Current Affairs - Economy

In June 2024, India's Index of Industrial Production (IIP) recorded a growth rate of 4.2%, an increase from 4% in the same month the previous year. This growth reflects an overall positive trend in industrial production. The sector-wise contributions included significant increases in mining (10.3%) and electricity (8.6%), while the manufacturing sector grew by 2.6%. The IIP is an important indicator of industrial performance and economic health, highlighting robust activity across various sectors.

The Reserve Bank of India (RBI) decided to maintain the repo rate at 6.5% during its August 2024 Monetary Policy Committee (MPC) meeting. This decision marked the ninth consecutive instance of keeping the rate unchanged, reflecting the RBI's cautious stance amid economic uncertainties. The 6.5% rate has been steady since February 2023, demonstrating the central bank's focus on maintaining economic stability. The decision was made by a 4:2 majority within the committee, underscoring the challenges in navigating the current economic environment.

India's fiscal deficit for the first quarter of FY25 stood at 8.1% of the full-year estimate, a notable decrease from 25.3% during the same period the previous year. This reduction is due to increased tax collections and higher surplus payments from the RBI. The fiscal deficit amounted to Rs. 1.36 lakh crore by the end of June 2024, indicating effective fiscal management and robust revenue growth.

The government has authorized 100% Foreign Direct Investment (FDI) via the automatic route for the aircraft Maintenance, Repair, and Overhaul (MRO) sector. This move is aimed at boosting the MRO industry by increasing foreign investment. Alongside this, a uniform 5% IGST rate on aircraft parts and tools imports has been introduced, which enhances the sector’s competitiveness. The new policies also include extended export periods, reduced GST, exempted customs duty, and simplified clearance procedures, all designed to improve efficiency and attract investment.

India Ratings & Research (Ind-Ra) has increased its GDP growth forecast for FY25 to 7.5%, up from the previous forecast of 7.1%. This adjustment reflects stronger consumption demand and is supported by various factors such as government capital expenditure, improved corporate and bank balance sheets, private sector investment, and measures outlined in the union budget. Additionally, Private Final Consumption Expenditure is expected to rise to 7.4% due to favorable budget measures and a potentially above-normal monsoon, contributing to the overall growth projection.