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Indian Economy - General Knowledge Questions
A)
5.6%
B)
6.1%
C)
6.5%
D)
6.9%

Correct Answer : Option (C) - 6.5%

Morgan Stanley Research on Monday (13th Nov 2023) forecasted a 6.5% economic growth for India in FY24 and FY25, attributing this growth to solid domestic fundamentals.

* The 2024 India Economics Outlook report emphasizes that strong domestic demand, bolstered by healthy corporate and financial sector balance sheets and policy reforms, will contribute to India's growth despite a global slowdown.

* This forecast comes as the intensifying conflict in Israel may affect oil prices, potentially influencing inflation and fiscal deficits.


Comparisons with other growth projections :

* The projection by Morgan Stanley aligns with the Reserve Bank of India's (RBI) estimation of 6.5% growth for FY24.
* In comparison, Moody's Investor Services recently maintained India's economic growth at 6.7% for FY24, noting impressive resilience in the face of a global slowdown due to solid domestic demand.
* The International Monetary Fund (IMF) also increased its FY24 growth forecast for India to 6.3% from its July forecast of 6.1%, based on better-than-anticipated consumption during Q1.


Inflation and interest rates outlook :

* Morgan Stanley anticipates headline inflation to decrease from 5.4% in FY24 to 4.9% in FY25.
* The research firm expects the RBI to maintain steady interest rates until the first half of 2024, followed by a gradual rate cut cycle starting from June 24 as a result of continued moderation in inflation.
* They foresee two rate cuts of 25 basis points each, keeping real policy rates averaging around 100 basis points in 2024.


Factors affecting growth and stability :

* The report indicates that a robust political mandate backing reform measures and enhanced external demand could lead to accelerated growth in India.
* However, potential risks include a delay in the capex cycle due to diminished business confidence from unexpected political outcomes or external environmental factors.
* Morgan Stanley also predicts an increase in private consumption growth, a resurgence in private capex, and stable export trends without impeding growth, assuming a well-balanced policy response..


Source : News Bytes App

A)
7.4%
B)
7.1%
C)
6.7%
D)
6.3%

Correct Answer : Option (D) - 6.3%

The recent Economic Outlook Survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) predicts a 6.3% expansion in India's economy for the fiscal year FY24.

The Federation of Indian Chambers of Commerce and Industry (FICCI) recently unveiled its latest Economic Outlook Survey, providing insights into the anticipated growth of India’s economy in the upcoming fiscal year, FY24. The survey, conducted in September 2023, brings together eminent economists from the banking, financial services, and industry sectors to provide a comprehensive analysis of the economic landscape.


Positive Contributors to Growth : The survey’s central projection foresees a 6.3% growth in the Indian economy for FY24. This projection hinges on several key factors:

1. Strong Financial Sector : India’s robust financial sector is expected to be a key driver of economic growth. As the sector continues to evolve and adapt to changing global dynamics, it is poised to provide critical support for the country’s economic expansion.

2. Urban Demand : Strong urban demand is another driving force behind the anticipated growth. As cities continue to develop and urbanization increases, consumer spending is expected to rise, further stimulating economic activity.

3. Private Investment : The survey underlines the importance of private investment, which is expected to surge due to the government’s front-loading of capital expenditures. This government strategy has incentivized private enterprises to invest in various sectors, contributing significantly to economic growth.

4. Real Estate Recovery : The real estate market is projected to pick up, indicating positive signs of recovery. This sector, which has faced challenges in recent years, is expected to play a pivotal role in boosting the economy.

5. Festival Season : The festival season is also anticipated to stimulate economic growth. Festive occasions often lead to increased consumer spending, which, in turn, fuels economic expansion.


Moderation in GDP Growth : While the survey’s central forecast is promising, it also predicts a moderation in GDP growth. After recording a growth rate of 7.2% in 2022-23, the expected 6.3% growth for 2023-24 signifies a slight deceleration in the pace of economic expansion.
Potential Challenges

The survey highlights several external factors that could pose challenges to India’s economic growth in the coming year:

1. Geopolitical Tensions : Ongoing geopolitical tensions in various regions can have far-reaching impacts on India’s economic stability and growth prospects. FICCI’s survey acknowledges the need to navigate these complex international relations carefully.

2. China’s Economic Slowdown : The slowing economic development in China, a significant trading partner for India, is another factor that requires close monitoring. Economic developments in China can influence India’s economic fortunes.

3. Monetary Tightening : The delayed effects of monetary tightening, implemented to control inflation and stabilize the financial system, might affect India’s economic trajectory in FY24.

4. Monsoon Variability : India’s agricultural sector is particularly vulnerable to variations in the monsoon season. The survey warns that a below-average monsoon could have adverse effects on the growth of agricultural and related industries.
Sectoral Insights


The survey provides sector-specific growth forecasts :

Agriculture : Growth in the agricultural sector is predicted to decrease from 4% in FY23 to 2.7% in the current fiscal year due to the influence of El Niño on monsoon rainfall.

Industry : The industry sector is expected to grow at a rate of 5.6%, reflecting its importance in India’s economic landscape.

Services : The services sector is anticipated to exhibit robust growth at 7.3%, underlining its role as a key contributor to India’s economic expansion.
Inflation Outlook


The direction of inflation remains uncertain. The survey suggests that Consumer Price Index (CPI)-based inflation is expected to hover around 5.5% in FY24, with a range of 5.3% to 5.7%. Factors contributing to inflationary pressures include the stickiness of cereal prices, fluctuations in agricultural commodities, and disruptions in global supply chains.


Inflation Risks and Volatility in Prices :  The survey emphasizes that while the CPI inflation rate may have peaked, upside risks to prices persist. Volatility in food prices due to weather-related uncertainties, international events like the cancellation of the Black Sea grain deal, and spikes in crude oil prices all have the potential to contribute to inflationary pressures.


Investment Momentum : One of the survey’s key findings is the positive impact of the government’s emphasis on capital spending. This strategy has triggered a surge in private investments and has supported the momentum of expansion in the economy. However, the survey cautions that it may take some time for investments to gain full momentum, and further rebounds in private investments will be influenced by both domestic and international consumption activities.

A)
6.0%
B)
6.3%
C)
6.7%
D)
7.1%

Correct Answer : Option (B) - 6.3%

In its October 2023 World Economic Outlook (WEO) report, the International Monetary Fund (IMF) raised India’s economic growth forecast for the fiscal year 2023-24.

The growth projection was increased from 6.1% to 6.3% due to stronger-than-expected consumption during April-June. The report also highlighted India’s resilient domestic economic activity and the positive impact of robust domestic demand, contrasting global economic trends.


Key Points of IMF World Economic Outlook (WEO) report :

GDP Growth Projection : The IMF revised India’s GDP growth forecast to 6.3% for both 2023 and 2024, indicating a 0.2 percentage points upward revision for 2023. This adjustment was attributed to the nation’s strong consumption patterns during the specified period.

Inflation Outlook : The IMF anticipated retail inflation in India to rise to 5.5% in fiscal 2023-24 before easing to 4.6% in 2024-25. This projection aligns with the Reserve Bank of India’s (RBI) inflation target over the medium term.

RBI’s Projections : The RBI’s projections for the current fiscal year included a consumer price index (CPI)-based inflation rate of 5.4% and a GDP growth rate of 6.5%. The IMF’s report endorsed these projections and emphasized the consistency of monetary policy measures in achieving the RBI’s inflation target.

Economic Performance : India’s economy exhibited resilience, expanding by 7.8% in April-June, surpassing market expectations. Private consumption played a significant role, growing at a rate of 6.0% compared to 2.8% in the preceding quarter (January-March).

Global Economic Landscape : The IMF’s report highlighted challenges faced by other major economies, such as China and the euro area. While the United States demonstrated a remarkable recovery, the euro area’s output remained 2.2% below pre-pandemic projections due to factors like the war in Ukraine and spikes in energy prices.

Global Growth Forecast : Despite the strong performance of the US economy, the overall global growth remained low and uneven. The IMF maintained the global real GDP growth forecast at 3% for 2023 but revised down its 2024 forecast to 2.9% from the previous 3%, citing uncertainties in the international economic landscape.

Current Account Deficit : The IMF anticipated India’s current account deficit to remain at 1.8% of GDP in FY24 and FY25, indicating a stable external economic position for the nation.

A)
6.0%
B)
6.3%
C)
6.9%
D)
7.8%

Correct Answer : Option (B) - 6.3%

The World Bank kept its economic growth projection for India at 6.3% for FY24, the same as its previous April estimate. However, it attributed the moderation from FY23’s 7.2% growth to adverse global factors affecting foreign demand and consumption growth.

“The expected moderation is mainly due to challenging external conditions and waning pent-up demand. However, service sector activity is expected to remain strong with growth of 7.4%, and investment growth is also projected to remain robust at 8.9%," the World Bank’s latest India Development Update stated.

The forecast is similar to projections by other institutions such as the OECD, Asian Development Bank and Fitch, but slower than the government’s and the Reserve Bank of India’s estimates, which pegged India’s growth at 6.5%. S&P Ratings pegged India’s growth estimates at 6%. During the April-June quarter, India’s economy grew 7.8%, its quickest pace in a year, buoyed by strong services activity and robust demand.

The World Bank said it expected fiscal consolidation to continue in FY24, with the central government fiscal deficit projected to continue to decline from 6.4% to 5.9% of GDP.

World Bank India director Auguste Tano Kouame said that it was not building in a lot of volatility in fiscal policy due to the upcoming general elections as it was not expecting relaxation in the government’s stated fiscal consolidation path. “I see almost zero risks of fiscal slippages overall despite the elections," he said.

Public debt is expected to stabilize at 83% of GDP. The current account deficit is expected to narrow to 1.4% of GDP, and it will be adequately financed by foreign investment flows and supported by large foreign reserves..

Source : Mint

A)
₹1.59 Trillion
B)
₹1.67 Trillion
C)
₹1.73 Trillion
D)
₹1.81 Trillion

Correct Answer : Option (A) - ₹1.59 Trillion

In August 2023, India witnessed a notable surge in Goods and Services Tax (GST) collection, amounting to ₹1.59 trillion, signifying an 11% increase compared to the same period last year (2023). This impressive growth can be attributed to enhanced compliance and anti-evasion measures put in place.


Comparison with Previous Months :

* August 2023’s collection marked a significant rise from the ₹1.43 trillion collected in August 2022.
* However, it’s important to note that GST collection moderated compared to the previous month, which recorded ₹1.65 trillion in July.


Factors Behind the Moderation :

* The moderation in collection is primarily attributed to subdued growth in integrated GST (IGST) and the cess on imports, which increased by only 3% in August.
* Importantly, both imports and IGST collections have experienced fluctuations in recent months.


Government’s Expectations :

* The government has set an ambitious target for the financial year, aiming for an average monthly GST collection between ₹1.6 trillion and ₹1.65 trillion.
* Experts anticipate the growth momentum to continue, although certain inhibiting factors are not ruled out.


Distribution of Tax Collection :

* Following the settlement of taxes for inter-state sales, the Centre collected ₹65,909 crore, while the states garnered ₹67,202 crore in August.


Year-on-Year Improvement :

* In comparison to the same month in the previous year, August 2023’s GST revenues showed an impressive 11% increase.
* Revenue from the import of goods increased by 3%, and revenue from domestic transactions (including import of services) grew by 14% compared to the same period last year, according to the finance ministry.


Strong Performance in Major States :

* Several major states reported robust growth rates in GST collection.
* Maharashtra recorded a remarkable 23% increase at ₹23,282 crore, Karnataka’s collection surged by 16% to ₹11,116 crore, and Gujarat’s collection increased by 12% to ₹9,765 crore, as per official data.


Source : Business Standard

A)
5.8%
B)
6.2%
C)
6.7%
D)
7.3%

Correct Answer : Option (C) - 6.7%

Global rating agency Moody's Investor Service on Friday (1st August 2023) raised India's economic growth forecast to 6.7% in 2023 from 5.5% pegged earlier.

It has, however, slashed India's 2024 gross domestic product (GDP) growth forecast to 6.1% from 6.5% earlier since the second quarter outperformance has created a high base this year.

Strong services expansion and capital expenditures propelled India's 7.8% real GDP growth in the second quarter from a year ago. We have accordingly raised our 2023 calendar year growth forecast for India from 5.5% to 6.7%," it said in a note.

On lowering the 2024 growth forecast, Moody's said, "Since the second quarter outperformance creates a high base in 2023, we have lowered our 2024 growth forecast from 6.5% to 6.1%."

Given the robust underlying economic momentum, the agency also recognises further upside risk to India’s economic growth performance.

India's monsoon season, which runs from June to October, could also see below-average rainfall, resulting in higher food prices, Moody's said. "So far, as of August 29, 2023, the India Meteorological Department has estimated a 9% rain deficiency across the country.

If El Niño this year proves to be particularly strong in the second half of 2023 and early 2024, agricultural commodity prices could shoot up."

The Reserve Bank of India’s monetary policy committee has left the repo rate unchanged for a third time this month. The recent uptick in food price inflation and uncertain El Niño-related weather conditions will delay monetary policy easing consideration to early next year, Moody's noted.

The agency further said that domestic demand in India remains buoyant, and as long as core inflation remains relatively stable, rate hikes are also unlikely.

Meanwhile, India's GDP for the first quarter (April-June) of the ongoing financial year accelerated to 7.8%, according to data released by the Ministry of Statistics and Programme Implementation on August 31.

The GDP growth stood at 6.1% in the fourth quarter of the previous financial year..

Source : CNBC

A)
6.49%
B)
6.82%
C)
7.17%
D)
7.44%

Correct Answer : Option (D) - 7.44%

In July, retail inflation in India experienced a significant upswing, reaching 7.44%, marking the highest rate since April 2022. This surge contrasts with the preceding four-month period of inflation below the central bank’s 6% tolerance threshold. The increase is largely attributed to an 11.5% spike in food prices, making it the first time since September 2022 that the price rise has crossed the 7% mark.


Food Price Surge Drives Overall Inflation :

The primary driver of the July inflation surge was an impressive 11.5% increase in food prices, causing a ripple effect on the overall inflation rate. Notably, vegetable prices surged by a staggering 37.3%, while cereals and pulses became over 13% more expensive. Consequently, urban consumers saw their food bills rise by over 12.3%, while rural consumers experienced an 11% increase in food inflation. On the whole, rural residents faced a slightly higher overall inflation rate of 7.63% for the same period.


Consumer Price Index and Food Price Dynamics :

The Consumer Price Index (CPI) rose by 2.9% from the previous month, reflecting the swift inflationary pressures. The month-on-month increase in food prices was notable as well, with a 6.7% upsurge. These figures surpassed the expectations of most economists.


Implications for the Economy :

The sudden surge in inflation poses challenges for the central bank’s projections and policy decisions. The 7% inflation rate for two consecutive months raises questions about the possibility of triggering action from the Reserve Bank of India (RBI). Bank of Baroda’s chief economist, Madan Sabnavis, points out that while the probability of an interest rate hike remains low, it cannot be ruled out entirely.


Future Outlook and Monetary Policy :

While a slight reduction in tomato prices might offer some relief in August, other food items such as pulses, spices, milk, and cereals continue to be sources of concern. Additionally, the uncertain monsoon outlook for the coming month and the progress of crop sowing further contribute to the inflation narrative.

Interest rate adjustments are now under scrutiny, with rating agency ICRA expecting the earliest rate cut around the second quarter of 2024-25. This projection includes a “fairly shallow” rate cut cycle, anticipated to be around 50-75 basis points from the current levels. As one basis point equals 0.01%, such adjustments could have a measured impact on the broader economy.

A)
(-) 1.36%
B)
(-) 1.82%
C)
(-) 2.23%
D)
(-) 2.76%

Correct Answer : Option (A) - (-) 1.36%

The wholesale price-based inflation remained in the negative territory for the fourth straight month in July 2023 at (-)1.36% on easing prices of fuel, even though food articles turned costlier.

* The wholesale price index (WPI) based inflation rate has been in the negative since April and was (-)4.12% in June. In July 2022, it was 14.07%.

* Inflation in food articles skyrocketed 14.25% in July against 1.32% in June.

* "Decline in the rate of inflation in July 2023 is primarily contributed by fall in prices of mineral oils, basic metals, chemical and chemical products, textiles and food products," the Commerce and Industry Ministry said on Monday.

* Fuel and power basket inflation eased to (-)12.79% in July from (-)12.63% in June.

* In manufactured products, the inflation rate was (-)2.51% as against (-)2.71% in June.

* The RBI, last week, kept interest rates unchanged at 6.5% for the third straight meeting but signalled tighter policy if food prices drive inflation higher.

* "The job on inflation is still not done," RBI Governor Shaktikanta Das had said. "Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions, and weather-related uncertainties."

* The RBI raised its inflation forecast for FY24 to 5.4% from 5.1% earlier, citing pressures from food prices.

* The central bank takes into account retail or consumer price index based inflation for formulating monetary policy. Retail inflation data for July is scheduled to be released later in the day..

Source : The Hindu Businessline

A)
Rs 1.35 lakh
B)
Rs 1.65 lakh
C)
Rs 1.85 lakh
D)
Rs 1.95 lakh

Correct Answer : Option (B) - Rs 1.65 lakh

The gross Goods and Services Tax (GST) revenue collected in July 2023 was Rs 1,65,105 crore, slightly higher than the collections in July 2023, according to data released by the finance ministry on Tuesday (1st August 2023).

It is for the fifth time since the rollout of the regime that the gross GST collection crossed the Rs 1.60 lakh crore mark.

In April 2023, the GST collections had touched an all-time high of Rs 1.87 lakh crore.

Of the Rs 1.65 lakh crore July 2023 mop up, the central GST was Rs 29,773 crore and state was is Rs 37,623 crore and Integrated GST was Rs 85,930 crore (including Rs 41,239 crore collected on import of goods).

The cess was Rs 11,779 crore (including Rs 840 crore collected on import of goods), a release by the ministry said.

The total revenue of Centre and the States in the month of July 2023 after regular settlement was Rs 69,558 crore for CGST and Rs 70,811 crore for the SGST.

Notably, the GST revenues for the month of July 2023 are 11% higher than the GST revenues in the same month last year.

During the month, the revenues from domestic transactions (including import of services) were 15% higher than the revenues from these sources during the same month last year (2022)..

Source : ToI

A)
6.1%
B)
6.8%
C)
7.3%
D)
7.9%

Correct Answer : Option (A) - 6.1%

The International Monetary Fund (IMF) on Tuesday (25th July 2023) raised the FY24 economic growth forecast for India by 20 basis points to 6.1 per cent, citing the country’s stronger-than-expected growth momentum in the March quarter of FY23.

“Growth in India is projected at 6.1 per cent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment,” said IMF in an update to its ‘World Economic Outlook’ (WEO) released in April.

 India’s economic growth increased by 6.1 per cent in the March quarter of FY23, beating analysts’ expectations as the expansion in manufacturing and construction surprised on the upside.


Most professional forecasters expect the Indian economy to grow between 6 per cent and 6.5 per cent in FY24. While the Organization for Economic Co-operation and Development (OECD) last month revised upward its forecast to 6 per cent for FY24, the Reserve Bank of India expects the economy to expand at 6.5 per cent in the same financial year.

 “India remains an economy that is growing quite strongly. One sixth of total global growth is accounted for by India this year,” Danish Leigh, division chief, Research department at IMF said addressing the media after the release of the WEO update report.

Leigh said inflation in India is projected to remain within the target range of 2-6 per cent. “IMF has an inflation forecast of 4.9 per cent for FY24. Food prices easing has contributed to that as well as the strong action by the Reserve Bank of India. We see the need to continue to balance the pressures of inflation and output to make sure that inflation stays inside the target range as we expect it will,” he added..

Source : Business Standard