Geopolitical risks cloud India’s economic outlook

Geopolitical conflicts and trade policy uncertainties are major risks for India’s economy, according to the government’s monthly economic report released on Monday.

The report maintains the current growth forecast but highlights concerns about escalating conflicts and financial market valuations in advanced economies. These risks could impact household sentiment and spending on durable goods in India.

The government projects economic growth between 6.5 per cent and 7 per cent for the current fiscal year, citing heightened geopolitical risks. However, the report also notes positive factors such as a strong agricultural outlook and expected increased demand during the festive season, providing a good outlook for the Indian economy.

Rural demand is on the rise, but urban demand seems to be slowing down due to soft consumer sentiments, reduced footfall from heavy rainfall, and seasonal trends of reduced spending. It is important to monitor underlying demand conditions.

The report also noted that retail inflation is stable, except for a potential increase in vegetable prices. The near-term food inflation will depend on the prices of tomato, onion, and potato in the coming months.

Attribution: Reuters

Subediting: Y.Yasser