Households’ optimism about economic conditions for year ahead has declined: Finmin

However, “on balance, India’s economic momentum remains intact,” the review noted.

As of now, the projection of real GDP growth of 6.5-7.0 per cent for FY25 in the Economic Survey 2023-24 seems appropriate, the Monthly Economic Review (MER) for July released by the ministry said.

The manufacturing and services sectors both are expanding, going by the Purchase Managers’ Indices, and tax collections – especially indirect taxes, which reflect transactions – are growing healthily, and so is bank credit. Despite a somewhat erratic monsoon, reservoirs have been replenished and inflation is moderating. Exports of both goods and services are doing better than they did last year, and stock markets are holding on to their levels, with Foreign Direct Investment looking up as gross inflows grow, the Finance Ministry said in the Monthly Economic Review.

The Indian economy has sustained its momentum in the first four months of FY25. GST collections in the first four months of FY25 underwent a level shift, pushed up by the widening of the tax base and heightened economic activity, the MER noted.

The double-digit growth in e-way bill generation reflects sustained economic activity, and is expected to result in higher GST collections in the coming months. The resilience of domestic activity is also reflected in the strong performance of the manufacturing and services sector purchasing managers’ indices. The manufacturing growth has been driven by expansion in demand conditions, a rise in new export orders and growth in output prices.

“The contact-intensive services sector has been a major performer driven by an upswing in the tourism and hotel industry. Going forward, the measures announced in the Union Budget FY25 for the MSMEs, manufacturing and services sectors are expected to give a big boost to the sectors.” Finance Ministry's July review said.

On the fiscal front, the Union Budget FY25 has laid out a glide path of fiscal consolidation. Supported by strong revenue collection, discipline in revenue expenditure, and robust economic performance, the fiscal deficit is projected to decline. At the same time, capital expenditure is maintained at high levels, supporting the fledgling private investment cycle.