The report also notes that the export growth in India may face hurdles in the upcoming months due to weakening demand in developed markets
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The Finance Ministry's latest monthly economic review stated that the upcoming administration in US following Donald Trump's historic victory in the latest US elections is set to play a key role in trade dynamics worldwide, ANI reported.
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As per ANI, the report mentioned that the global economic factors, including shifts in interest rates, earnings growth, and geopolitical developments, will significantly impact trade and capital flows.
It said "Apart from the emerging indications of domestic growth and stability, the dynamics of global interest rates, earning growth and valuation, geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows".
It added that the geopolitical tensions, especially the ongoing war between Russia and Ukraine, have added uncertainty to financial market. There has been increasing demand for safe-haven assets like U.S. Treasuries and gold as investors seek stability, ANI reported.
These sensitive conditions continue to weigh on global markets and could impact the trade environment in India.
It said "Recent developments in the ongoing conflict between Russia and Ukraine have caused some concern in financial markets with safe-haven assets such as US Treasuries and gold finding a bid".
The report also notes that the export growth in India may face hurdles in the upcoming months due to weakening demand in developed markets, ANI cited.
While the global slowdown raises issues for merchandise exports, the ministry noted that the services trade continues to maintain its strong momentum.
It said "On the external front, India's export recovery may encounter challenges due to softening demand in developed markets. However, trade in the services sector is sustaining momentum".
Despite these external challenges, the report highlighted that the domestic economic outlook in India still remains cautiously optimistic. Notably, Agriculture is set to benefit from favourable monsoon conditions, higher minimum support prices, and sufficient input supplies, ANI cited.
Strong agricultural production prospects are expected to curb inflation, despite existing price pressures in few food items. Early November trends have already shown a moderation in specific food prices. However, geopolitical risks could still impact domestic inflation and supply chains.
The report highlighted that the high-frequency indicators of economic activity in India have shown signs of recovery following a temporary slowdown during the monsoon months.
Measures of rural and urban demand, the Purchasing Managers' Index (PMI), and E-way bill generation all showed a good recovery in October. With a growing manufacturing workforce and a notable inflow of young workers into organized sectors, the formal employment sector is also experiencing expansion.
Despite India's difficult the global environment, these trends point to a growing domestic economy.
(With inputs from ANI)
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