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India’s Finance Ministry has warned that the country may face a recession in 2024 due to a number of factors, including higher food and energy prices, geopolitical tensions, and a record-high trade deficit.

Higher food and energy prices

The prices of food and energy have been rising globally in recent months, and this is putting a strain on household budgets in India. The cost of rice, wheat, and other essential food items has increased significantly, and this is likely to continue in the coming months. The price of oil has also been rising, and this is having a knock-on effect on the prices of other goods and services.

Geopolitical tensions

The ongoing war in Ukraine is also having a significant impact on the global economy. The war has disrupted supply chains and caused energy prices to rise. This is creating uncertainty and volatility in the global economy, and it is making it difficult for businesses to plan for the future.

Record-high trade deficit

India’s trade deficit reached a record high in October 2023, as imports outpaced exports. This is a worrying trend, as it suggests that India is importing more goods and services than it is exporting. This is putting a strain on the country’s foreign exchange reserves and could lead to a depreciation of the rupee.

Rural demand

Despite the challenges facing the Indian economy, there is some positive news. Rural demand has sustained momentum in Q2, driven by stable foodgrain production incomes and moderate inflation. This suggests that rural households are still able to spend money, and this is helping to support the economy.

Overall, the Indian economy is facing a number of challenges, and there is a risk of a recession in 2024. However, there are also some positive signs, such as sustained rural demand. The government will need to take action to address the challenges facing the economy, and it will be important to monitor the situation closely in the coming months.

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