairs publication cited the decline in volume growth of urban sales of fast-moving consumer products, as well as the 2.3% contraction in car sales in the first half of this year, “mainly due to of lower sales in the second quarter.” [Q2]”, and a decline in home sales and launches in the second quarter.
These trends “can be largely explained by softening consumer confidence, limited visitor numbers due to above-normal rainfall, and seasonal periods when people tend to refrain from new purchases,” said the review, the latest version of which was first published in September had raised concerns about “emerging signs of tensions in certain sectors”.
‘Not promising’
While the ministry hopes rural demand will continue to pick up, it did not appear as optimistic about overall consumption trends, saying “underlying demand conditions keep it under review.” “Going forward, the ongoing festive season and improving consumer confidence could boost urban consumer demand. However, initial indications were not particularly promising,” it added.
The survey also noted that production grew by just 1% in August and that momentum in the sector “appears to have weakened in September following very strong growth in the summer months”, reasoning that lower international oil prices and increased oil -imports may have affected domestic production. refinery production, while steel production was likely affected by the moderation in automotive industry growth.
The ministry’s comments on the pain points in the economy assume significance amid a tepid second-quarter earnings season for corporate India and soon after the Reserve Bank of India’s (RBI) October bulletin referred to waning momentum in indicators such as the goods and services tax (GST). ) collections, growth in bank credit and exports of goods.
The FinMin economic overview, however, cited the latest RBI surveys on consumer sentiment to point to a “sequential improvement in consumer optimism,” and the manufacturing sector as an indicator of optimism among producers.
While India’s economic performance in the first half of this year was “satisfactory”, the ministry said growth risks stem from escalating geopolitical conflicts, increasing geo-economic fragmentation and elevated financial market valuations in some advanced economies. “Their spillover effects on India could cause negative welfare effects, affecting household sentiment and changing spending intentions for durable goods,” the report warned.
Published – Oct 28, 2024 9:49 PM IST
