The  ministry  also said  fuller transmission of  monetary policy, which essentially means  banks passing on  central  bank interest  rate  increases  to  consumers, could  also  reduce  domestic demand. 2023-24

  The  Ministry of Finance said in its latest monthly  report that although “inflationary pressures” have eased, persistent risks to growth and macroeconomic stability due to inflation remain. report. Economic Review  October 2023. 

  The  ministry  also said  fuller transmission of  monetary policy, which essentially means  banks passing on  central  bank interest  rate  increases  to  consumers, could  also  reduce  domestic demand. 

  “While  more than half of the current  fiscal  year  was marked by  positive developments in the economy, the full  fiscal  year  is expected to end on schedule  with  strong  and  steady growth. macroeconomic. However, downside  risks  still exist.  Inflation is one of  the factors  that  makes  the government and the RBI on high alert. Financial flows in the external sector also need constant monitoring as they impact the value of  the  rupee and the balance of payments.  The report said a  fuller  monetary policy  transmission could  also  reduce  domestic  demand.  

 Headline retail inflation  fell  to a four-month low of  4.87%  in October. However, inflation  fears  persist. Last week,  the  RBI  said  in its monthly bulletin  that while  demand  for festivals  remains  “strong”  and consumer  confidence “optimistic,”  India has  “a ways  to  go.” ”  and  “still not recovered” when it comes to  inflation. 

  In addition,  the  ministry emphasized  that  the  transmission of  tightening  monetary policy  “may start  to  have an effect”,  which  could  impact domestic demand.  “Ahead of the  cumulative  250 basis  point  (bps)  increase  in  the  policy repo rate, lending rates  were  increased by 187 bps  for new  loans and 105 bps  for existing  loans,”  the statement  said.

 At the same time, the  ministry  said the  holiday  season  had “further enhanced consumer demand”. “Even as  accumulated savings and  falling unemployment  rates  are  the underlying  drivers behind consumer  demand, the wealth effect  stems  from rising  house  prices and  stock market capitalization,” the report said. Increasing stock prices can  also  boost consumption.  The  ministry  also  highlighted  that the central government is on track to achieve  its  fiscal deficit target for the current financial year  thanks to strong  revenue  collection  and prudent expenditure management. 

  “Continued  dynamism  in  tax collections,  supported by prudent expenditure management,  has  helped contain  the  budget  deficit to  below 40%  of the  budget forecast in  the first half of  this  year. The  government’s focus  on capital  spending also  continued during the  year, providing a boost  to private investment.  “The  recent  sharp  and rapid decline in global crude oil prices  also  removes  a potentially significant  source of  impact on public  finances,” he  said. On the growth front, the ministry said  India’s  growth experience  during  2023-24  is expected to  continue to be a positive outlier  compared to other major economies.

  “The  government’s  sustained investment  efforts,  healthy corporate  profits  and  reduced  bank  bad debt  will likely  help  investment  continue to be vibrant  despite  high  input costs.  Indian  exports are also expected to perform well,  thanks to  strong  services  exports, he  said.  

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