Current Affairs - Economy

Fitch Ratings revised India’s FY25 GDP growth forecast upward to 6.9%, an increase from its earlier estimate of 6.5%. This revision reflects strong domestic demand, resilient private sector activity, and the positive impact of GST reforms. Consumer spending and supportive financial conditions, including stable interest rates and liquidity, have strengthened India’s economic outlook despite global trade challenges. GST reforms are expected to further enhance compliance, lower costs of doing business, and stimulate consumption. Fitch also projects India’s economy will maintain robust momentum in the medium term, averaging 6.3% growth by FY27, keeping the country ahead of global growth trends.

The UPI–UPU Integration was launched in Dubai during the 28th UPU Congress by Jyotiraditya Scindia. This integration connects India’s Unified Payments Interface (UPI) with the Universal Postal Union (UPU) platform, making global remittances faster, safer, and more affordable. By linking the systems, India aims to enhance financial inclusion, strengthen cross-border digital transactions, and reduce the cost of sending money internationally. Additionally, India pledged USD 10 million towards innovation, e-commerce, and digital payments. This initiative also aligns with the United Nations’ sustainable development goal of reducing global remittance costs to below 3% by 2030, thus empowering millions of migrant workers and their families.

The GST Council has undertaken a major reform by reducing the number of slabs from four to two, fixing them at 5% and 18%. In addition, a new 40% slab has been introduced for sin goods such as tobacco, liquor, sugary drinks, and luxury items to discourage their consumption and increase revenue. Essential goods, along with healthcare and education related items, will now become more affordable under the 5% slab, while most durable goods will attract 18%. Coal has been shifted into the 18% category, making it costlier. This restructuring aims to simplify compliance, reduce confusion, ease consumer budgets, and boost demand across sectors.

Morgan Stanley has upgraded India’s GDP growth forecast for FY26 to 6.7%, revising it upward from the earlier estimate of 6.2%. The decision is driven by India’s strong 7.8% GDP growth in Q1, reflecting robust private and government consumption, healthy investment momentum, and supportive agricultural output due to a good monsoon. Additionally, impending GST cuts and the festive season are expected to further boost domestic demand. While external headwinds such as weaker exports and higher US tariffs pose challenges, these are likely to be offset by resilient rural consumption and front-loaded government expenditure, strengthening India’s growth trajectory.

The Indian government has announced a landmark reform by allowing 100% Foreign Direct Investment (FDI) in the insurance sector, replacing the previous 74% cap. This change is part of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025, and aims to attract significant foreign capital into the sector. The Insurance Regulatory and Development Authority of India (IRDAI) will oversee the verification of such investments under the automatic route to ensure transparency. The reform is expected to encourage global insurers to enter the Indian market, foster innovation, strengthen competition, and provide much-needed capital. With India’s insurance industry projected to grow at 7.1% annually, this move is positioned to accelerate expansion and modernization.