Current Affairs - Economy

In Q3 FY25, India’s current account deficit (CAD) widened to $11.5 billion, which accounted for 1.1% of the country’s GDP. This increase was primarily driven by a higher merchandise trade deficit. Compared to the previous quarter (Q2 FY25), where the CAD was $16.7 billion (1.8% of GDP), this reflects a moderate improvement. The full-year CAD for FY25 is expected to be around 0.8% of GDP, with a slight increase projected for FY26. This indicates a stable external sector performance amid global economic fluctuations.

In 2024, India emerged as the world’s second-largest tea exporter, surpassing Sri Lanka and following Kenya, which remained the top exporter. India exported 254 million kilograms of tea, marking a significant growth from the previous year. This achievement reflects the success of favourable government policies, increased production of orthodox tea, and robust industry support. The Indian tea industry aims to reach an export target of 300 million kilograms by 2030, driven by strategic initiatives to expand market reach and enhance the quality of tea exports globally.

The US has imposed a 25% tariff on imported cars and auto components, a move aimed at protecting domestic industries and boosting local manufacturing. This policy is expected to have global repercussions, impacting markets like the EU, Canada, India, and China. While Indian automakers may face limited immediate challenges, auto component manufacturers and tyre companies exporting to the US could experience significant revenue impacts. The tariff aligns with broader trade strategies to encourage US-based production, potentially leading to price hikes for American consumers and shifts in global trade dynamics.

The OECD study highlights that accelerated climate action could result in a 0.2% increase in global GDP by 2040, compared to current policies. Well-designed climate policies, which focus on enhancing productivity and fostering innovation, have the potential to significantly drive economic growth. This boost in GDP is equivalent to the size of Sweden’s economy, illustrating the positive economic impact of addressing climate change. Conversely, unclear climate policies could have the opposite effect, potentially reducing GDP by 0.75% by 2030.

S&P Global has revised India's GDP growth forecast for FY26 to 6.5%, down by 20 basis points from the earlier estimate of 6.7%. The revised forecast takes into account assumptions such as stable commodity prices and a normal monsoon. The report highlights key factors such as cooling food inflation, tax benefits from the FY26 Budget, and lower borrowing costs that are expected to support domestic consumption and economic activity. Despite global trade uncertainties, India's services exports to the US are anticipated to remain resilient.