Current Affairs - Economy

Retail inflation in December 2024 stood at 5.22%, a four-month low, reflecting a positive trend in the country’s economic stability. This decline from November’s 5.48% was mainly due to easing food prices, with food inflation dropping from 9.04% to 8.39%. Rural and urban inflation rates also showed improvement, easing to 5.76% and 4.58%, respectively. The RBI uses such Consumer Price Index (CPI) data to guide its monetary policy, aiming to maintain inflation within a target range of 4% ±2%. These figures are significant indicators of the economy's health and help in planning fiscal policies.

India’s factory output, as indicated by the Index of Industrial Production (IIP), rose by 5.2% in November 2024, the highest growth rate in six months. This increase was driven by favourable base effects, seasonal demand during the festive period, and notable improvements in manufacturing, capital goods, and consumer durables. The cumulative industrial growth for April-November 2024 was recorded at 4.1%.

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.