Current Affairs - Economy

On January 10, 2025, the Indian rupee hit a record low of ₹86 against the US dollar, marking a significant depreciation. This decline was driven by a stronger US dollar, sustained foreign institutional investor (FII) outflows, and rising global crude oil prices. These factors added pressure on the rupee, reflecting challenges in the Indian economy and increased volatility in the foreign exchange market. Despite interventions by the Reserve Bank of India, the rupee breached the ₹86 threshold for the first time.

Bank of Baroda has projected that India’s economy will grow at 6.8% in FY2025-26. This positive outlook is driven by strong private consumption, high-frequency indicators such as GST collections and services PMI, and improved agricultural output. While other forecasts, including the UN’s, suggest slightly lower growth rates, Bank of Baroda’s estimate reflects the optimistic economic indicators and solid foundations from sectors like agriculture, which will contribute to the country’s growth.

India’s GDP growth rate for 2024-25 is projected at 6.4%, as per the National Statistical Office (NSO). Although this represents a slowdown from the 8.2% growth recorded in 2023-24, India continues to be the fastest-growing major economy globally. The projected growth underscores the resilience of sectors like construction, expected to grow by 8.6%, and financial services, forecasted at 7.3%. Additionally, improved private and government consumption expenditure indicates robust economic activity. The revised estimates emphasize the need for targeted policy interventions to sustain momentum in agriculture, infrastructure, and consumption-driven growth.

Nomura has lowered India’s GDP growth forecast for FY25 to 6.7%, citing factors such as reduced government spending, weaker consumer demand, and declining industrial activity. The forecast reflects a cautious outlook following lower-than-expected growth in the April-June quarter. Despite the downgrade, the medium-term prospects remain optimistic, with expectations of support from easing inflation and potential fiscal stimulus. This revision contrasts with other institutions like Goldman Sachs and J.P. Morgan, which predicted 6.5% growth, highlighting differing perspectives on India's economic trajectory.

As per the SBI report, India’s rural poverty rate in 2024 was 4.86%, a significant decline from 25.7% in FY12. Urban poverty also saw a substantial drop from 13.7% in FY12 to 4.09% in FY24. These figures highlight the country’s progress in reducing poverty across both rural and urban areas. The improvements are attributed to sustained economic growth, inflation-adjusted poverty lines, and targeted welfare measures aimed at uplifting disadvantaged communities.