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Indian Economy - General Knowledge Questions
A)
6.1%
B)
6.7%
C)
7.2%
D)
7.8%

Correct Answer : Option (A) - 6.1%

Moody’s Analytics projects a modest uptick in India’s economic growth for 2024, estimating a 6.1% expansion, slightly higher than the 6% projected earlier in March. Despite the growth, it remains lower than the 7.7% recorded in 2023. The report highlights concerns regarding inflation, citing India’s recent consumer price inflation hovering around 5% with no clear evidence of abating pressure.

Inflation Dynamics and RBI’s Outlook :

Moody’s Analytics underscores the persistent challenge of inflation across the Asia-Pacific (APAC) region, with uncertain trends. The Reserve Bank of India (RBI) maintains a cautious stance, particularly regarding food prices, and projects a retail inflation rate of 4.5% for the fiscal year 2024-25. Geopolitical tensions further complicate the inflation outlook, with risks to commodity prices and supply chains.

Economic Performance and Post-Pandemic Rebound :

The report assesses the economic landscapes of major APAC economies, noting a divergence in domestic demand dynamics. While China and Japan face hurdles due to weak internal demand, India and ASEAN economies benefit from a delayed but improving post-pandemic rebound. However, the output in India remains below pre-pandemic levels by 4%, indicating ongoing recovery challenges from various disruptions, including supply chain issues and geopolitical conflicts.

Regional Comparisons and Recovery Trajectories :

Moody’s Analytics places the recovery of India and Southeast Asia in the context of broader regional and global trends. Despite significant output losses compared to pre-pandemic trajectories, the Asia-Pacific region demonstrates resilience, with a forecasted growth of 3.8% in 2024, outpacing the global economy’s projected 2.5% growth.

A)
6.5%
B)
7%
C)
7.5%
D)
8%

Correct Answer : Option (B) - 7%

The Asian Development Bank (ADB) has raised India's GDP growth forecast for FY25 to 7% from the previous estimate of 6.7%, citing robust investment in public and private sectors and improving consumer demand as key drivers of growth.

A)
5.4%
B)
5.9%
C)
6.3%
D)
6.8%

Correct Answer : Option (D) - 6.8%

Morgan Stanley has increased its GDP growth forecast for India for the financial year 2024-25 (FY25) to 6.8%, up from the previous estimate of 6.5%. This revision reflects a positive outlook on India’s economic trajectory, emphasizing its strength and stability in the current cycle. The firm also revised its growth forecast for the ongoing financial year, FY24, to 7.9%.

Economic Outlook and Monetary Policy :

Optimistic Trajectory : Morgan Stanley anticipates a shallow easing cycle in monetary policy, driven by continued traction in industrial and capital expenditure activities.

Growth Projection :

Robust Growth Momentum : India’s GDP growth is expected to track around 7% in the fourth quarter of FY23-24 (QE Mar-24), with broad-based growth across rural-urban consumption and private-public capital expenditure.

Inflation Trends :

Favorable Inflation Trajectory : Recent trends indicate a softening in headline inflation, with moderation in food inflation and core inflation. The firm expects headline inflation to average 4.5% in FY25 and core inflation to remain muted at 4.1%.

Factors Affecting Growth :

Global and Domestic Risks : Morgan Stanley highlights potential risks from slower-than-expected global growth, higher commodity prices, and tighter global financial conditions. Domestically, factors such as central elections and changes in policy mix warrant close monitoring.

Supply Chain and Commodity Prices :

Disinflation Trend: Supply-chain normalization and easing commodity price pressures are expected to contribute to a disinflation trend in the coming period.

A)
6%
B)
7%
C)
8%
D)
9%

Correct Answer : Option (B) - 7%

Fitch Ratings has raised India’s growth forecast for FY25 to 7%, up from the previous estimate of 6.5%. The upgrade is attributed to robust domestic demand and sustained growth in business and consumer confidence, following a strong 8.4% expansion in Q3FY24.

Reasons for Forecast Upgrade :

* Strong Domestic Demand : Fitch predicts domestic demand, particularly investments, to be the main driver of growth.
* High Confidence Levels : Confidence among businesses and consumers remains high, further supporting growth.
* Short-Term Growth Outlook : Growth is expected to be higher than normal in the short term but may moderate towards a more sustainable pace in FY25.

Inflation Expectations :

* Gradual Decrease : Fitch expects inflation to gradually decrease to 4% by the end of the year, assuming stabilization in food prices.

Monetary Policy Forecast

* Revised Interest Rate Cut Estimate : Fitch now anticipates the Reserve Bank of India to cut interest rates by 0.5% in the second half of the year, down from the previous estimate of 0.75%. This adjustment reflects the stronger growth outlook.

* RBI’s Stance : The RBI has maintained the repo rate at 6.50% for six consecutive meetings and remains committed to achieving a sustainable 4% inflation target.

A)
4.16%
B)
4.57%
C)
5.09%
D)
5.43%

Correct Answer : Option (C) - 5.09%

Retail inflation in February 2024 saw a decline to a four-month low of 5.09 per cent, remaining well within the Reserve Bank of India’s comfort zone of 6 per cent for the sixth consecutive month.

While the overall inflation figure remained relatively steady compared to January, certain items within the food basket experienced price increases.

Food Basket Inflation :

* The inflation rate within the food basket saw a marginal uptick, rising to 8.66 per cent in February from 8.3 per cent in the previous month.
* Notably, prices of specific items such as vegetables, fruits, oils and fats, and pulses and products witnessed a slight decrease on a month-on-month basis.
* Conversely, the rate of price escalation was higher in segments including cereals and products, meat and fish, and milk and products.

Weightage of Food Basket :

* The food basket holds significant importance, accounting for nearly 50 per cent weightage in the Consumer Price Index (CPI). This underscores the substantial impact of food prices on overall inflation trends.

A)
7% and 6.8%
B)
7% and 6.5%
C)
6.7% and 6.1%
D)
6.9% and 5.7%

Correct Answer : Option (A) - 7% and 6.8%

UBS anticipates a moderation in India’s real GDP growth for fiscal years 2025 and 2026, projecting rates of 7% and 6.8%, respectively. Despite this, India is expected to maintain its position as one of the fastest-growing global economies. The report highlights the continuation of growth momentum in the first three quarters of fiscal year 2024, driven by cyclical recovery and structural improvements.

GDP Growth Projection

* Real GDP growth expected to moderate to 7% and 6.8% in FY25 and FY26 respectively.
* Positive surprises noted in India’s GDP growth, averaging above 8% in the first three quarters of FY2024.
* Expectation of moderation attributed to global factors such as weaker growth and local factors like softness in public capex.

Sector-wise Analysis :

* Anticipated moderation in investment-led growth due to lower public capex.
* Gradual recovery expected in consumption growth driven by rural growth recovery, relying on expectations of a normal monsoon as projected by IMD.

Equity Market Outlook :

* Expectation of near-term volatility in the Indian equity market due to elevated geopolitical and economic risks.
* Manageable downside risks amid supportive domestic macro and micro environment.
* Reversal of rate cycle could provide valuation support as equity risk premium falls.
* Investors advised to utilize steep market corrections as buying opportunities, favoring domestic economy linked sectors for long-term structural growth opportunities.

A)
B)
C)
6.8%
D)

Correct Answer : Option (C) - 6.8%

Crisil Ratings predicts India’s economy to expand by 6.8% in FY25, with significant growth potential driven by domestic reforms and cyclical factors. By 2031, India aims to double its economy to $7 trillion and achieve upper-middle-income status.

GDP Growth Trajectory :

* India’s GDP growth expected to moderate to 6.8% in FY25 from the current fiscal year’s 7.6%.
* Structural reforms and cyclical levers to support continued growth, potentially positioning India as the third-largest economy by 2031.


Economic Outlook :

* IMF projects India to reach $5 trillion economy by 2027-28.
* India, presently the fifth largest economy globally, aims for $7 trillion GDP by 2031, elevating it to upper-middle-income status.

Per Capita Income Projection :

* By fiscal 2031, India’s economy anticipated to reach $6.7 trillion, raising per capita income to $4,500.
* This transformation would align India with upper-middle-income countries as defined by the World Bank, marking a significant economic milestone.

A)
7.9%
B)
7.6%
C)
7.2%
D)
6.8%

Correct Answer : Option (D) - 6.8%

Moody’s, the global credit rating agency, has raised its GDP forecast for India in 2024 to 6.8%, reflecting a positive economic outlook. This revision is based on India’s position as the fastest-growing economy among G20 nations, supported by robust growth prospects and policy continuity.

Factors Driving India’s Economic Growth :

1. Strong Growth Trajectory : India’s consistent growth trajectory contributes significantly to its economic prospects.
2. Stable Inflation : The country’s stable inflation rate further supports its economic stability and growth potential.
3. Policy Continuity : Moody’s expects policymakers to maintain continuity in their economic policies, providing a conducive environment for sustained growth.

Projections for 2025

1. Continued Momentum : Moody’s projects India’s GDP growth momentum to persist into 2025, with a forecasted growth rate of 6.4%.


Role of Reserve Bank of India (RBI)

1. Policy Stability : The agency anticipates the RBI to maintain its policy rate, offering additional support for economic stability and growth momentum.

Government’s Economic Vision

1. Sustainable Growth : The government aims to foster sustainable economic growth and address critical infrastructure gaps across sectors, aligning with its long-term vision.

Investor Confidence and International Optimism

1. Resilience Amid Uncertainties : Moody’s upward revision underscores growing investor confidence and international optimism about India’s ability to navigate challenges and leverage opportunities for sustained growth.

A)
12.9%
B)
12.5%
C)
11.6%
D)
11.1%

Correct Answer : Option (B) - 12.5%

India’s Goods and Services Tax (GST) collection witnessed a significant surge of 12.5% year-on-year, reaching Rs 1.68 lakh crore in February, as stated by the government. This figure marks a notable increase from the Rs 1.50 lakh crore collected during the corresponding period last year.

* 12.5% Year-on-Year Increase : February’s GST collection rose by 12.5% compared to the same month in the previous year, showcasing robust growth in tax revenues.

* Exceeds Previous Year’s Average : The finance ministry highlighted that the average monthly gross collection for the fiscal year 2023/24 stands at Rs 1.67 lakh crore, surpassing the corresponding period of the previous year.

* Ambitious Fiscal Target : The government has set an ambitious target of Rs 9.57 lakh crore for GST collection in the current fiscal year, reflecting confidence in economic recovery and tax compliance measures.

A)
7.4%
B)
7.1%
C)
6.8%
D)
6.5%

Correct Answer : Option (D) - 6.5%

Morgan Stanley Research said on Wednesday (21st Feb 2024) that it expects India’s GDP growth for FY25 to moderate to 6.5 per cent from 6.9 per cent projected for FY24.

ICRA, meanwhile, has projected the year-on-year (Y-o-Y) GDP growth to moderate sequentially to 6 per cent in Q3 FY24 from 7.6 per cent, led by agriculture and industry sectors.

Aditi Nayar, chief economist, head-research & outreach, ICRA Ltd, said, “Lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in government expenditure and an uneven monsoon are expected to dampen the GDP growth to 6 per cent in Q3 FY24 from 7.6 per cent in Q2 FY24.”

MS Research’s report said it maintained a constructive outlook on the Indian economy, while highlighting that risks emanate from global factors and elections in May 2024.

“Domestic demand improved in January, while macro stability remains comfortable, reflecting strength in the fundamentals. We maintain our constructive outlook on the economy,” Morgan Stanley Research said in its report titled India Economics – Macro Indicators Chartbook: Strength in Growth, Stability in Macro-Fundamentals.


Expecting the GDP growth to remain healthy, Morgan Stanley Research has projected growth for the third quarter of FY24 ending December 2023 at 6.5 per cent, even as it slows from 7.7 per cent in the first half of the current financial year.

The research arm of the investment bank also said that, supported by strength in services exports and softening global commodity prices, especially oil, the current account deficit is likely to remain benign.

The ICRA report noted a slowing down of investment activity in the third quarter of the current financial year. It said that the government’s gross capital expenditure dipped slightly in October-December 2023 to 24.4 per cent from 26.4 per cent in the previous quarter.

The capital outlay and net lending of 25 state governments shrank by 3.9 per cent Y-o-Y, after having surged by 42.4 per cent in Q2 FY24..

Source : Business Standard