Image used for representational purposes. File
| Photo Credit: Reuters

“Monetary and fiscal policies are robust, and because of that, we are witnessing high GDP growth,” RBI governor Sanjay Malhotra said. File
| Photo Credit: ANI

 The report says the primary driver of the slowdown was the capital goods sector, with the fall in growth rates in this area contrasting with accelerations at consumer and intermediate goods makers. (Representational image)
| Photo Credit: Getty Images/iStockphoto

United Nations:

The World Bank projects India’s economy to grow by 6.7 per cent in the next fiscal year starting in April, slightly higher than in the current fiscal year, and continuing to top the growth tally. The Word Bank’s Global Economic Prospects released on Thursday estimated the current fiscal year’s growth rate at 6.5 per cent, down from the 8.2 per cent in the previous period.

But it said that “the services sector is expected to enjoy sustained expansion, and manufacturing activity will strengthen, supported by government initiatives to improve the business environment”, buoying the growth projections of 6.7 per cent for the next two fiscal years.

With global gross domestic product growth rate stuck at 2.7 per cent since 2023 and into the projections till 2026 according to the Bank, India is the world’s fastest growing large economy.

China follows it with a projected growth of 4.5 per cent this calendar year, and slowing down to 4 per cent next year.

The world’s largest economy, the US, was estimated to have grown by 2.8 last year with the projected growth slowing down to 2.3 per cent this year and 2 per cent next year.

The report warned about the risks to the world economy from trade tensions and tariff hikes without naming the US President-elect Donald Trump, who has threatened to upend world trade.

“Adverse trade policy shifts in major economies” could pose a risk for India, the report said.

The World Bank projections for India’s GDP growth hew closely to the United Nations projections released last week — 6.6 per cent for this calendar year and 6.8 per cent for next year.

The World Bank attributed the drop in India’s growth rate from 8.2 per cent in 2023-24 to 6.5 per cent in the current fiscal year to “a slowdown in investment and weak manufacturing growth”.

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

Reserve Bank of India’s (RBI) new Governor Sanjay Malhotra.
| Photo Credit: PTI

Facing criticism from the government over the central bank prioritising inflation over growth, the new RBI Governor Sanjay Malhotra on Monday (December 30, 2024) said that prospects of the Indian economy are expected to improve on the back of high consumer and business confidence in 2025.

“As we strive to preserve financial stability to support a higher growth path for the Indian economy, our focus remains steadfast on maintaining stability of financial institutions and, more broadly, systemic stability,” Mr. Malhotra said in foreword to the Financial Stability Report.

He further said that despite the global uncertainties Indian economy is expected to pick up pace in the second half of the current financial year.

“Notwithstanding the uncertainties shrouding the global macro-financial ethos as it unfolds, prospects for the Indian economy are expected to improve after the slowdown in the pace of economic activity in the first half of 2024-25.

“Consumer and business confidence for the year ahead remain high and the investment scenario is brighter as corporations step into 2025 with robust balance sheets and high profitability,” said Mr. Malhotra who took over as 26th Governor earlier this month.

Flagging the issue of growth moderation in the first half, the Finance Ministry in its November Monthly Economic Review had raised concerns that the possibility that structural factors may also have contributed to the slowdown in H1 should not be ruled out.

India recorded a slowdown in GDP growth to a seven-quarter low of 5.4% for the second quarter ended September 2024. For the first half, the GDP growth stood at 6%.

Slowdown in growth and moderation in inflation are building case for RBI to slash policy rate in its upcoming Monetary Policy Committee meeting.

Mr. Malhotra further said that financial sector regulators in India too are intensifying reforms and sharpening their surveillance against the backdrop of the soundness of the financial system bolstered by robust earnings, low levels of impaired assets and strong capital buffers, as this report highlights.

Stress test results reveal that capital levels of the banking system as well as of the Non-banking Financial Companies (NBFCs) sector will remain well above the regulatory minimum even under adverse stress scenarios, he said.

“We continue to secure and anchor public trust and confidence to support India’s aspirational goals. We remain committed to developing a modern financial system that is customer-centric, technologically leveraged and financially inclusive,” he said.

Referring to the global economy, he said, it exhibits resilience in the face of formidable headwinds from political and economic policy uncertainty, persisting conflicts and an environment of fragmenting international trade and tariffs.

Brightening the global prospects is the likelihood that the decline in inflation will continue and align with targets during the year ahead, allowing purchasing power to recover, he said.

As monetary policy gains headroom to further support economic activity, financial conditions can be expected to remain easy and contribute to an improvement in the trajectory of global GDP from a prolonged phase of low growth, he said, adding, robust labour market and sound financial system too provide congenial conditions for this turnaround.

However, he said, the medium-term outlook remains challenging, with downside risks from possible intensification of geopolitical conflicts, sporadic financial market turmoil, extreme climate events and rising indebtedness.

Stretched asset valuations, fragilities in the less regulated non-bank financial intermediaries, and threats from new and emerging technologies also add to the evolving uncertain outlook, he added.

Washington:

Union Finance Minister Nirmala Sitharaman said that India wants to enhance its influence in the world as one in every six persons is Indian and the world cannot ignore India’s economy.

While participating in a panel discussion on the ‘Bretton Woods Institutions at 80: Priorities for the Next Decade’, organised by the Center for Global Development on the sidelines of the World Bank and International Annual Meetings 2024 in Washington, DC, Ms Sitharaman stated that no country, whether US which is far away or China which is very close cannot ignore India.

When asked how nations like India and other big emerging markets step up and play a role that helps to take ownership of that process and drive the reform forward, Ms Sitharaman said, “Yes, absolutely possible. And on this, I just want to again start from where a thought of my Prime Minister came in and this is well thought through. He once said India’s priority is not to impose its dominance. In the sense we have the biggest democracy, we have in the world, the largest population but to enhance its influence. Now why do we want to have our influence enhanced? It’s only because the fact that today one in every six person in the world is an Indian and you just cannot ignore our economy and the way in which it is growing, that’s the second.”

“And third, the skilled manpower which today is in India and also everywhere else running large corporations which are for running institutions which are in large countries, developed countries. But yet that particular point that Larry mentioned, that in today’s world, the course which developed countries took, starting from producing textiles, cycles, bicycles and something else, and reaching development, is no longer available. It is going to be something else,” she added.

Stressing that no country can ignore India, Union Finance Minister stated, “Are we in a position to define that path? In that, one flag post which I want to draw your attention to about India and its role is leading on technology, servicing through technology, leveraging technology and that is where when you look at Indians everywhere you are saying that they are the ones before sitting and readily saying yes we will give you the systems which can run complex corporate whether it is a refining system, oil refining system, whether it is multilateral banking system or anything else. So, you really can’t ignore and also the geopolitical neighbourhood in which we live. No country, the US which is very far away from us or China which is very close to us, cannot ignore us.”

Nirmala Sitharaman stated that India has always backed multilateral institutions and did not at any time seek to undermine any multilateral institution. She said that expectations pinned on multilateral institutions are fissured away as no solutions are coming out of them.

Expressing India’s support for multilateral institutions, the Union Minister said, “I think we have followed policies of strategic and peaceful multilateralism. The multilateralism of which you want us to speak about. India has always stood in favour of multilateral institutions. We didn’t want any time undermining of any multilateral institution. But progressively we see the hope and the expectations which are pinned on multilateral institutions are fissured away because we think no solutions are coming out of them.”

“So again, Larry said, these institutions now are not offering an alternative pathway. That is where one of my points is, the core competencies of these institutions, in that they look at so many different economies, look at the dynamism with which some economies are growing and some which are getting stunted, the information base that they have, they should be the first ones to share the information and they should be the first ones to also suggest without imposing,” she added.

Other panellists during the discussions included Emeritus President and Charles W Eliot University Professor, Harvard University, Lawrence H Summers, Spain’s Minister of Economy, Trade and Business Carlos Cuerpo and Egypt’s Minister of Planning, Economic Development, and International Cooperation Rania A. Al Mashat.

Union Minister for Finance and Corporate Affairs Smt. @nsitharaman participates in a discussion on the ‘Bretton Woods Institutions at 80: Priorities for the Next Decade’, organised by the Center for Global Development @CGDev on the sidelines of the World Bank and IMF… pic.twitter.com/AuaOeSVOw0

— Ministry of Finance (@FinMinIndia) October 23, 2024

Ms Sitharaman stressed that multilateral institutions should strengthen themselves for the global good. She said that shaping the future is an ambitious goal and called for the involvement of Bretton Woods institutions in it.

She said, “In one of my earlier conversations with Larry, he voiced the concern, saying how would institutions like IMF and the World Bank go about telling an economy to a country that your economy is in a wretched position, you can’t do anything about it. They can’t, they cannot and they need not.”

“But yet, they can, with a wealth of information and experience and the manpower, the kind of human resources they have, share in time information with countries and also lead to build the strength of institutions, not tear down institutions, but strengthen up institutions for the global good, which I would think is very necessary to strengthen multilateralism. We are in favour of multilateralism. We of course spoke about a lot of things about …, LiFE, which is a mission in India, LiFE being the lifestyle for environment, adapt to certain kinds of living and so on,” she added.

Stressing the Bretton Woods institutions role in shaping the future, the Union Finance Minister said, “Shaping the future is one very ambitious nice goal and we need to follow that and we need to have Bretton Woods institutions work on that rather than reacting to future developments. Unfortunately, in the last few decades, we see them reacting to future developments with the strength that they have. And I think, therefore, information sharing is one thing.”

The Bretton Woods Institutions are the World Bank and the International Monetary Fund (IMF). They were set up at a meeting of 43 countries in Bretton Woods, New Hampshire in the US in July 1944. Their aims were to help rebuild the shattered postwar economy and promote international economic cooperation.

In her remarks, Ms Sitharaman said, “India, of course, has International Solar Alliance, Biofuel Alliance, and we’re talking about disaster-resilient infrastructure and all these need money. All these need help for countries which are in smaller economies, island economies, which need them. So, through the digital public infrastructure that we have publicly funded and taken it up to different countries, we are spreading that attention and I think these are areas in which India will contribute.”

Nirmala Sitharaman arrived in Washington, DC on Wednesday. India’s Ambassador to the US, Vinay Kwatra, welcomed her in Washington, DC. Prior to visiting Washington, DC, Ms Sitharaman was in New York.

In a post on X, the Ministry of Finance stated, “Union Minister of Finance and Corporate Affairs Smt. @nsitharaman is welcomed at Washington DC by India’s Ambassador to USA, Shri @AmbVMKwatra after her arrival from New York, today evening.”

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

Dr. Nicholas Sitko
| Photo Credit: Special Arrangement

Senior Economist of the Food and Agriculture Organization (FAO) of the United Nations, Nicholas Sitko, said India has to increase its own fertiliser production capacity as the situation in Ukraine and West Asia is likely to remain unstable. Dr. Sitko, who was in New Delhi in connection with a discussion on FAO’s report ‘The Unjust Climate: Measuring the Impacts of Climate Change on Rural Poor, Women, and Youth’, said India has to think of changing its farming systems to become less dependent on imported fertilisers and should focus on building up organic carbon in soil by switching to natural farming practices.

Talking to The Hindu, Dr. Sitko said there are many parts of the world where agricultural systems are facing tough challenges due to climate change. Adaptations to those changes are becoming difficult for the systems. “But we are still in what we call soft limits to adaptations where there are technological solutions that could help us to address some of the challenges,” he said, adding that the FAO report on ‘Unjust Climate’ highlights that not everybody is able to equally access the adaptation practices.

“In India, in many agricultural communities, there is a shift in the structure of agriculture. Many men are going outside agriculture to find work, and many women are staying in the communities to carry on the agricultural activities. These women are becoming the backbone of the agricultural economy,” he said and added that women farmers and agriculture workers face issues that are specific to them, and their unpaid family labour increases the agricultural burden on them. “There should be policies in place that make sure that these women farmers can access insurance and credit, participate effectively in training, have equality in the distribution of inputs, and access to the market,” he said.

Fertiliser markets

On the situation in Ukraine and Gaza and its impact on agriculture, he said at present he doesn’t see any stability in the fertiliser markets. “So, what can India do? You can develop your fertiliser production capacity. It is also about how you shift your farming systems to become less dependent on imported fertilisers and how to make better use of the fertilisers we have. This is where there is a potential win-win situation with climate medication as well,” he said, adding that capturing carbon in the soil by retaining residues and having legumes integrated into the system can enhance soil nutrients. “This transition to lower import intensity agriculture based on the building up of organic carbon in soil offers potential to reduce fertiliser use,” he said.

He said the transition to a much more nature-based agriculture, shifting away from petrochemicals and mono crops can come with a yield penalty for the first one or two years. “Marginalised farmers do not have that luxury,” he said and asked the government to provide a social safety net for farmers. “India has robust social safety net programmes. Households undergoing the transition should also have this safety net, and it should be a much more integrated approach by bringing together technology and training,” he said.

Integrated approach

The most urgent step in this direction is to ensure that there is an integrated approach. “We are not going to tackle one problem with one technology,” he said and called for a holistic approach. “It involves bringing together a variety of ministries,” he said. “We need to recognise that people are highly vulnerable, agriculture workers are highly vulnerable. We need to take care of their society. India is doing a lot in terms of looking forward on its climate impact and trying to adjust the policies to anticipate what the future will be,” he said.

When asked about a previous FAO report that said about 74% of the Indian population does not have access to a nutritious diet, he said India has a high number of people who are very vulnerable to food insecurity. “Small changes in prices and supplies can have a dramatic effect on availability of food for a large share of the population.” He said there is a strong focus on wheat and rice, but there is a strong component of legumes as well. “India has a historical legacy of thinking of food as medicine. Food is more than just a commodity here. Building on that foundation with a state presence to ensure that when things go wrong there is a safety net in place will be helpful,” he said.

The 6.9% economic growth projections for India in the mid-year update is an upward revision from the 6.2% GDP forecast made by the U.N. in January.
| Photo Credit: B. Jothi Ramalingam

The United Nations has revised upwards India’s growth projections for 2024, with the country’s economy now forecast to expand by close to 7% this year, mainly driven by strong public investment and resilient private consumption.

The World Economic Situation and Prospects as of mid-2024, released Thursday, said, “India’s economy is forecast to expand by 6.9% in 2024 and 6.6% in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly.”

The 6.9% economic growth projections for India in the mid-year update is an upward revision from the 6.2% GDP forecast made by the U.N. in January this year. The U.N. World Economic Situation and Prospects (WESP) 2024 report that was launched in January had said that growth in India was projected to reach 6.2% in 2024, amid robust domestic demand and strong growth in the manufacturing and services sectors. The projection in January for India’s GDP growth for 2025 remains unchanged at 6.6% in the latest assessment of the economic situation.

The update said that consumer price inflation in India is projected to decelerate from 5.6% in 2023 to 4.5% in 2024, staying within the central bank’s two to six per cent medium-term target range. Similarly, inflation rates in other South Asian countries declined in 2023 and are expected to decelerate further in 2024, ranging from 2.2% in the Maldives to 33.6% in Iran. Despite some moderation, food prices remained elevated in the first quarter of 2024, especially in Bangladesh and India.

In India, labour market indicators have also improved amid robust growth and higher labour force participation, it said. India’s government remains committed to gradually reduce the fiscal deficit, while seeking to increase capital investment.

South Asia’s economic outlook is expected to remain strong, supported by a robust performance of India’s economy and a slight recovery in Pakistan and Sri Lanka. Regional GDP is projected to grow by 5.8% in 2024 (an upward revision of 0.6 percentage points since January) and 5.7% in 2025, below the 6.2% recorded in 2023. However, still tight financial conditions and fiscal and external imbalances will continue to weigh on South Asia’s growth performance. In addition, potential increases in energy prices amid geopolitical tensions and the ongoing disruption in the Red Sea pose a risk to the regional economic outlook, it said.

The world economy is now forecast to grow by 2.7% in 2024 (an increase of 0.3 percentage points from the forecast in January) and 2.8% in 2025 (an increase of 0.1 percentage points).

The upward revisions mainly reflect a better outlook in the United States, where the latest forecast points to 2.3% growth in 2024 (an upward revision of 0.9 percentage points since January), and several large emerging economies, notably Brazil, India and Russia.

It noted that several large developing economies – Indonesia, India and Mexico – are benefiting from strong domestic and external demand. In comparison, many economies in Africa and Latin America and the Caribbean are on a low-growth trajectory, facing high inflation, elevated borrowing costs, persistent exchange rate pressures and lingering political instability. The possible intensification and spreading of conflicts in Gaza and the Red Sea add further uncertainties to the near-term outlook for the Middle East, the mid-year update said.

Global trade is expected to recover in 2024. The early boost to trade flows in the first months of the year can be attributed to destocking of the inventory that piled up amid supply-chain disruptions in 2021-22. “China’s foreign trade grew faster than expected in the first two months in 2024, driven largely by exports to emerging markets, particularly to Brazil, India and Russia,” it said.

However, persistent geopolitical tensions in the Middle East and disruptions in the Red Sea, and escalating cost of freight continue to pose challenges to global trade, it added.

The mid-year update said global economic prospects have improved since January, with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment. However, the outlook is only cautiously optimistic. Higher-for-longer interest rates, debt sustainability challenges, continuing geopolitical tensions and ever-worsening climate risks continue to pose challenges to growth, threatening decades of development gains, especially for least developed countries and small island developing states.

The outlook for China registers a small uptick with growth now expected to be 4.8 per cent in 2024, from 4.7 per cent projected in January. China’s growth is projected to moderate to 4.8% in 2024, from 5.2% in 2023. Pent-up consumer demand – released after the lifting of pandemic-related restrictions – has largely dissipated. While enhanced policy support is expected to boost investments in public infrastructure and strategic sectors, the property sector poses a significant downside risk to the Chinese economy, it said.

The Manufacturing sector Flash PMI stood at 59.1 in April, unchanged from March’s final reading for the index. File
| Photo Credit: Reuters

Combined output from India’s manufacturing and services sectors may have grown at the fastest pace in almost 14 years this month, with the services activity rising to a three-month high, as per the HSBC Flash Purchasing Managers’ Index (PMI) for April.

A spurt in international sales this month is reckoned to have bolstered new order inflows for manufacturing and services firms, with fresh export orders seen to have grown at the fastest pace since September 2014.

The Manufacturing sector Flash PMI stood at 59.1 in April, unchanged from March’s final reading for the index. The Services PMI, which stood at 61.2 in March, rose to 61.7 on the Flash PMI print for this month. A reading of 50 on the PMI indicates no change in activity levels. 

The Flash PMI scores for an ongoing month are based on responses from about 75% to 85% of 800 services and manufacturing players surveyed for the PMI that is available for each month in the first week of the subsequent month. “The composite output index rose at the fastest pace in nearly fourteen years, with the services PMI climbing further in April, led by a surge in new orders,” HSBC economists said in a note.

Mixed signals on hiring

Manufacturing firms accelerated hiring this month while services players slowed down on new job creation, the Flash PMI signalled, even as both sectors reported a dip in input costs. While manufacturers raised output charges, improving their margins this month, Services firms saw operating margins worsen with labour costs spiking. 

“The orders-to-inventory ratio for manufacturers continue to remain above one, albeit moderated slightly in April. Overall business confidence ticked up in April and panellists expect further improvement in demand conditions over the coming year,” HSBC economists Pranjul Bhandari and Maitreyi Das said. 

RBI Governor Shaktikanta Das presented a memento to Prime Minister Narendra Modi during a ceremony to mark 90 years of the Reserve Bank of India in Mumbai on April 1, 2024.
| Photo Credit: PTI

Prime Minister Narendra Modi on April 1 said India needs to become economically self-reliant in the next ten years so that the nation is not impacted much by global factors.

Speaking on the 90th anniversary of the Reserve Bank of India (RBI), the Prime Minister also said a lot of work will be generated for everyone once the BJP-led NDA assumes office for the third term in June. “We have to increase India’s economic self-reliance,” he said.

Mr. Modi said the banking sector has become profitable and credit growth has been increasing because of efforts taken by his government and the RBI in the last decade. He added that the gross NPAs of public sector banks, which was around 11.25% in 2018, dropped to less than 3% by September 2023.

The “twin-balance sheet” problem is now a thing of the past, Mr. Modi said, adding that banks are now registering a credit growth of 15%. The RBI has played a significant role in all these accomplishments, he said.