Commodity price volatility presents ‘substantial’ challenges: Finance Ministry

Bengaluru: The Union Finance Ministry said on Friday that the ongoing geo-political upheavals and the resultant volatility in prices of commodities globally, continues to be a cause of concern on the economic front, but added that there are enough macro-economic buffers to navigate these challenges.

“The unrelenting geopolitical tensions and volatility in global commodity prices, especially of petroleum products, present substantial multi-frontal challenges,” the ministry said in its latest Monthly Economic Review (MER), for the month of April 2024.

Nonetheless, the expectation is that the macro-economic buffers nurtured and strengthened during the post-Covid management of the economy will help the India navigate these challenges reasonably smoothly, the MER stated.

India’s retail inflation for April declined to a 10-month low of 4.83%, the second consecutive month below the 5% level. This was primarily due to easing of core inflation, even as food prices remained elevated.

There has been a continued decline in retail inflation since December 2023. It has been within the Reserve Bank of India’s (RBI) tolerance range of 2-6 per cent for the seventh month in a row. However, it has been above the central bank’s medium-term target of 4 per cent for 54 consecutive months.

Primarily due to the ongoing conflict in the Middle-East, prices of the benchmark Brent crude have risen more than 6 per cent year-to date.

On Wednesday, the MER stated that as per all available high-frequency data, the strong performance of the Indian economy in 2023-24 has carried onto the current April-June quarter (Q1 of 2024-25).

“The Indian economy closed FY24 strongly with its growth surpassing market expectations, despite strong external headwinds. Early indications suggest a continuation of the economic momentum during the first quarter of FY25,” it stated. 

It said that industrial activity is gaining momentum and fixed investment is gathering pace on the back of the focus the government’s capital spending. “The forward-looking surveys of the Reserve Bank also indicate improving consumer confidence and industrial outlook,” the report said.