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Blog

Tuesday, March 18, 2025

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The Finance Ministry’s Monthly Economic Review for March sounded a cautionary note stating that India must remain watchful of the possible dangers arising from reduced agricultural output, increased prices, and geopolitical developments. Despite aligning with the World Bank and Asian Development Bank’s projections for a 6.5% growth rate in the ongoing fiscal year, the review warned that there are several factors that could influence the projected combination of growth and inflation outcomes.

 

“It is important… to be vigilant against potential risks such as El Nino conditions creating drought conditions and lowering agricultural output and elevating prices, geopolitical developments and global financial stability,” the review said.

 

All these three could affect the favourable combination of growth and inflation outcomes currently anticipated, it said. The report said FY23 has been strong for India’s economy despite the tailwind of the pandemic and the headwind of the geopolitical conflict intertwining to escalate global economic uncertainty.

 

“The strength is seen in the economy, estimated to grow at 7 per cent, higher than the trend rate and the growth of the other major economies. Growing macroeconomic stability as seen in the improved current account deficit, easing inflation pressure, and a banking system strong enough to survive the increase in policy rates, has made the growth rate further sustainable,” it said.

 

The report said that the financial sector has strong banking supervision, with the RBI assessing the financial stability of all institutions, regardless of asset size, in its twice-a-year evaluation.

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