Current Affairs - Economy

As of September 20, India’s foreign exchange reserves reached a record high of $692.3 billion, driven by market interventions by the Reserve Bank of India (RBI) and inflows into stocks and bonds. This reserve includes $605.7 billion in foreign currency assets, $63.6 billion in gold reserves, and $18.5 billion in Special Drawing Rights (SDRs) with the International Monetary Fund. The rise in reserves helps India maintain financial stability, manage currency volatility, and enhance investor confidence.

The Asian Development Bank (ADB) has retained its forecast for India's GDP growth rate at 7% for FY24, driven by strong performance in agriculture, industry, and services. This growth rate is attributed to the government's fiscal consolidation efforts and resilience amidst global geopolitical challenges. Key growth drivers for FY24 include agricultural improvements, robust performance in the industrial and services sectors, and rural spending. The ADB also forecasts a growth rate of 7.2% for FY25, driven by private investments, urban consumption, and job creation through employment-linked incentives.

S&P Global Ratings has maintained its economic growth forecast for India at 6.8% for the financial year 2024-25. This forecast aligns with their projection of steady growth for the country. Comparatively, other agencies like the Reserve Bank of India (RBI) and Moody's have slightly different forecasts, with the RBI estimating a 7.2% growth for the same period and Moody's predicting a growth rate of 7.2% for 2024 and 6.6% for 2025.

India has seen a significant increase in ammonium nitrate (AN) imports from Russia, leading to concerns within its domestic fertiliser industry. Ammonium nitrate is crucial for both agriculture and industries like mining. Cheaper imports from Russia create competitive pressure on Indian companies, which are investing heavily to expand their production capacity. As India relies on imports to meet a substantial portion of its fertiliser needs, including potash, disruptions or shifts in trade patterns can significantly impact domestic markets.

The US Federal Reserve's decision to cut interest rates by 50 basis points marks a strategic shift to balance inflation control with economic growth promotion. This rate cut is the first significant reduction since the Covid-19 pandemic began. By lowering interest rates, the Fed aims to combat inflation while stimulating job creation, as unemployment rose to 4.2% in August 2024. This move is expected to make loans cheaper for individuals and businesses, potentially boosting hiring and economic expansion. The Fed targets a 2% inflation rate, seeking a "soft landing" for the economy.