Winning Bizness Economic Desk

Global ratings agency S&P Global has updated its economic forecasts for Asia-Pacific economies after the election results in the United States (US), as per which it has lowered its projections for India’s GDP growth for two years—FY 26 and FY 27.

It has projected the GDP growth rates for the two fiscals at 6.7 per cent and 6.8 per cent, respectively.

The internationally renowned agency has retained its outlook at 6.8 per cent GDP growth for this fiscal (FY 25).

“In India, we see GDP growth easing to 6.8 per cent this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter,” the ratings agency (S&P Global) said in its report.

S&P Global expects India’s GDP to grow at seven per cent in FY 28, it said.

According to the latest S&P report, the persistent food inflation is delaying rate cuts by the country’s central bank, the Reserve Bank of India (RBI).

The ratings agency expects the Reserve Bank to cut rates only once in the current fiscal year (FY 25 or year-ending March 31, 2025).

S&P added that the Reserve Bank of India cannot turn a blind eye to food inflation when contemplating rate cuts.

“Food items make up nearly 46 per cent of the inflation basket and persistently high food inflation raises inflationary expectations,” it stated.

The impending changes in the US administration would be challenging for both China as well as the rest of the Asia-Pacific, the report observed.

What is important to note is that increases in tariffs by the US have now become more likely, especially with relation to China.

According to S&P Global, while much of the region should be able to continue to grow solidly, central banks would probably remain cautious by not cutting their policy rates too fast. Risks too have increased, it stated.

Agri Workforce’s Contribution to GDP Very Negligible: Report

Around 46 per cent of the country’s workforce is engaged in agriculture but contributes only negligibly at 18 per cent to the country’s GDP.

This is according to a Foundation for Economic Development Report.

An important point to note here is that manufacturing stands out as the only sector capable of absorbing unskilled labour on a scale necessary to propel the economy forward.

What requires highlighting here is that jobs in manufacturing and services are 3-to-6 times more productive than agriculture work, underscoring the sector’s potential to transition the workforce into higher productivity roles.

Industrial clusters, which act as hubs for manufacturing jobs, require more labour than surrounding towns and villages can provide.

A big barrier leading to labour shortages and lower productivity is the lack of adequate worker housing near these clusters, the report said.

What requires highlighting is that this shortfall also hampers the country’s ability to compete globally in manufacturing exports, thus limiting job creation and economic expansion.

The report also highlights the fact that the existing worker housing is inadequate and often comprises of slums or sub-standard settlements that fail to meet the scale and quality required.

What is required is a series of initiatives to unlock the potential in manufacturing, the report said.

It called for mixed-use zoning regulations to allow worker housing in all zones, simplifying building by-laws to slash costs and delays. It also called for exempting worker housing from the ambit of Goods and Services Tax (GST) and other commercial property charges.

According to the report, the above initiatives would make it easier for the private sector to invest in worker housing. The report also suggested that worker housing should be treated as critical infrastructure.

Another suggestion of the report relates to government financial support in the form of subsidies for constructing worker housing and rental vouchers for workers.

India Exports Pinaka Weapon Systems to Armenia

India has commenced the supply of the highly sophisticated and effective Pinaka rockets to Armenia.

Export of the DRDO-developed rocket launchers commenced at around the same time that India started deliveries of the Akash air defence missile system to the European country.

According to defence sources quoted in a leading news publication, the first lot of Pinaka barrel rocket launcher systems has already been supplied to Armenia.

Pinaka rocket launchers are highly capable weapon systems with variants which can strike targets over eighty kilometres.

The point to note here is that contracts between Indian firms and Armenia for the supply of these weapons were inked about two-years ago after intensive negotiations.

Here, what needs to be highlighted is the fact that Armenia is one of the three largest buyers of Indian weapons and equipment along with the United States and France, another European country.

Another important point to note here is that a number of countries from south-east Asia and Europe have exhibited interest in Pinaka rockets. France has also evinced an interest in acquiring this weapon system.

Forex Reserves Slide to Over Four-Month Low

The country’s foreign exchange reserves slid by USD 17.76-billion during the week ended November 15 to its over four-month low of USD 657.892-billion.

This is the seventh consecutive week of a decline in the country’s forex reserves.

The USD 657.89-billion reserves is the lowest level since July 5 of this year, when the reserves had stood at USD 657.16-billion.

In the previous week ended November 8, the country’s foreign exchange reserves had declined by USD 6.5-billion.

The foreign exchange reserves have moved southward by nearly USD 30-billion in the last six-weeks and are down by USD 47-billion from the record high of USD 704.89-billion touched in late-September.

A point that requires highlighting here is that foreign portfolio investors (FPIs) have pulled out a total of Rs 1.65-lakh-crore in the past few weeks.

Changes in Foreign Currency Assets (FCAs) are also caused by the central bank’s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.

Tata Power Inks Deal with ADB for USD 4.25-bn

Electricity power distribution company Tata Power, a Tata group company, said that it has entered into a Memorandum of Understanding (MoU) with the Asian Development Bank (ADB) for USD 4.25-billion to finance key clean energy power projects.

“Tata Power, one of India’s leading integrated power companies and the Asian Development Bank have signed a MoU coinciding with the on-going Climate Conference (COP29) at Baku, Azerbaijan, to evaluate financing for its several strategic projects aimed at enhancing India’s power infrastructure and promoting renewable and clean energy,” Tata Power said in a regulatory filing.

The Tata group company said that it has inked a Memorandum of Understanding to explore financing options for critical on-going and upcoming projects, including the 966 MW solar wind hybrid project, a Pumped Hydro Storage Project, and other initiatives focussed on energy transition, decarbonisation and battery storage.

Additionally, the MoU aims to facilitate funding for capital expenditure to enhance the distribution networks under the company’s management.

The collaboration is a major step as India progresses towards its ambitious renewable energy target of 500 GW by 2030.

Kia India Plans ME, African Markets Push

Kia India has announced plans to double its exports of Completely Knocked-Down (CKD) vehicle units by 2030, with a focus on expanding into the Middle-East and African markets.

The company also said that it has crossed the milestone of exporting one-lakh CKD units since shipments began in June 2020 from its Anantapur manufacturing facility in Andhra Pradesh.

Presently, Kia India accounts for fifty per cent of Kia Corporation’s global CKD exports, highlighting the critical role of its Indian operations.

In total, the company has exported 3,67,000 vehicles, including popular models such as the Seltos, Sonet and Carens.

In 2024, Kia India aims to export over 38,000 CKD units to key markets, including Uzbekistan Ecuador and Vietnam.

Kia’s Anantapur plant, equipped with advanced manufacturing technology, is strategically located near major ports, enabling efficient logistics for exports.

Expanding into the Middle-East and Africa is central to Kia India’s growth strategy, given the rising demand in these regions for affordable and reliable vehicles.

Kia India said that its focus on CKD exports complements its efforts to meet domestic demand while solidifying its position as a global manufacturing hub.