There are signs that capital formation growth rebounding: Finance ministry

The finance ministry in its monthly report noted that Union government capex picking up pace, which in the first two quarters were slow.

The Indian economy grew by 5.4 per cent in real terms in the July-September quarter of the current financial year 2024-25. The quarterly growth was quite lower than RBI's forecast of 7 per cent. In the April-June quarter too, India's GDP grew at a slower pace than was estimated by its central bank. Much of it is due to low capex spending and weak consumption demand.

On average, India grew at 6 per cent in the first half of 2024-25.

The finance ministry's monthly report published Thursday noted that from a demand perspective, private consumption remained steady because of sustained rural demand, while investment growth softened in July-September quarter.

"The slowdown in investment growth can be attributed to a softening of public capex and private capex levels being affected by global uncertainties, excess capacity, and fears of dumping," it said.

Against that backdrop, it noted that there are signs of capital formation growth rebounding with government capex picking up pace.

Coming to inflation, the inflationary pressures softened in November 2024, driven by lower food and core inflation.

The finance ministry argues that an influx of fresh produce in the market has moderated vegetable price pressures.

"Healthy progress in rabi sowing indicates a promising harvest that will help alleviate food inflation pressures. The downward trend in international crude oil prices is a positive factor for domestic inflation, while elevated global edible oil prices remain a risk," the finance ministry report read.

Looking ahead, the report asserted that India's growth outlook in 2025-26 for the coming years is bright when viewed through the lens of Indian domestic economic fundamentals, but added that it is also subject to fresh uncertainties. (ANI)