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Indian Economy - General Knowledge Questions
A)
7.1%
B)
7.5%
C)
7.9%
D)
8.2%

Correct Answer :   7.5%

The National Council of Applied Economic Research (NCAER) forecasts India's GDP growth rate for the fiscal year 2024-25 (FY25) to potentially reach around 7.5%.

This outlook suggests optimism about the resilience and growth momentum of the Indian economy, supported by various high-frequency indicators showing robust performance across sectors.

A)
5.7%
B)
6.4%
C)
6.8%
D)
7.3%

Correct Answer :   6.8%

S&P Global Ratings has maintained India's GDP growth estimate for FY25 at 6.8%.

This projection takes into account factors such as high interest rates and reduced fiscal stimulus impacting demand in non-agricultural sectors, indicating a moderated growth outlook compared to previous fiscal years.

A)
8.5%
B)
6.8%
C)
7.9%
D)
7.2%

Correct Answer :   7.2%

Fitch Ratings has revised India’s GDP growth forecast for the financial year 2024-25 upward to 7.2% from the earlier estimate of 7%.

This adjustment is based on anticipated improvements in consumer spending and ongoing investment, albeit at a slower pace than in recent quarters.

The revision aligns with the Reserve Bank of India's forecast and contrasts with projections by other institutions like the IMF and ADB, which have set their estimates at 7% for the same period.

Fitch's outlook factors in global economic conditions, including recovery in Europe and China's export sector, influence India's economic growth prospects.

A)
4.75%
B)
4.91%
C)
5.24%
D)
5.68%

Correct Answer :   4.75%

India’s consumer price index (CPI) inflation dropped to a 12-month low of 4.75% in May 2024, down from 4.83% in April, marking a continued trend within the Reserve Bank of India’s target range of 2-6% since September 2023.

The inflation rates for rural and urban areas stood at 5.28% and 4.15%, respectively. Despite this decrease, inflation in the food basket remained elevated at 8.69% in May, slightly lower than 8.70% in April. The Reserve Bank of India aims to maintain CPI inflation at 4%, with a margin of 2% on either side, and recent projections suggest a stable outlook for the coming quarters.

Overview of CPI Inflation :

In May 2024, India’s consumer price index (CPI) inflation reached a 12-month low of 4.75%, indicating a marginal decline from the previous month’s 4.83%. This aligns with the Reserve Bank of India’s target range and reflects varied inflation rates across rural (5.28%) and urban (4.15%) areas.

Food Inflation Trends :

Despite the overall decrease in CPI inflation, food inflation remained high at 8.69% in May, marginally down from 8.70% in April. This category continues to influence India’s inflation dynamics significantly.

RBI’s Inflation Targets and Projections :

The Reserve Bank of India (RBI) has set a target of maintaining CPI inflation at 4%, with a range of 2% on either side. Projections for 2024-25 indicate a stable inflation outlook, with varying rates across quarters: Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%.

A)
6.7%
B)
5.9%
C)
5.3%
D)
4.9%

Correct Answer :   4.9%

India’s Index of Industrial Production (IIP) recorded a growth rate of 4.9% in March 2024, showing a slight slowdown primarily attributed to a faltering mining sector. This decline follows a robust 5.6% growth in February 2024 and contrasts sharply with the 1.9% growth seen in March 2023.

Sectoral Performance Overview :

The mining sector experienced a significant deceleration with growth plummeting to 1.2% in March 2024 from 6.8% in the same month a year ago. Meanwhile, the manufacturing sector showed resilience, accelerating to 5.2% growth compared to 1.5% in March 2023. Electricity generation surged by 8.6%, marking a recovery from a 1.6% contraction in March of the previous year.

Key Contributors to Manufacturing Growth :

Key drivers within the manufacturing sector included the manufacture of basic metals (7.7% growth), pharmaceuticals (16.7% growth), and other transport equipment (25.4% growth). These segments significantly contributed to the overall industrial output expansion in March 2024.

End Use Classification :

Segmenting by the end use of goods, primary goods output rose by 2.5%, capital goods by 6.1%, intermediate goods by 5.1%, and infrastructure and construction goods by 6.9%. However, consumer non-durable goods output saw a decline of 4.9%, contrasting with a 9.5% rise in consumer durables output.

Economic Insights and Outlook :

Economists point out that the slowdown in industrial production growth reflects the waning effect of previous favorable conditions, notably the leap-year effect. Despite challenges in the mining sector, the uptick in manufacturing and electricity generation suggests some resilience in India’s industrial landscape, albeit with varying sectoral performances.

A)
7.4%
B)
6.9%
C)
6.2%
D)
5.7%

Correct Answer :   6.9%

Goldman Sachs has revised India's GDP growth forecast for CY24 to 6.9%, up from 6.7%, following a strong 7.8% growth in Q1 2024. For FY 2024-25, the GDP growth is projected at 6.8%.

Goldman Sachs has revised its GDP growth forecast for India for the calendar year 2024, raising it by 20 basis points to 6.9% from an earlier projection of 6.7%. This adjustment follows a stronger-than-expected GDP growth of 7.8% for the January-March 2024 quarter, driven by robust investment demand and a recovery in consumption.

Fiscal Year Projections :

For the fiscal year 2024-25, Goldman Sachs projects India’s GDP growth at 6.8%. The Central Statistics Office (CSO) recently reported that India’s GDP grew by 7.8% in the fourth quarter of 2023-24, primarily due to a strong performance in the manufacturing sector.

Analysis and Expectations :

Santanu Sengupta, Chief Economist at Goldman Sachs India, noted that despite the strong Q1 growth, lower sequential growth is expected in subsequent quarters. This outlook has led Goldman Sachs to revise its CY24 real GDP growth forecast to 6.9% year-on-year.

Fiscal Deficit Outlook :

In a separate research note, Sengupta indicated that Goldman Sachs Research anticipates the Central government will achieve the 2024-25 fiscal deficit target of 5.1% of GDP, supported by higher-than-budgeted dividends from the Reserve Bank of India (RBI). The consolidated fiscal deficit for 2023-24 was 5.6% of GDP, lower than the revised estimate of 5.8%, due to expenditure cuts and higher-than-expected receipts.

Government Financial Management :

The government’s overall expenditure was reduced by ?50,000 crore compared to the Revised Estimate (RE), with subsidy payouts cut by ?30,000 crore. Meanwhile, receipts were higher than the RE by ?20,000 crore, driven by high non-tax revenues, including a substantial dividend from the RBI and public sector undertakings. The RBI announced a dividend of ?2.1 lakh crore to the Central government, significantly exceeding the budget estimate of ?1 lakh crore.

A)
5.4%
B)
6.2%
C)
7.4%
D)
8.6%

Correct Answer :   7.4%

The Indian economy showcased robust growth, with a GDP increase of 7.4% in Q4 FY24 and an overall 8% growth for the fiscal year FY24, according to an SBI Research report. This announcement comes ahead of the official GDP figures release by the Centre on May 31 for Q4 FY24 and the provisional estimates for FY24. The Reserve Bank of India (RBI) estimated Q4 FY24 real GDP growth at 7.3%, with expectations for Q1 FY25 at 7.5%, and full-year FY25 growth projected at 7.0%. Chief Economic Adviser V. Anantha Nageswaran also indicated a high possibility of India’s economic growth touching 8% in FY24.

Urban and Rural Economic Indicators :

SBI Research highlighted a secular growth trend across both urban and rural landscapes. Since January 2024, over 80% of leading indicators showed acceleration, particularly in urban areas. Indicators such as passenger vehicle sales, airport passenger traffic, GST collection, credit card transactions, petroleum consumption, and toll collections pointed to increasing urban economic momentum. The rural economy also showed positive signs, with the percentage of accelerating indicators rising to 75% in March 2024 from 56% in February 2024. Key indicators such as diesel consumption and two-wheeler sales are on the rise, reflecting growing rural economic activity.

Corporate Performance :

In Q4 FY24, around 2,400 listed entities reported a top-line growth of 9%, while EBIDTA grew by approximately 21%, compared to a flat top line in previous quarters. However, PAT growth decreased to 12% from 42% in the preceding two quarters on a year-over-year basis. The report noted that an ‘above normal’ monsoon is expected to benefit the rural economy by boosting domestic supplies of pulses, oilseeds, and cereals. Corporate GVA grew by around 18% in Q4 FY24, compared to 20% in Q4 FY23 and 26% in Q3 FY24, with EBIDTA growth marginally reducing to 21% from 26% in the previous quarter. Sectors such as Banking, Automobile, Capital Goods, Consumer Durables, and Pharma reported strong performance during the quarter.

GDP Growth & Global Outlook :

The report emphasized that global growth remains resilient, with easing inflationary pressures and tight employment conditions despite geopolitical and extreme weather event risks. Global headline inflation is expected to decrease from an annual average of 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025, with advanced economies (AEs) returning to their inflation targets sooner than emerging market and developing economies (EMDEs).

Projections and Expert Opinions :

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, noted strong performance across various sectors, including trade and hotels, and robust manufacturing activities, with expectations of 6.1% GDP growth for Q4, leading to an annual GDP growth close to 7.6%. DK Srivastava, Chief Policy Advisor at EY India, mentioned that both domestic and international institutions predict around 7% growth for India in FY25, with Q4 FY24 GDP growth potentially exceeding 6.5%, resulting in annual growth close to 7.8%, as projected by the IMF. India Ratings & Research forecasted a GDP growth rate of 6.2% for Q4 FY24, while ICRA predicted a deceleration to 6.7% for the same period, projecting overall GDP growth of 7.8% for FY24.

A)
6.1%
B)
6.6%
C)
6.9%
D)
7.2%

Correct Answer :   6.6%

Moody’s Ratings predicts a 6.6% expansion for the Indian economy in the fiscal year ending March 2025 (FY25). This growth trajectory is anticipated to fuel strong credit demand, particularly benefiting the Non-Banking Financial Companies (NBFCs), despite challenges posed by rising funding costs.

Economic Growth Projection :

Moody’s anticipates India’s GDP to grow by 6.6% in FY25, followed by a 6.2% growth in the subsequent year. This projection, albeit slightly lower than some other estimates, reflects the agency’s assessment of the economic landscape.

Impact on NBFC Sector :

Strong economic growth is expected to drive robust loan growth in the NBFC sector, offsetting the effects of increasing funding costs on profitability. The sector’s resilience is further bolstered by favorable economic conditions, which are projected to help maintain asset quality amidst rising interest rates and customer debt burdens.

Loan Growth and Diversification :

Aggregate loan growth in NBFCs surged to 20.8% year-on-year in September 2023, primarily fueled by retail loan demand. Looking ahead, Moody’s anticipates a continued growth trajectory of about 15% over the next 12-18 months, driven by diverse lending activities including infrastructure financing and support for small and medium-sized enterprises.

Challenges and Mitigation :

While growth in unsecured retail loans may moderate following regulatory adjustments, NBFCs are poised to maintain their pivotal role in addressing credit needs across India’s economy. The top 20 NBFCs, with established market positions and diversified loan portfolios, are expected to navigate challenges with relative stability, supported by government or corporate ownership which bolsters funding resilience during turbulent periods.

A)
5.8%
B)
6.3%
C)
6.7%
D)
7.1%

Correct Answer :   7.1%

The National Institute of Public Finance and Policy (NIPFP) predicts India’s GDP growth for the fiscal year 2024-25 to be 7.1%. Utilizing high-frequency models, NIPFP underscores the government’s fiscal consolidation efforts, emphasizing tax buoyancy and compression of revenue expenditure.

States’ Capex Growth :

In the fiscal year 2023-24, states witness robust capital expenditure (capex) growth, attributed to substantial transfers from the central government. This highlights the effective utilization of resources at the state level, contributing to economic expansion.

Divergent Projections :

While NIPFP’s forecast stands at 7.1%, other entities such as the Asian Development Bank (ADB) and Fitch Ratings estimate a growth rate of 7%. In contrast, the International Monetary Fund (IMF), S&P Global Ratings, and Morgan Stanley project a slightly lower growth rate of 6.8% for FY25, indicating varying perspectives on India’s economic trajectory.

IMF’s Appreciation of India’s Fiscal Discipline :

The International Monetary Fund (IMF) commends India for maintaining fiscal discipline, particularly noteworthy in an election year. Emphasizing the significance of sound macro fundamentals, IMF’s Director for Asia and Pacific Department, Krishna Srinivasan, lauds India’s steady economic performance, projecting growth at 6.8% for 2024-25, driven by private consumption and public investment.

A)
6.8%
B)
7.1%
C)
7.8%
D)
8.2%

Correct Answer :   6.8%

The International Monetary Fund (IMF) on Tuesday (16th April 2024) raised India’s GDP growth projection for 2024-25 by 30 basis points to 6.8 per cent in its update to the World Economic Outlook (WEO), citing buoyant domestic demand. However, the fund’s estimate is below the 7 per cent growth projection by the government.

“Growth in India is projected to remain strong at 6.8 per cent in 2024 (FY25) and 6.5 per cent in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population,” the IMF said in its report. For India, according to the report, data and forecasts are presented on a financial year basis.

For FY24, the IMF raised India’s GDP growth projection to 7.8 per cent, compared to 6.7 per cent in its January report. For FY26, the IMF expects the country’s economic growth to slow down slightly to 6.5 per cent -- the same as projected in its January update.

According to the second advance estimates by the National Statistical Office, the growth rate of GDP during 2023-24 was estimated at 7.6 per cent, compared to a growth rate of 7 per cent in 2022-23.

Rating agencies, including Fitch and Barclays, recently revised India’s GDP growth projection for FY24 to 7.8 per cent due to strong domestic demand and persistent growth in business and consumer confidence levels.

The finance ministry in its last monthly economic report (for February) said that strong growth accompanied by stable inflation and external account, and progressive employment outlook would help the Indian economy close FY24 on a positive note. “There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25,” it said.

On inflation, the fund projected India’s consumer price inflation declining from an average of 5.4 per cent in FY24 to 4.6 per cent in FY25, and further to 4.2 per cent in FY26..


Source : Business Standard