Winning Bizness Economic Desk

India’s apex bank, the Reserve Bank of India (RBI) said that economic activity in the country should be at an encouraging level in the next fiscal (FY 25).

The recovery in rabi sowing, sustained profitability in manufacturing and underlying resilience of services should support economic activity in 2024-25 (April 1, 2024-to March 31, 2025).

Among the key drivers on the demand side, household consumption is expected to improve owing to the upturn in the private capex cycle, the Reserve Bank said.

Improved business sentiments, healthy balance-sheets of banks and corporates and the government’s continued thrust on capital expenditure would also support the economic activity in the country.

India’s apex bank also said that the net external demand would be supported by the improving outlook for global trade and rising integration in global supply-chains.

It, however, warned that headwinds for geo-political tensions, volatility in international financial markets and geo-economic fragmentation, pose risks to the outlook.

The real GDP growth for FY 25 has been pegged at seven per cent with Q1 at 7.2 per cent, Q2 at 6.8 per cent, Q3 at 7 per cent and Q4 at 6.9 per cent.

The risks are evenly balanced, the RBI pointed out.

India’s Dec IIP Growth Increases to 3.8 pc

India’s industrial output in December of last year (2023) climbed up to 3.8 per cent, data released by the country’s Ministry of Statistics and Programme Implementation (MoSPI) revealed.

In November, the number stood at 2.4 per cent.

Here, it must be pointed out that in December 2022 India’s industrial output had expanded by 5.1 per cent.

For the April-to December 2023 period, industrial growth stood at 6.1 per cent as against the 5.5 per cent in the corresponding period of the previous year.

Industrial growth has accelerated in December even though its lead indicator, core sector growth had slumped to a 14-month low of 3.8 per cent in December from 7.8 per cent in the previous month.

Eight core industries comprise more than 40 per cent of the weight of the IIP and as such, lower core sector growth is usually reflected in weaker Index of Industrial Production (IIP) growth.

Here, a point that needs highlighting is that industrial growth picked-up in December 2023 as the manufacturing sector output increased by 3.9 per cent after having clocked a growth of just a meagre 1.2 per cent in November last year.

While manufacturing output expanded at a faster pace in December, mining and electricity production cooled to 5.1 per cent and 1.2 per cent from seven per cent to 5.8 per cent, respectively.

CPI, Core Inflation Both Decline in January

The country’s January Consumer Price Index (CPI) inflation or headline retail inflation declined to a three-month low of 5.10 per cent, primarily because of reducing food prices.

This is as per data from the Ministry of Statistics and Programme Implementation (MoSPI).

The CPI inflation in December of last year (2023) was 5.69 per cent.

While headline retail inflation cooled last month, it has now spent 52 consecutive months above the Reserve Bank of India (RBI)’s medium-term target of four per cent.

It must, however, be pointed out here that inflation has now been within the tolerance range of two-to-six per cent for the fifth month in a row.

The slide in inflation in January was primarily driven by weaker price momentum as clearly indicated by the Month-on-Month (MoM) changes in prices in food prices with the Consumer Food Price Index (CFPI) down 0.7 per cent from December 2023.

Within food items, the price index for vegetables was down 4.2 per cent MoM while that of fruits was lower by two per cent. Among those food items which clocked increases were eggs at 3.5 per cent and cereals and products at 0.8 per cent.

Here, it must be pointed out that on the whole food inflation was down at 8.30 per cent from 9.53 per cent in December 2023.

Vegetables inflation has, however, remained high due to the MoM reduction in prices being less than the usual seasonal behaviour. Additionally, factors such as delayed sowing amid patchy monsoons and delayed kharif harvest have also contributed to prices not reducing as much as expected.

The truckers’ strike very recently may have also had a hand in contributing to supply-disruptions of fruits and vegetables, thus keeping their prices at elevated levels.

Price indices for housing, fuel and light, clothing and footwear and miscellaneous categories all climbed by a very miniscule 0.2-to-0.4 per cent. This means that food items apart, the MoM price increases were very small indeed.

Consequently, core inflation excluding food and fuel fell further to 3.6 per cent from 3.9 per cent in December of last year.

The above inflation data has come just a few days after the Reserve Bank’s Monetary Policy Committee (MPC) left untouched its policy repo rate at 6.5 per cent for the sixth meeting in a row.

According to India’s central bank’s latest forecast, the CPI inflation is seen at five per cent in the current quarter before sliding to four per cent in the July-to-September period.

However, it is then set to increase to 4.7 per cent in the first-quarter of 2025.

UPI Services Launched in SL, Mauritius

India’s Unified Payments Interface (UPI) services were launched in the neighbouring country of Sri Lanka in the south in a virtual event.

It was also launched in Mauritius and the ceremony was attended by India’s Prime Minister Mr Narendra Modi, Mauritius Prime Minister Mr Pravind Jugnauth and Sri Lanka’s President Mr Ranil Wickremesinghe.

The launch of this service in both the countries has come amid India’s increasing bilateral economic ties with the two countries.

The launch also enables the availability of UPI settlement services for Indian nationals travelling to both Sri Lanka and Mauritius. Similarly, it also applies to Mauritian nationals travelling to India.

“This would increase the tourism between us (India, Sri Lanka and Mauritius). I am confident that Indian tourists would also prefer destinations where UPI services are available,” India’s Prime Minister said.

“The digital pubic infrastructure has brought about a revolutionary change in India. Even the smallest businessman in our smallest village is making digital payments because it has convenience as well as speed,” Mr Modi added.

Here, it must be pointed out that earlier this month, France allowed Indian tourists visiting the Eiffel tower in Paris to buy tickets using the UPI mechanism. In fact, France has become the first European country to accept UPI payments.

This UPI service will also soon be extended to other tourism and retail merchants in France.

Developed by the National Payments Corporation of India (NPCI), the UPI is an instant real-time payment system to facilitate inter-bank transactions through mobile phones.

India Largest Global Milk Producer, But Productivity Low, Says Finance Minister

The country’s Union Finance Minister Mrs Nirmala Sitharaman said that India, though it is the world’s largest milk producer, it still continues to struggle with low productivity of milch animals.

The Finance Minister in her budget speech emphasised the government’s efforts to support dairy farmers and said that a major effort is being made to control foot and mouth disease.

Efforts were already on to control foot and mouth disease, she said, adding that a comprehensive programme for supporting dairy farmers would be formulated.

This programme would be built on the success of existing schemes such as the Rashtriya Gokul Mission, National Livestock Mission and infrastructure development funds for dairy processing and animal husbandry, Mrs Sitharaman said.

In the last fiscal (FY 23), there was a four per cent increase in India’s milk production reaching a total of 230.58-million tonnes.

A point that requires highlighting here is that over the past nine-years, India has observed a 58 per cent surge in its milk production.

The northern state of Uttar Pradesh (UP) has contributed the highest share of milk production at 15.7 per cent while Rajasthan follows in second position at 14.44 per cent. The third and fourth spots are occupied by Madhya Pradesh and Gujarat—8.73 per cent and 7.49 per cent, respectively. Rounding-off at fifth position is Andhra Pradesh at 6.70 per cent.