Indian Economy - General Knowledge Questions

The Organisation for Economic Co-operation and Development (OECD), on Tuesday(22nd Nov 2022), cut its gross domestic growth forecast for India for the current financial year (FY23) to 6.6 per cent from 6.9 per cent, citing higher medium-term global uncertainty and slowing domestic economic activity.

 

OECD is the latest of a host of banks, agencies and multilateral institutions which have recently cut their India GDP forecast for FY23.

 

“Economic growth has lost momentum over the summer, due to a combination of erratic rainfall, which impacted sowing activities, and falling purchasing power. Concerns over demand conditions are considerable in services and infrastructure sectors, while consumers have become cautious regarding non-essential spending due to higher prices for food and energy.”.

Source : Business Standard

CRISIL has revised its forecast for India’s real gross domestic product (GDP) growth to 7 per cent for the current fiscal (2022-23) from 7.3 per cent estimated previously. 

 

* The credit rating agency said this is primarily because the slowdown in global growth has started to impact India’s exports and industrial activity.

 

* Crisil downgraded the India growth forecast by 30 bps to 7 per cent while ICRA pegged the economic expansion at 6.5 per cent for the second quarter of FY2022-23. This is mainly due to the ripple effect of slowdown in global growth and mixed crop output.

 

* “We have revised down our forecast for real gross domestic product growth to 7 per cent for fiscal 2023 from 7.3 per cent, primarily because of the slowdown in global growth that has started to impact our exports and industrial activity.

* This will test the resilience of domestic demand,” Crisil chief economist Dharmakirti Joshi said.

 

* Aditi Nayar, his counterpart at Icra, in her report pencilled a 6.5 per cent growth in Q2 of the current fiscal, nearly half of the year-ago quarter when the economy had clipped at 12.7 per cent, but which is still a tad higher than the monetary policy committee’s September forecast of 6.3 per cent and at 6.5 per cent in gross value added (GVA) less than half of 13.5 per cent a year ago.

 

Main Causes For This Downturn : The lower numbers to the mixed crop output trends revealed by the advance estimates of kharif production, adverse input cost movements for certain sectors with a higher fuel intensity, as well as the impact of the flagging external demand on non-oil merchandise exports, which whittled down the gains from robust demand for contact-intensive services, healthy capital spending by government and pre-festive season stocking of goods.

 

* Paring growth forecast only by 30 bps as domestic demand still remains supportive, helped by a catch-up in contact-based services, government capex, relatively accommodative financial conditions, and overall normal monsoons for the fourth time in a row.

* The ripple effect of the global slowdown will be felt more next fiscal, which will put domestic demand under pressure as interest rate hikes get transmitted more to consumers, and the catch-up in contact-based services fades.

 

About The GDP Components : GDP growth over the pre-Covid levels is expected to double to around 8 per cent in Q2 relative to 3.8 per cent seen in the previous quarter. The agency estimates the sectoral growth in Q2 to be driven by the services sector (9.4 per cent), with a subdued trend foreseen for the industry (2 per cent), and agriculture, forestry and fishing (2.5 per cent).

 

* Despite the markdown in near-term growth, the country is expected to remain a growth outperformer over the medium-run, and expected GDP growth to average 6.6 per cent between fiscals 2024 and 2026, compared to the 3.1 per cent global growth forecast by the International Monetary Fund.

 

* China (4.5 per cent growth estimated for 2023-25), Indonesia (5.2 per cent), Turkey (3 per cent) and Brazil (1.6 per cent)..

Source : The Hindu Businessline

Goldman Sachs expects India's economic growth to slow to 5.9% in 2023, from an estimated 6.9% growth in 2022, as the boost from the post-COVID reopening fades and monetary tightening weighs on domestic demand.

 

* "We expect growth to be a tale of two halves in 2023, with a slowdown in the first half (due to dwindling reopening effects)," Santanu Sengupta, India economist at Goldman Sachs, said on Sunday(20th Nov 2022).

 

* India's growth in the seven months since March 2022, which Goldman Sachs considers the post-COVID reopening, was faster than most other emerging markets in the first seven months after they reopened, the U.S. investment bank said.

 

* "In the second half, we expect growth to re-accelerate as global growth recovers, the net export drag declines, and the investment cycle picks up," Sengupta said.

 

* The Reserve Bank of India (RBI), last week, pegged the domestic growth rate at 7% for 2022-23.

 

* Sengupta expects the government to continue its focus on capital spending and sees signs of the nascent investment recovery continuing, with conducive conditions helping the economy pick up in the second half.

 

* Goldman Sachs expects headline inflation to drop to 6.1% in 2023, from 6.8% in 2022, saying government intervention was likely to cap food prices and that core goods inflation had probably peaked..

Source : Business Today

India's wholesale price index (WPI) inflation eased to 8.39 per cent in October 2022 - helped by a fall in prices of fuel and manufactured goods.

This is the first time in 19 months WPI inflation has been recorded in single digits; the previous single-digit figure was 7.89 per cent in March 2021.

 

October figures are down from 10.7 per cent in September and 12.41 per cent in August, and are a far cry from the all-time high of 16.6 per cent in May.

 

"Decline in rate of inflation in October 2022 is primarily contributed (to) by fall in the price of mineral oils, basic metals, fabricated metal products, except machinery and equipment; textiles; other non-metallic mineral products; minerals, etc.," the commerce and industry ministry was quoted by PTI.

 

October inflation in food articles was 8.33 per cent. Inflation in vegetables prices was 17.61 per cent as against 39.66 per cent.

'Fuel and power' inflation was 23.17 per cent and for manufactured products it was 4.42 per cent.

 

Consumer price index inflation (CPI), or retail inflation, figures are due later today. A poll of 47 economists by news agency Reuters indicates CPI will also slow - from 7.41 per cent in September to an expected 6.73 per cent for October.

India’s retail inflation softened to a three-month low at 6.77 per cent in October 2022 from 7.41 per cent in September 2022 as food prices declined substantially.

 

The easing in price pressure may turn the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) less hawkish when it meets next month even though a pause in the ongoing rate hike cycle is unlikely.

 

The data released by the National Statistical Office on Monday(14th Nov 2022) showed food inflation eased to 7.01 per cent from 8.6 per cent in September due to a decline in prices of vegetables, fruit, pulses, and edible oil.

 

Services inflation, which includes items like health, education, transport and communication, recreation and personal care, eased to a 29-month low at 5.9 per cent.

 

Reacting to the latest inflation numbers, the finance ministry said the measures taken by the government to rationalise tariff structures of major inputs to augment domestic supplies helped to keep cost-push inflation in consumer items in control..

Source : Business Standard

Moody’s Investor Services has lowered India’s economic growth forecast by 70 basis points to 7 per cent for the calendar year 2022. This is in line with the downward revision of the global growth forecast.

 

What Moody’s Said : “The downward revision assumes higher inflation, high interest rates and slowing global growth will dampen economic momentum by more than we had previously expected,” the agency said in a report titled Global Macro Outlook 2023-24 : Global economy faces a reckoning over inflation, geopolitics and policy trade-offs.’ Further it said that the weakening of the rupee and high oil prices continue to exert upward pressures on inflation, which has remained above the Reserve Bank of India’s (RBI) ‘4 per cent -/+ 2 per cent’ target inflation range for much of this year(2022).

 

This is not the first downward revision of the Indian economy, though all the revisions are for the fiscal year. International Monetary Fund (IMF) cuts India’s GDP forecast for the current fiscal (the year 2022-23 or FY 23) by 60 basis points to 6.8 per cent from 7.4 per cent estimated earlier. Before that, World Bank cut the forecast by 1 percentage point to 6.5 per cent, ADB by 50 basis points to 7 per cent, Fitch by 80 basis points to 7 per cent and RBI cut the forecast by 20 basis points to 7 per cent. S&P Global and OECD have maintained the forecast at 7.3 per cent and 6.9 per cent, respectively.

 

Moody’s said that annual headline CPI inflation increased to 7.5 per cent in September after dipping below 7 per cent in July. Wholesale price inflation, however, has declined for four straight months, from a peak of 16.6 per cent in May to 10.7 per cent in September. From May to September, the RBI raised the repo rate a cumulative 190 bps to 5.9 per cent to contain inflation risks.

 

About Economic Fundamentals : Acknowledged that underlying growth dynamics are fundamentally strong, boosted by a rebound in services activity. Government capital expenditure and manufacturing capacity utilization have also improved. September exports are down from the peak in March, but they are still around 30 per cent above the pre-pandemic level. Non-food credit growth shows solid momentum. The private sector, having deleveraged after the RBI’s Asset Quality Review in 2015, is now well-positioned to increase Capex spend.

 

Also, the Production Linked Incentive Scheme to attract investment in 14 key manufacturing sectors shows results. While these domestic strengths will continue to support the domestic growth narrative, global financial tightening and slowing external demand will pose downward pressure on growth in 2023, the report added.

 

Talking about the global economy, the agency said that it is on the verge of a downturn amid extraordinarily high levels of uncertainty amid persistent inflation, monetary policy tightening, fiscal challenges, geopolitical shifts and financial market volatility. “Global growth will slow in 2023 and remain sluggish in 2024. Still, a period of relative stability could emerge by 2024 if governments and central banks manage to navigate their economies through the current challenges,” it said..

Source : The Hindu Businessline

According to a press release by Ministry of Finance, the gross GST revenue collected in the month of October 2022 is ₹ 1,51,718 crore of which CGST is ₹ 26,039 crore, SGST is ₹ 33,396 crore, IGST is ₹ 81,778 crore (including ₹ 37,297 crore collected on import of goods) and Cess is ₹ 10,505 crore (including ₹ 825 crore collected on import of goods), which is second highest till date.

The government has settled ₹ 37,626 crore to CGST and ₹ 32,883 crore to SGST from IGST as regular settlement. In addition, Centre has also settled Rs 22,000 crore on adhoc basis in the ratio of 50:50 between Centre and States.

The total revenue of Centre and the States after regular as well as adhoc settlements in the month of October 2022 is ₹74,665 crore for CGST and ₹ 77,279 crore for the SGST.

The revenue for October 2022 is second highest monthly collection, next only to the collection in April 2022 and it is for the second time the gross GST collection has crossed Rs. 1.50 lakh crore mark. October also saw the second highest collection from domestic transactions, next only to April 2022.

This is the ninth month and for eight months in a row now, that the monthly GST revenues have been more than the ₹ 1.4 lakh crore mark. During the month of September 2022, 8.3 crore e-way bills were generated, which was significantly higher than 7.7 crore e-way bills generated in August 2022..

Source : Business Standard

UPI transactions rose by 7.7 per cent in October 2022 to 730 crore. The total value for the month stood at more than ₹12.11 lakh crore.

 

In September 2022, UPI transactions stood at 678 crore with a total value of ₹11.16 lakh crore.

 

The instant interbank fund transfer through IMPS (Immediate Payment Service) transactions in October stood at 48.25 crore and the value was at ₹4.66 lakh crore.

The transactions were higher by 4.3 per cent as compared to September according to the monthly data from the National Payments Corporation of India (NPCI).

 

The NETC FASTag, which facilitates automatic toll collection at NHAI's toll booths across the country, registered a 9.3 per cent growth in the number of transactions compared to 28.3 crore in September 2022.

 

The value of transactions stood at ₹4,451.87 crore in October 2022 as against ₹4,244.76 crore in September 2022.

 

While the Aadhaar card-enabled AePS, which facilitates easy, quick and safe banking transactions, increased to 11.77 crore in October compared to 10.27 crore in previous month. The value of AePS transactions rose to ₹31,112.63 crore from ₹26,665.58 crore..

Source : Mint

India's foreign exchange reserves further fell to an over two-year low for the week ended October 14, 2022, as the central bank continued to defend the rupee’s downslide while ignoring depleting forex reserves to be a major concern.

 

The foreign exchange reserves of Asia's third largest economy fell by $3.85 billion to $524.52 billion for the week ending Oct 21, 2022, according to data released today by the Reserve Bank of India.

 

The spot forex reserves have fallen from $607 billion in end-March and depleted by $117.93 billion from the record high of $642.45 billion seen on September 3 last year(2021).

 

The forex reserves have now depleted for 11 weeks out of 12. The one time it got lucky was for the week ended Oct 7, when gains in gold reserves had lifted the forex reserves by just $204 million.

 

The foreign exchange reserves had fallen to their lowest level since July 2020 to $528.37 billion for the week ending Oct 14.

 

The fall in the foreign exchange reserves can be attributed to a fall in the Foreign Currency Assets (FCA), which is a major component of the overall reserves..

Source : Economic Times

India may draw $475 billion in FDI : India has promising growth prospects for foreign direct investment (FDI) and has the potential to draw $475 billion in FDI flows over the next five years, according to a CII-EY report. 

 

Despite the effects of the pandemic and geopolitical developments, foreign direct investment (FDI) in India has steadily increased over the past ten years, reaching $84.8 billion in FY 2021–22.

 

* 71% of multinational corporations (MNCs) with operations in India view it as a key market for their international expansion. Prospects for the long run and the short term are what are fueling the optimism.

 

* According to the report titled “Vision – Developed India : Opportunities and Expectations of MNCs,” the majority of MNCs believe that the Indian economy will perform significantly better in the next three to five years.

 

* With 96% of respondents being optimistic about the overall potential of the country.

 

* The robust momentum in India’s domestic consumption, services, digital economy, and infrastructure is dictating the country’s growth trajectory.

 

* Behind only the US and China, the forecasted actual growth in consumption is the third greatest, and by 2025, the rapidly growing digital economy is predicted to reach $1 trillion.

 

 

* India’s potential is fueled by a number of factors, including the country’s ranking as one of the largest and fastest-growing economies in the world, strong consumer patterns, digitization, and an expanding services industry.

 

* India is one of the world’s largest economies with one of the fastest rates of growth.

 

* The government’s strong emphasis on infrastructure and manufacturing, along with strong consumption trends, digitisation, and a growing services sector, have all contributed to the confidence in India’s potential.

 

* Significantly, more than 60% of MNCs reported that the business environment has improved during the previous three years.

 

* MNCs value the effects of the GST, the government’s push toward digitalization in many areas, and tax transparency, among other reforms.

 

* India is a big and stable democracy which is another factor that makes India a desirable investment destination for MNCs.

 

* India is likewise viewed as an option by the majority of respondents to their China+1 approach..

Source : The Hindu