Washington:

Donald Trump on Tuesday pushed NATO members to boost their defense spending to five percent of GDP, underlining his long-standing claims that they are underpaying for US protection.

“They can all afford it, but they should be at five percent not two percent,” the incoming US president told reporters.

“Europe is in for a tiny fraction of the money that we’re in,” Trump said. “We have a thing called the ocean in between us, right? Why are we in for billions and billions of dollars more money than Europe?”

Trump has long been skeptical of NATO, the cornerstone of security in Europe since World War II, and last month reiterated a familiar threat to leave the alliance if its members did not step up spending.

The transatlantic alliance’s 32 countries in 2023 set a minimum level for defense spending of two percent of gross domestic product, and Russia’s war in Ukraine has jolted NATO to strengthen its eastern flank and ramp up spending.

Trump is not the only top official to call for an increase — NATO chief Mark Rutte likewise said last month that “we are going to need a lot more than two percent.”

Rutte also warned that European nations were not prepared for the threat of future war with Russia, calling on them to “turbocharge” their defense spending.

In his remarks on Tuesday, Trump claimed that President Joe Biden decided Ukraine should be able to join NATO, suggesting that this helped lead to Russia’s all-out invasion in February 2022.

“Somewhere along the line, Biden said, no, they should be able to join NATO. Well, Russia has somebody right on their doorstep, and I could understand their feeling about that,” Trump said.

NATO allies in reality agreed to Ukrainian membership in 2008 — when Republican president George W. Bush was in office — while the United States and Germany have more recently backed away from allowing Kyiv to join out of fear it could drag the alliance into a war with Russia.

Trump has vowed to press for a quick deal to end Russia’s war, raising concerns about the future of US military aid for Kyiv that has been key to helping it resist Moscow’s assault.

The conflict “should have never been started,” Trump said Tuesday, adding: “I guarantee you, if I were president, (the) war would have never happened.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Indian economy: what to expect in 2025?

| Video Credit:
The Hindu

At the start of 2024, there was a lot of excitement about the Indian economy – the country was one of the fastest growing economies in the world and there was anticipation that India will become a $4 trillion economy in 2024-25 and become the world’s third-largest economy by 2027. The consensus was that the Indian economy was expected to grow at an impressive 7%.

However, the latest data from the National Statistics Office (NSO) showed the real GDP growth was at 5.4% in the second quarter of this financial year, the lowest in seven quarters. The Gross Value Added growth slowed to 5.8%.

This growth is underwhelming, given that Reserve Bank of India recently projected that the GDP would grow by 7%. In its meet in December, the MPC has now downgraded the growth forecast for 2024-25 to 6.6% from 7.2%.

Is the Indian economy slowing down or is the 5.4% growth pace just “a one-off number”, as Chief Economic Adviser V. Anantha Nageswaran put it? We spoke to Rajani Sinha Chief Economist at CareEdge to find out what’s in store for 2025.

Video: Thamodharan B.

Washington:

A year of conflict between Israel and Hamas has resulted in a “devastating impact on the economy” in the occupied West Bank and Gaza, the IMF said Thursday, including a nearly 90 percent drop in Gaza’s GDP.

“Preliminary official estimates indicate an 86 percent decline in GDP in the first half of 2024” in Gaza, said International Monetary Fund communications chief Julie Kozack.

She added that Gaza’s “civilian population faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid delivery.”

In the West Bank, “already grim prospects have further deteriorated, and preliminary official data indicate a 25 percent decline in GDP in the first half of 2024,” Kozack told reporters at a regular briefing.

Israel has been at war in Gaza since Hamas’s October 7 resulted in the deaths of 1,205 people in the country, mostly civilians, according to an AFP tally based on Israeli figures that include hostages killed in captivity.

Israel’s retaliatory offensive in Gaza has killed at least 41,788 people, the majority of them civilians, according to figures provided by the Hamas-run territory’s health ministry. The UN has described the figures as reliable.

Israeli economy also hit

Israel’s economy has also been battered by the war, with three main ratings agencies downgrading its debt.

After shrinking by 21 percent in the fourth quarter of 2023, Israeli GDP rebounded by 14 percent in the first three months this year, official data showed.

But growth turned sluggish in the second quarter at 0.7 percent.

Kozack also noted that “in Lebanon, the recent intensification of the conflict is exacerbating the country’s already fragile macroeconomic and social situation.”

“We’re closely monitoring the situation, and this is a situation of great concern and very high uncertainty,” she added.

Hezbollah, an ally of Hamas, began exchanging cross-border fire from Lebanon with Israel after Hamas’s October 7 attack. But the conflict has escalated after Israel announced this week that its troops had started “ground raids” into parts of southern Lebanon, after days of heavy bombardment of areas across the country where the group holds sway.

The bombing has killed more than 1,000 people, according to Lebanon’s health ministry, and forced hundreds of thousands to flee their homes.

Hezbollah-backer Iran launched around 200 rockets in a direct missile attack on Israel on Tuesday, prompting Netanyahu to warn that Tehran would pay.

Iran said it was in retaliation for the killing of Hassan Nasrallah, the leader of Hezbollah, in a massive bombing in south Beirut.

US President Joe Biden said he was discussing possible Israeli strikes on Iranian oil facilities, in comments that sent oil prices spiking Thursday just a month before the US presidential election.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Congress leader Jairam Ramesh. File
| Photo Credit: ANI

This year’s Union Budget will be judged by what it does to revive and rejuvenate India’s Micro, Small and Medium Enterprises (MSMEs), the Congress said on July 16.

In a statement, Congress general secretary Jairam Ramesh said that through a “combination of deliberate policy and wilful neglect”, the Narendra Modi-led government has systematically bludgeoned the MSME sector that accounts for 30% of India’s GDP, about 45% of its exports, and employs 12 crore people. Demonetisation, the “botched” implementation of GST, the COVID-19 lockdown, “rampant oligopolisation”, and cheap Chinese imports have all contributed to the near destruction of the sector, he said.

“Consequently, MSMEs are faced with high tax rates, severe credit crunch, high input prices, and widespread closures. Unsurprisingly, their contribution to GDP today is the lowest it has been in decades,” Mr. Ramesh said. 

GST 2.0 needed

The party’s wishlist of measures to revive the sector includes the extension of the non-performing assets (NPA) classification period for loans to MSMEs from 90 days to 180 days. The Congress called for GST 2.0 with a single, moderate rate, and relief for small taxpayers like MSMEs. The party also wants dedicated funds to create MSME export capacity, and enhanced funding for start-ups.

“The self-anointed non-biological Prime Minister and his government must revisit their economic agenda, shed their cronyism, and end their whimsical policymaking. This Budget will be judged by what it does to revive and rejuvenate India’s MSMEs,” Mr. Ramesh said.

Arvind Virmani, NITI Ayog member. File
| Photo Credit: Special arrangement

“The Indian economy will grow around 7% in the current fiscal year and is on track to maintain a similar growth rate for several years,” NITI Aayog member Arvind Virmani said on July 12.

Mr. Virmani said there are new challenges facing the country and they will have to be dealt with. “Indian economy will grow at 7% plus minus point 0.5%… I expect that we are on track to grow at 7% for several years from today,” he told PTI in an interview.

Last month, the Reserve Bank of India (RBI) pegged the FY25 gross domestic product (GDP)growth rate at 7.2%. Responding to a question on the decline in private consumption expenditures in the last fiscal year, Mr. Virmani said it is actually recovering now.

“The effect of the pandemic was to draw down savings… and very different from previous financial shocks,” he said. Explaining further, Mr. Virmani said it is like what he calls a double drought situation.

“We also had, of course, El Nino last year, but what the pandemic did was that it resulted in people having to draw down their savings… So, the obvious reaction is to rebuild your savings, which tend to reduce current consumption,” he noted.

“If people were buying branded goods, they will buy less branded or ordinary goods and save part of that money,” he said, explaining that this shows a slide in consumption.

Mr. Virmani said history shows that coalition partners can slow privatisation in States in which the regional ally is in power, but that is not a big issue.

“I see no reason why privatisation cannot happen in the other States and it may also happen in these States (where coalition parties are in power). I am just giving you a historical example,” he said.

With support from N. Chandrababu Naidu’s Telugu Desam Party (TDP) and Nitish Kumar-led JD(U), along with other alliance partners, the NDA crossed the halfway mark in the recently held Lok Sabha elections to form the government at the Centre.

On the decline in foreign direct investments (FDI) to India, despite it being the fastest growing economy, Mr. Virmani said riskless return of investment is much higher in the U.S. and other developed countries than in emerging markets.

“As soon as interest rates begin to come down in the U.S., I expect the FDI into emerging markets, including India, to increase,” he said.

India’s Finance Minister Nirmala Sitharaman holds up a folder with the Government of India’s logo as she leaves her office to present the federal budget in the parliament, before the nation’s general election, in New Delhi, India, February 1, 2024.
| Photo Credit: REUTERS

The government under Prime Minister Narendra Modi should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, suggested SBI Research ahead of the much-awaited full Budget for 2024-25 to be tabled on July 23 – the first Budget under Modi 3.0.

What is fiscal deficit?

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings that may be needed by the government.

SBI Research suggested that the Centre should target a fiscal deficit of 4.9%, but it must not obsess too much over the fiscal stance. The Government intends to bring the fiscal deficit below 4.5% of GDP by the financial year 2025-26.

In the Interim Budget earlier this year, the Government has targeted a fiscal deficit of 5.1% of GDP for 2024-25. However, SBI Research believes that the Government may budget a fiscal deficit of less than “5% — may be 4.9% — for 2024-25” due to stellar growth in GST revenues and higher dividends from PSUs and RBI.

State borrowings

As the budgeted fiscal deficit gets lowered, the gross market borrowing of the government will also reduce to around ₹13.5 lakh crore in FY25 compared to ₹14.1 lakh crore in the interim budget and net market borrowing to ₹11.1 lakh crore against ₹11.8 lakh crore earlier, the report, authored and led by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said. “This along with India’s inclusion in Global Bond indices will keep the yield curve movements anchored,” it added.

In 2023-24, the Government pegged the fiscal deficit target for FY2023-24 at 5.9% of gross domestic product (GDP). Later, it was downwardly revised to 5.8%.

The interim budget, tabled on February 1, took care of the financial needs of the intervening period until a government was formed after the Lok Sabha polls, after which a full budget was supposed to be presented by the new government in July.

FM Sitharaman to break record with sixth budget presentation

With this upcoming Budget Presentation,surpassed the record set by former Prime Minister Morarji Desai, who as finance minister, presented five annual budgets and one interim budget between 1959 and 1964.

Mrs. Sitharaman’s upcoming Budget speech would be her sixth.The government on July 6 announced the dates of the Budget session of Parliament which will start on July 22 and conclude on August 12.

As per the data, the economy expanded 8.2% in 2023-24 against a 7% growth in 2022-23. Representational file image.
| Photo Credit: Reuters

India’s economy grew 7.8% in the March quarter, pushing up the annual growth rate to 8.2%, according to official data released on May 31.

Growth in the January-March period was lower than the 8.6% expansion in the December quarter.

The gross domestic product (GDP) had expanded 6.2% in the January-March period of the 2022-23 fiscal year, according to data released by the National Statistical Office (NSO).

As per the data, the economy expanded 8.2% in 2023-24 against a 7% growth in 2022-23.

The NSO in its second advance estimate of national accounts had pegged the country’s growth at 7.7% for 2023-24.

China has registered an economic growth of 5.3%in the first three months of 2024.

 The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.
| Photo Credit: REUTERS

Indian economy is likely to grow at 7% in the current fiscal year starting April, the Reserve Bank of India (RBI) said in its annual report released on May 30.

The Indian economy, it said, expanded at a robust pace in 2023-24 (April 2023 to March 2024 financial year), with real GDP growth accelerating to 7.6% from 7.0% in the previous year – the third successive year of 7% or above growth.

“The real GDP growth for 2024-25 is projected at 7.0% with risks evenly balanced,” it said.

India’s GDP growth is robust on the back of solid investment demand which is supported by healthy balance sheets of banks and corporates, the government’s focus on capital expenditure and prudent monetary, regulatory and fiscal policies, the RBI said. The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.

Indian economy, the report said, is well-placed to step up growth trajectory over the next decade in an environment of macroeconomic and financial stability.

“As headline inflation eases towards the target, it will spur consumption demand especially in rural areas,” it said.

It further said the external sector’s strength and buffers in the form of foreign exchange reserves will insulate domestic economic activity from global spillovers.

The report, however, added that geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.

The RBI also emphasised that the Indian economy would have to navigate challenges posed by rapid adoption of AI/ML (artificial intelligence/machine learning) technologies as well as recurrent climate shocks.

The annual report is a statutory report of RBI’s central board of directors. The report covers the working and functions of the Reserve Bank of India for the April 2023-March 2024 period.

Bengaluru:

India’s economy likely grew at its slowest pace in a year in the January-March quarter due to weak demand, according to a Reuters poll of economists who said the possibility of growth significantly surpassing their forecasts was low.

The country’s gross domestic product (GDP) unexpectedly grew by 8.4% in October-December compared to a year earlier, thanks to a sharp drop in subsidies which provided an artificial boost to net indirect taxes. But economic activity, as measured by gross value added (GVA), showed a more modest 6.5% expansion.

Economists in the poll said that situation was unlikely to have been repeated in the last quarter.

Growth in Asia’s third-largest economy likely slowed to an annual 6.7% in January-March, more in line with the long-term GDP growth rate, according to a Reuters poll of 54 economists. GVA growth was expected to slow to 6.2%.

Most economists in the poll said growth likely slowed due to moderation in both the manufacturing and services sectors. They also cited a muted contribution from agriculture.

Forecasts for GDP growth were in a 5.6%-8.0% range. The data are due at 1200 GMT on May 31, just days before general election results will be announced on June 4. Prime Minister Narendra Modi is expected to win a rare third term in power.

“We expect some sanity to return,” said Kunal Kundu, India economist at Societe Generale. “Among the components, we do not expect any major improvement.”

Over two-thirds of economists who answered an additional question said the possibility of GDP growth significantly surpassing their forecast was low. The rest said it was high.

“Core inflation continuing to drop and recording the lowest growth since the onset of the pandemic is symptomatic of weak domestic demand,” Mr Kundu said.

Weaker growth in private consumption, which accounts for 60% of GDP, was also likely to appear in upcoming quarters.

Economic growth, which likely averaged 7.7% last fiscal year, was forecast to slow to 6.8% this fiscal year and 6.6% in the next, suggesting consistent 8% growth was still some distance away for the world’s fastest-growing major economy.

While most economists reckon 8% or higher growth is needed to generate adequate job growth for millions of young people joining the work force, some are skeptical that can be consistently achieved.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said 5-6% was a “reasonable” potential growth rate for India’s economy.

“For this potential to be reaped, though, reforms need to be pursued, and Modi 2.0 took some steps back on this front – a reversal of agriculture reforms, delay in the implementation of new labour codes and a broad turn away from regional trade agreements.”

A growing divergence between financial economists’ GDP forecasts and government estimates has also raised questions over how India measures growth.

The National Statistical Office (NSO) said it expected GDP growth to be 5.9% in the January-March quarter.

“I think there is a slight overestimation of the informal sector GDP…which is why things on the ground probably do not look as exuberant as the headline numbers suggest,” said Dhiraj Nim, economist at ANZ.

The informal sector contributes nearly half of the country’s GDP and employs about 90% of India’s workforce.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

United Nations:

 Indian economy’s growth rate projection for this year has been raised by 0.7 per cent to 6.9 per cent from the forecast made in January by the UN and it retains its position as the world’s fastest-growing large economy.

The better outlook is fueled by lower inflation, robust exports, and increased foreign investments, Hamid Rashid, the chief of the UN’s Global Economic Monitoring Branch, said on Thursday.

“The drivers (of higher projection) are very simple: inflation has come down significantly, and that means the fiscal position is not as constrained as in other countries,” he said at the release of the mid-year edition of the World Economic Situation and Prospects (WESP) report.

Exports, which is another element in the improved projection, have been “pretty robust” and India is also benefiting from more investments coming in from other Western sources while the flow to China is coming down, Rashid said.

“India has become an alternative investment source or destination for many Western companies,” he added.

Another factor benefiting India, he said, is the special import arrangement India has with Russia for oil that is lowering its cost, he said.

The WESP report also gave a positive picture of the employment situation, saying: “In India, labour market indicators have also improved amid robust growth and higher labour participation.”

It said that the women’s labour force participation has increased particularly in South Asia.

India’s growth projection for next year remains at 6.6 per cent, which was made in January.

Last year, the WESP report said, India’s economy grew by 7.5 per cent and in 2022 by 7.7 per cent when it received a big short-term boost coming out of the drastic Covid slowdown.

The report also revised the projection for the world economy this year to 2.7 per cent, an increase of 0.3 per cent from January.

“Most major economies have managed to bring down inflation without increasing unemployment and triggering a recession,” the report said adding a cautionary note, “However, the outlook is only cautiously optimistic as higher-for-longer interest rates, debt difficulties, and escalating geopolitical risks will continue to challenge stable and sustained economic growth”.

The developing economies on the whole are growing at a faster clip — clocking 4.1 per cent — than the developed economies which are expected to record only a 1.6 per cent growth rate this year.

However, the growth among developing countries is uneven, the WESP report stated.

While large developing economies like India, Indonesia and Mexico are benefiting from strong domestic and external demand, many African, Latin American and Caribbean economies are on a “low-growth trajectory” because of “lingering political instability”, higher borrowing costs and exchange rate fluctuations, it said.

China’s economy is projected to grow by 4.8 per cent this year, making it the second fastest-growing large economy.

The US economy is projected to grow by 2.3 per cent this year.

“Despite the most aggressive monetary tightening in decades, a scenario of hard landing of the United States economy has receded,” the report said.

Looking ahead, the WESP saw risks and opportunities in rapid technology changes.

“The breakneck pace of technological change — including in machine learning and artificial intelligence — presents new opportunities and risks to the global economy, promising to boost productivity and advance knowledge on the one hand, while exacerbating technological divides and reshaping labour markets on the other,” the report said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)