Despite a rather volatile monsoon, India's economic momentum remains strong. The real GDP growth forecast of 6.5-7 percent in the economic survey appears reasonable, according to a report released by the Ministry of Finance on Thursday.

The monthly economic report for July shows that the Indian economy maintained its momentum in the first four months of fiscal 2025.

Revenues from the goods and services tax increased significantly during this period, due to a larger tax base and increased economic activity, the Finance Ministry report said.

“The resilience of the domestic economy is also reflected in the strong performance of the purchasing managers' indices for the manufacturing and services sectors. Growth in the manufacturing sector was driven by improving demand conditions, an increase in new export orders and growth in producer prices,” it said.

The report says the federal budget for fiscal year 2025 sets a path to fiscal consolidation. Thanks to strong revenues, discipline in spending policy and robust economic performance, the budget deficit is expected to decline.

At the same time, capital spending will be maintained at a high level to support the emerging private investment cycle.

Retail inflation fell to 3.5% in July 2024, the lowest since September 2019, due to a moderation in food inflation. The steady progress of the southwest monsoon has also supported kharif sowing.

The replenished water levels in the reservoirs augur well for the ongoing Kharif crop and the upcoming Rabi crop, which is expected to further reduce food inflation in the coming months.

“Overall, India's economic momentum remains intact. Despite a somewhat erratic monsoon, water reservoirs have been replenished. According to purchasing managers' indices, manufacturing and services are growing,” it said.

Tax revenues, particularly transaction-based indirect taxes, grew healthily, as did bank lending, it said.

“Inflation is easing and exports of goods and services are performing better than last year. Stock markets are holding their level. Foreign direct investment is picking up as gross inflows increase,” the report said.

At this stage, it said, the forecast of real GDP growth of 6.5-7.0% for fiscal year 2025 made in the Economic Survey for 2023-24 appears appropriate.

(With inputs from PTI)