Economy: Better than many other countries, India to end 2024 on a positive note
Virendra Pandit
New Delhi: The India Story continues…
Despite a few downs, the Indian economy is ending 2024 on a positive note, with the Wholesale Price Index (WPI) easing to a three-month low in November, prices cooling, and business growth reaching a four-month high, the media reported on Monday.
Government data showed on Monday that the WPI, which was 2.36 percent in October 2024, and 0.39 percent in November 2023, eased to a three-month low of 1.89 percent in November 2024 as prices of food items, especially vegetables, fell.
Food prices declined to 8.63 percent in November from 13.54 percent in October, the Ministry of Commerce and Industry’s data said. The decline was helped by a fall in vegetable prices, which was 28.57 percent vis-a-vis 63.04 percent in October. Onion prices fell 2.85 percent in November.
The fuel and power category witnessed further deflation of 5.83 percent in November, compared to 5.79 percent in October.
In the manufactured products category, inflation increased to 2 percent in November from 1.50 percent in October.
“Positive rate of inflation in November 2024 is primarily due to increase in prices of food articles, food products, other manufacturing, textiles, machinery and equipment, etc,” the ministry said.
The retail inflation rate, which is based on the Consumer Price Index (CPI), last week fell within the tolerance band of the Reserve Bank of India (RBI) to 5.48 percent in November from a 14-month high of 6.21 percent in October. This raised the hope of a much-anticipated policy rate cut in the upcoming February 2025 review by the central bank.
Earlier this month, the RBI, which mainly takes into account retail inflation while framing monetary policy, kept the benchmark interest rate or repo rate unchanged at 6.5 percent in its monetary policy for the 11th consecutive time and maintained a ‘neutral’ stance.
Meanwhile, preliminary surveys showed that India’s private sector output grew at the fastest pace in four months (August-November), helping the economy end 2024 on a positive note. This was underpinned by enhanced demand in services and manufacturing and record job growth.
India, Asia’s third-largest economy, grew 5.4 percent last quarter (July-September 2024), but easing inflation may spur demand among private sector firms, improving the outlook for next year, which is only two weeks away.
The rebounding demand was reflected in the PMI for the dominant services sector, which rose to a four-month high of 60.8 from 58.4 in November, while the index for manufacturing was 57.4, up from 56.5 last month.
Service providers led the rise in sales with the new business sub-index touching the highest since January 2024. Improving international demand for goods and services also enhanced sales with the former recording a faster increase than the latter.
That improved the business outlook for 2025 and overall optimism rose to its highest since September 2023 and prompted companies to ramp up hiring additional staff at the fastest pace since the survey began in late 2005, the media reported.
Both manufacturing and services posted a new peak for employment generation.
Inflationary pressures eased in December after two consecutive months of steeper rises. However, firms again increased selling prices albeit at a slower pace than November’s near 12-year high.
That will provide some relief to new RBI Governor Sanjay Malhotra after consumer inflation came in lower than expected at 5.48 per cent last month with economists betting on a rate cut in February 2025.
