- India's Finance Ministry expects softer inflation as oil prices ease due to Strait of Hormuz traffic
- Inflation may stay contained, aided by lower commodity prices and eased West Asia conflict risks
- Free Trade Agreements are projected to boost exports, with merchandise exports showing growth
India's Finance Ministry is expecting softer inflation reading in the coming months, as oil prices cool off on the back of trade vessel traffic passing through the Strait of Hormuz.
"Inflation readings may remain relatively contained in the coming months," the Ministry said in its monthly economic report, adding that the cessation of West Asia conflict brightens outlook.
FinMin also highlighted that decline in international commodity prices expected to provide some cushion against further price pressures.
However, it pointed out while US-Iran talks have helped moderate crude oil prices, any further disruptions in oil production pose risks to economic growth.
The economic review highlighted that Free Trade Agreements (FTAs) with foreign partners are expected to boost exports, and that Merchandise exports growth remains a bright spot for the economy.
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Water Woes
Notably, the review emphasised on the need to build water buffers in the coming years, as the country grapples with adverse climate phenomenon El Nino, and a severe rainfall deficit.
"India needs to build water buffers in coming years," the review stated, adding that outlook for growth will be shaped by El Niño and geopolitical risks.
The Finance Ministry also said that the focus has now shifted to concerns related to delayed southwest monsoon, including its impact on Kharif sowing. Apart from water buffers, the country will also require buffer stock for critical raw materials, as per the Ministry.
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Moreover, in terms of internal strains on the economy, the review outlined that high-frequency employment hints at the job market softening even as external pressures may be relieved with easing oil prices.
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