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 Robust investment activity and strengthening private consumption demand is driving growth in the Indian economy amidst the sluggish global growth, according to the Finance Ministry’s monthly review released on Friday.

The strong demand is evident from indicators like burgeoning air passenger traffic and sale of passenger vehicles, rising digital payments, improved consumer confidence and expectations of a normal monsoon, the report states.

Increased demand for residential properties in tier-2 and tier-3 cities augers well for furthering construction activity. Non-farm employment has revived, improving the capacity to absorb the labour leaving agriculture. The ascent of manufacturing sector employment is expected to be marked by upscaling of enterprises and sunrise sectors emerging as catalysts for generating quality employment, the report points out.

India's inflation outlook for the upcoming months is positive. Core inflation is trending downwards, indicating a broad-based moderation in price pressures. The pick-up in summer sowing is likely to help reduce food prices, the report states.

On the external front, the narrowing merchandise trade deficit and the rising net services receipts are expected to result in an improvement in the current account balance in FY24.

In FY25, however, the current account deficit will bear watching. An increase in domestic household savings will be necessary to finance private sector capital formation in the economy, the report states.

Improving global investor confidence on India has started reflecting in foreign portfolio investment flows. The announcement by Bloomberg that India would be included in its bond index from January 2025 should bolster inflows, buoyed by the fiscal prudence that the government has demonstrated over the years. Bond investors will base their investment decisions based on their perception of its persistence. On the whole, India looks positively towards the dawn of FY25, it adds.