Current Affairs - Economy

India’s automobile sector experienced record growth in the fiscal year 2023-24, with total vehicle production reaching 28 million units. This surge in production reflects India’s transformation into a global manufacturing hub, particularly in the electric vehicle (EV) segment. The growth is attributed to the ‘Make in India’ initiative, which has significantly boosted domestic manufacturing, foreign direct investments (FDI), and exports. This milestone underscores India’s strategic push to strengthen its automotive industry, contributing to economic growth and employment generation.

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.