India may face recession risks in 2024, warns Finance Ministry
The Ministry of Finance's latest monthly review warns of a potential recession in 2024 due to uncertainties surrounding rising food and energy costs amid geopolitical tensions. A decrease in global merchandise trade volume, as indicated by the World Trade Organization's (WTO) October 2023 report, is anticipated to impact worldwide trade figures. India, in October, saw a record trade deficit, fueled by increased value imports and reduced exports.
Gold imports surge, trade deficit widens
In October, India saw a 60% year-on-year increase in gold imports, reaching a 31-month peak, as reported by Reuters. The Finance Ministry's October review highlighted that the growth in imports compared to exports has led to a larger merchandise trade deficit than the same period last year. The report stated, "Gold and silver imports almost doubled in October 2023 compared to October 2022, signaling the robust demand during the festival season."
Inflationary pressures and rural demand outlook
Moving forward, the Finance Ministry predicts that a drop in global crude oil prices and ongoing moderation in core inflation will help manage India's inflationary pressures. The ministry noted that rural demand has maintained steady momentum in Q2 FY24 due to stable foodgrain production income and moderate inflationary pressures. Private final consumption expenditure (PFCE) has become the primary driver of India's growth, with the festive season further supporting this trend.
