Apart from the strong growth in the manufacturing and services sectors of the economy, the report expects global monetary easing and improving demand prospects from India’s trading partners to bolster export performance.
The merchandise and non-oil exports have shown positive growth for three quarters in a row and the trend is expected to continue into Q2 of 2024-25, according to the report.
However, at the same time, the report states that there is a downside risk from the geopolitical tensions spreading from the West Asia crisis and economic uncertainty in the advanced economies.
The report comes in the backdrop of a positive assessment of the external sector by the RBI. The apex bank’s Governor Shaktikanta Das had said on Thursday: “India’s foreign exchange reserves reached a historical high of US$ 675 billion as of August 2, 2024, as overall, India’s external sector remains resilient with key indicators continuing to improve.”
According to RBI data, India’s current account deficit (CAD) moderated to 0.7 per cent of GDP in 2023-24 from 2.0 per cent of GDP in 2022-23 due to a lower trade deficit and robust services and remittances receipts.
The RBI chief further stated that buoyancy in services exports and strong remittance receipts are expected to keep CAD within a sustainable level in Q1:2024-25.
Foreign direct investment (FDI) flows have also picked up in 2024-25 as gross FDI rose by more than 20 per cent during April-May 2024, while net FDI flows doubled during this period compared to the corresponding period of the previous year.
Figures compiled by the RBI show that FDI flows rose sharply to US$ 15.2 billion in April-May 2024-25 from US$ 12.3 billion during the same period a year ago. Net FDI flows increased twofold to US$ 7.1 billion in April-May 2024-25 from US$ 3.4 billion a year ago due to lower repatriation.