India’s Finance Ministry warns of recession risks in 2024

  • With uncertainties linked to higher food and energy prices persisting amid geopolitical tensions, the Finance Ministry in its monthly review has said that risks of recession may reappear in 2024.
  • The ministry said that private final consumption expenditure, or PFCE, has emerged as the strongest driver of India’s growth so far. Yet, a fuller transmission of the monetary policy may temper domestic demand, it said.
  • Rural demand will likely sustain momentum due to improved foodgrain production incomes and stabilizing prices.
  • With uncertainties linked to higher food and energy prices persisting, inflation remains a risk that the government and central bank are continuing to monitor.
  • The review acknowledged, however, that softening crude oil prices and core inflation will keep inflationary pressures under control in the near future.
  • On the fiscal balance, the government aims to cut the fiscal deficit to 5.9% of GDP in FY24, with a medium target of 4.5% by FY26. Healthy revenue collection and controls on spending have meant that the government is on track for this year’s target at 39%.

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