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India Set To Overtake Japan As Asia’s Second-Largest Economy By 2030, Says S&P Global

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“The near-term economic outlook is for continued rapid expansion during the remainder of 2023 and for 2024, underpinned by strong growth in domestic demand,” said S&P Global

India, the fifth-largest economy in the world, is anticipated to pass Japan and become the third-largest economy in the world by 2030 with a GDP of USD 7.3 trillion, acccording to S&P Global Market Intelligence’s most recent issue of PMI.

The Indian economy showed two consecutive years of strong, sustained growth in 2021 and 2022, and it has continued to do so in 2023.

The fastest-growing global economy in this fiscal year is likely to be India, whose gross domestic product (GDP) is predicted to increase by 6.2 to 6.3 per cent in the fiscal year that ends in March 2024. The third-largest economy in Asia experienced a stunning 7.8 per cent growth in the April-June quarter.

“The near-term economic outlook is for continued rapid expansion during the remainder of 2023 and for 2024, underpinned by strong growth in domestic demand,” said S&P Global.

The recent acceleration of FDI into India is a reflection of the country’s positive long-term growth prospects, which are supported by a youthful population profile and fast expanding urban household incomes.

“It is projected that India’s nominal GDP, expressed in USD, will increase from USD 3.5 trillion in 2022 to USD 7.3 trillion in 2030. By 2030, the size of the Indian GDP would surpass that of Japan due to the country’s strong economic growth, making India the second-largest economy in the Asia-Pacific region, according to the report.

By 2022, the Indian GDP was already larger than the GDPs of France and the UK combined. India’s GDP is anticipated to exceed Germany by 2030.

The long-term forecast for the Indian economy, according to S&P Global, is underpinned by a number of important growth factors.

“India’s sizable and rapidly expanding middle class, which is assisting in driving consumer expenditure, is a significant positive aspect. India is becoming an increasingly important investment destination for a wide range of multinationals in several industries, including manufacturing, infrastructure, and services,” according to the report. This is due to the country’s rapidly expanding domestic consumer market as well as its sizable industrial sector.

The present digital transformation of India is predicted to drive the rise of e-commerce, altering the retail consumer market landscape during the next decade. According to S&P Global, this is bringing global multinationals in technology and e-commerce to the Indian market.

The report states, “India’s strong FDI inflows have been boosted by large inflows of investments from global technology MNCs such as Google and Facebook that are attracted to India’s large, fast-growing domestic consumer market, as well as a strong upturn in foreign direct investment inflows from manufacturing firms.” 

Overall, India is expected to continue to be one of the world’s fastest-growing economies over the next decade.

 

RBI

Interest Rate To Remain High For Now: Shaktikanta Das

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Since May 2022, the Reserve Bank has also increased the short-term benchmark lending rate (repo) by a total of 250 basis points however, it has stopped raising rates and has kept the repo rate at 6.5per cent since February of this year

Shaktikanta Das, governor of the Reserve Bank India (RBI), stated that only time will tell how long interest rates will continue to be high for the foreseeable future, on Friday.

Major central banks around the world have increased their key policy rates in response to the ongoing geopolitical crises in order to combat excessive inflation.

Since May 2022, the Reserve Bank has also increased the short-term benchmark lending rate (repo) by a total of 250 basis points. However, it has stopped raising rates and has kept the repo rate at 6.5per cent since February of this year.

Only time will tell how long interest rates will stay high, the governor remarked in response to a question at the Kautilya Economic Conclave 2023.

Das stressed that the monetary policy is always challenging and there is no room for complacency in his speech at the Conclave, saying that it must remain actively disinflationary to ensure that the decline in domestic inflation from its peak of 7.44 per cent in July continues smoothly.

retail inflation

India’s Wholesale Inflation Stays In Negative Zone For 6th Month

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Deflation in September is primarily due to a fall in prices of chemical and chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of the previous year

Wholesale inflation in India based on the wholesale price index (WPI) continued to stay in the negative zone for the sixth straight month through September, official data showed on Monday.

In April this year, it went into negative territory. Similarly, in the initial days of Covid, in July 2020, the WPI was reported to be negative.

The September wholesale inflation came in at (-) 0.26 per cent against (-) 0.52 per cent in August, and against (-) 1.23 the previous month of July, official data released by the Ministry of Commerce and Industry showed.

Deflation in September is primarily due to a fall in prices of chemical and chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of the previous year.

The WPI data comes after the statistics ministry had said on 12 October that headline retail inflation had fallen to a three-month low of 5.02 per cent in September.

The government releases index numbers of wholesale prices on a monthly basis on the 14th of every month (or the next working day). The index numbers are compiled with data received from institutional sources and selected manufacturing units across the country.

Overall wholesale inflation was 8.39 per cent in October 2022 and has fallen since then. Notably, the wholesale price index (WPI)–based inflation had been in double digits for 18 months in a row till September last year.

Meanwhile, the retail inflation in India is again back in RBI’s two to six per cent comfort level in September but is above the ideal 4 per cent scenario. September retail inflation was at 5.02 per cent.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. (ANI)     

 

retail inflation

Retail Inflation Slides To 5.02% In Sept, Lowest In Three-Month

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Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.56 per cent in September as compared with 9.94 per cent in August

India’s retail inflation eased to 5.02 per cent from 6.83 per cent in September which is a three-month low banking on sliding vegetable prices but remained above 4 per cent, a target aimed by the Reserve Bank of India (RBI).

It is likely that RBI would like to get comfortable with inflation before easing rates. However, it came between the tolerance band of 2-6 per cent of the central bank.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.56 per cent in September as compared with 9.94 per cent in August.

RBI earlier this month kept its key lending rate steady for a fourth consecutive policy meeting and emphatically reiterated that it is targeting inflation of 4 per cent and a print of below 6 per cent may not suffice as a condition for easing rates.

Vegetable prices were the key driver in keeping inflation elevated in the previous two months, forcing the government to ban some exports of rice and raise duties for onions.

Vegetable inflation sharply eased to 3.39 per cent in September from 26.14 per cent in the previous month. Cereal inflation in September eased to 10.95 per cent from 11.85 per cent in August. India has also banned exports of wheat since last year.

Ranen Banerjee, Partner, Economic Advisory Services, PwC India expects that the policy rates to remain unchanged for quite some time – at least till Q1 of FY25 – given the inflation prints in coming months will face upward pressure risks from the possible lower farm outputs owing to uneven rain experienced during monsoons. 

Global crude prices remaining elevated owing to production cuts, Chinese impetus and geopolitical flare ups will put further pressure on the inflation front, Banejee added.

Economist at Acuité Ratings & Research, Suman Chowdhury also believes that due to El Nino phenomenon, the yield in the upcoming kharif crop may get impacted, the lower acreage and the expected decline in domestic pulses production.

It is given that the prices of pulses are on the rise with an inflation print of 16.38 per cent. Cereal inflation continues to be in double digits at 10.95 per cent YoY despite the steps taken by the government to cool down the market prices of wheat and rice.

For fintech sector, CEO and Co-founder of Biz2Credit and Biz2X, Rohit Arora said that it will to a more predictable environment for interest rates and lending conditions, setting the stage for continued growth and innovation.

 

 

IMF

IMF Revises India’s Growth Projection To 6.3%

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Earlier this month, the World Bank maintained its growth projection for the current fiscal at 6.3 per cent due to positive trends in investment and consumption

Amid the Israel-Hamas war, the International Monetary Fund (IMF) has increased India’s economic growth forecast by 20 basis points to 6.3 per cent for the fiscal year 2023-24 (FY24). This upward revision is attributed to improved consumption demand. However, there is no alteration in the projection for FY25, which remains at 6.3 per cent.

The Indian economy exhibited a growth of 7.2 per cent in FY23. The IMF, in its annual publication ‘World Economic Outlook’ (WEO) stated, “Growth in India is projected to remain strong, at 6.3 per cent in both 2023 and 2024, with an upward revision of 0.2 per cent for 2023, reflecting stronger-than-expected consumption during April-June.”

In its previous projection in April, the IMF estimated a growth rate of 5.9 per cent, which was revised to 6.1 per cent in July due to robust growth of 7.8 per cent in the April to June quarter.

Earlier this month, the World Bank maintained its growth projection for the current fiscal at 6.3 per cent due to positive trends in investment and consumption.

Notably, both the IMF and World Bank projections are lower than the estimates of the Modi government and the Reserve Bank of India (RBI), which have pegged India’s GDP growth at 6.5 per cent.

While projections from the Organisation for Economic Cooperation and Development (OECD), Fitch Ratings and ADB align with the government’s estimates, they are higher than S&P Global Ratings’ forecast of 6 per cent.

India holds a share of 7.3 per cent in the World Economy and 12.5 per cent in emerging markets and developing economies.

World Outlook

Regarding the global economy, the WEO has reduced growth projections for 2023 and 2024. Pierre-Olivier Gourinchas, Economic Counselor and Director of the Research Department noted, “According to our latest projections, world economic growth will slow from 3.5 per cent in 2022 to 3 per cent this year and 2.9 per cent next year, a 0.1 per cent downgrade for 2024 from July. This remains well below the historical average.”

He added that the global economy is still recovering from the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. Despite disruptions in energy and food markets, as well as substantial monetary tightening to combat high inflation, economic activity has not stalled, but growth remains slow and uneven.

Inflation Concerns

Regarding overall price trends, the statement mentioned that a deceleration in headline inflation from 9.2 per cent in 2022 to 5.9 per cent this year and 4.8 per cent in 2024. Core inflation, excluding food and energy prices, is also expected to decrease, albeit more gradually, to 4.5 per cent next year. Most countries are unlikely to return to their inflation targets until 2025.

While some of the extreme risks have moderated, such as severe banking instability, the balance remains tilted to the downside. The report particularly highlighted concerns about China’s real estate crisis and the potential impact on financial stability.

michael patra

14% Surge In Financial Savings: RBI Dy Guv Patra

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Households transition from financial to physical savings, notes RBI Deputy Governor Patra

Reserve Bank of India(RBI) Deputy Governor Michael Patra disclosed the information that financial savings have seen a 14 per cent increase in absolute terms in 2023. Patra also pointed out a noteworthy shift in households’ preference from financial savings to physical savings.

He explained, “The absolute level of savings rose by 14 per cent in 2023. There has been an increase in financial liabilities of households. If you observe where these liabilities are being directed, they are mostly towards housing. Households are shifting from financial savings to physical savings. When they make this shift, they contribute to investment; the physical part of savings goes directly into investment. So, in the next year, you will observe an uptick in investment.”

However, there has been a notable decline in net financial savings of households, hitting a 50-year low, accounting for 5.1 per cent of gross domestic product (GDP) in the financial year 2023 (FY23), down from 7.2 per cent in FY22, as per data from the Reserve Bank of India (RBI). Additionally, the annual financial liabilities of households surged to 5.8 per cent of GDP in FY23, compared to 3.8 per cent in FY22.

The net assets held by households exhibited a decrease, standing at Rs 22.8 trillion in FY21, then dropping to Rs 16.96 trillion in FY22 and further declining to Rs 13.76 trillion in FY23. Household debt has been on the rise. Reports indicate that household debt, measured by the stock of financial liabilities, remained notably high at 37.6 per cent of GDP in FY23, compared to 36.9 per cent in FY22.

Rbi cfo

RBI Predicts Retail Inflation To Stand At 5.4% For The Fiscal Year 2023-24

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RBI Governor Shaktikanta Das emphasised that the MPC will continue to closely monitor inflation and is steadfast in its commitment to align it with the targeted level

 

The Reserve Bank of India (RBI) has kept its retail inflation forecast unchanged, projecting an average of 5.4 per cent for the fiscal year 2023-24. In its latest announcement during the bi-monthly monetary policy, RBI Governor Shaktikanta Das revealed that the Monetary Policy Committee (MPC) unanimously opted to maintain the repo rate at 6.5 per cent, marking the fourth consecutive decision to keep rates steady after raising them by 250 basis points (bps) since May 2022 in an effort to curb rising prices.

Governor Das emphasised that the MPC will continue to closely monitor inflation and is steadfast in its commitment to align it with the targeted level. He also mentioned that the growth projection for the current financial year remains at 6.5 per cent, with risks evenly balanced.

This MPC meeting took place amidst the backdrop of Consumer Price-based Inflation (CPI) reaching 6.83 percent in August, and the inflation data for September is expected to be released next week.

It’s worth noting that the government has entrusted the RBI with the task of maintaining CPI inflation at 4 per cent, allowing for a margin of 2 per cent on either side.

 

 

RBI

RBI Maintains Repo Rate At 6.5% Amid Unchanged Growth & Inflation Projections

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The last adjustment to this rate was an increase from 6.25 per cent to 6.50 per cent during the February 2023 meeting

 

The RBI Monetary Policy Committee has opted to keep the primary policy repo rate steady at 6.5 per cent. This marks the fourth consecutive meeting in which the MPC has chosen to maintain the existing repo rate. 

The last adjustment to this rate was an increase from 6.25 per cent to 6.50 per cent during the February 2023 meeting. The MPC has made a 5-1 decision to uphold the policy stance. During the announcement of the bi-monthly monetary policy, RBI Governor Shaktikanta Das stated that the Real GDP growth projection for FY24 remains at 6.5 per cent, with no changes. 

Likewise, the projected inflation rate for FY24 stands at 5.4 per cent, remaining unchanged from previous projections. Governor Das emphasised the critical importance of averting food and fuel price shocks as non-negotiable priorities.

 

 

RBI

Weighted Average Lending Rate Of SCB Increases By 3-Bps In August: RBI

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WALR was 9.44 per cent in July 2023 which increased to 9.47 per cent in August

 

Weighted average lending rate (WALR) on fresh rupee loans of Scheduled Commercial Banks (SCBs) increased by 3 basis points (bps) from 9.44 per cent in July 2023 to 9.47 per cent in August 2023, Reserve Bank of India (RBI) said in its recent report.

The share of External Benchmark based Lending Rate (EBLR) linked loans in total outstanding floating rate rupee loans of Scheduled Commercial Banks(SCBs) stood at 50.2 per cent at end-June 2023 while that of MCLR linked loans was 44.8 per cent, indicating seamless lending by banks.

One-year median Marginal Cost of fund-based Lending Rate (MCLR) of SCBs increased from 8.60 per cent in August 2023 to 8.70 per cent in September 2023.

“The WALR on outstanding rupee loans of SCBs has remained unchanged at 9.84 per cent in August 2023 compared to the previous month,” RBI cited in its report. Though the WALR increased by 3 basis points, the weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs increased by 1 bp from 6.35 per cent in July 2023 to 6.36 per cent in August 2023.

 “The weighted average domestic term deposit rate (WADTDR) on outstanding rupee term deposits of SCBs increased by 6 bps from 6.54 per cent in July 2023 to 6.60 per cent in August 2023,” RBI added. 

 
GDP

S&P Global Retains India’s Growth At 6% For FY23-24

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S&P Global Ratings kept India’s Gross Domestic Product (GDP) prediction financial year 2023 at 6 per cent, the report said on Monday given slowing global economy, an increased chance of below-normal monsoons, and a delayed impact of rate hike.

The rating agency believes the recent increase in vegetable price inflation is only temporary, but due to rising global oil costs, it increased its prior projection for full fiscal retail inflation to 5.5 per cent from 5 per cent.

“Growth this year will be weaker than in 2022, but our outlook remains broadly favorable. Notwithstanding the strong expansion in India in the June quarter, we maintain our forecast for fiscal 2024 (ending March 2024), given the slowing world economy, the delayed effect of rate hikes, and the rising risk of subnormal monsoons,” the report said. In the fiscal year 2022–23, which concluded in March 2023, the Indian economy grew by 7.2 per cent.

According to the report, Asia-Pacific continues to be a “multi-speed region” with regard to GDP and marginally increased its projection for 2023 to 3.9 per cent due to internal resilience.

 Both developed and emerging Asian economies experienced an increase in GDP growth year over year in the second quarter. India was in the lead once more, with GDP increasing by 4.2 per cent from one quarter to the next and 7.8 per cent from a year earlier, it further added.

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