Demand conditions in economy need to be watched: Finance ministry
NEW DELHI: The outlook for the Indian economy is good, underpinned by a stable external sector, positive agricultural scenario, expected improvements in demand supported by the festive season, a finance ministry report said on Monday but cautioned that demand conditions in the economy need to be watched.
The latest concern over urban demand comes close on the heels of two top FMCG companies – Nestle and HUL – flagging sluggish urban sales due to stubborn food inflation, while rural demand appeared to be improving and some weak economic indicators pointing to a sort of slowdown.
The finance ministry’s monthly economic review for Sept said rural demand continues to improve, as reflected in increasing FMCG volume sales and a rise in three-wheeler and tractor sales but seemed to express concern over slowing urban demand. “However, urban demand appears to moderate due to softening consumer sentiments, limited footfall due to above-normal rainfall and seasonal periods during which people tend to refrain from new purchases,” said the report.
It said contrary to rural demand, there has been evidence of a slowdown in urban demand as reflected in performance of various indicators in first half of FY25 and cited slowing FMCG, auto and housing sales in urban centres.
Latest data also showed that the country’s industrial output contracted for first time in 22 months in Aug, dragged down by a high base effect and decline in mining and electricity and a weak manufacturing sector. “Going forward, the ongoing festive season and improvement in consumer sentiments may boost urban consumer demand. However, early indications were not particularly promising,” the report cautioned.
But, RBI governor Shaktikanta Das said there are mixed signals about demand and positives outweigh negatives.
“What I would like to emphasise is that there are mixed signals… The so-called slowdown in certain areas is outweighed by the positives that we are getting,” Das said in an interview to CNBCTV18 in Washington.
