Winning Bizness Economic Desk
India’s foreign exchange reserves moved northward for the fifth straight week, touching an over 20-month high of USD 615.97-billion as at December 15 of this year.
The foreign exchange reserves rose by USD 9.1-billion in the reporting week after a healthy climb of USD 16.5-billion in the prior four weeks.
Here, it must be highlighted that the Indian debt and equity market registered increased net inflows in December. Till now, the net inflows have swollen to USD 9.2-billion in December.
The number stood at USD 2.9-billion in the previous month of November.
The Reserve Bank of India (RBI)’s intervention in forex markets along with valuation changes impact reserves. Changes in foreign currency assets are expressed in dollar terms. It also reflects the effect of appreciation or depreciation of other currencies held in its reserves.
Foreign exchange reserves also include India’s reserve tranche position in the International Monetary Fund (IMF).
India Leads in Global Remittances: World Bank
India leads in global remittances at USD 125-billion this year (2023), according to a World Bank report.
The report highlights India’s significant position as the top remittance recipient, drawing attention to the evolving dynamics in the remittance landscape.
The World Bank (WB)’s latest Migration and Development Brief reveals a continuing growth in remittance flows to low-and-middle income countries (LMICs) this year (2023), though it is at a slower pace as compared to previous years.
Remittances to LMICs increased by an estimated 3.8 per cent in 2023, reaching a total of USD 669-billion.
Resilient markets in advanced economies and the Gulf Cooperation Council (GCC) countries played a pivotal role in supporting migrants’ ability to send money back home.
The report suggests a potential risk of a decline in real income for migrants in 2024 due to global inflation and low growth prospects.
In the South-Asian region where India is located, remittance flows into the country registered a healthy growth, contributing to the overall positive trend. South Asia as a whole, clocked a 7.2 per cent climb in remittances in 2023.
The Indian economy buoyed by a tight labour market in the US and robust employment growth in Europe, outperformed previous forecasts by reaching USD 125-billion in remittances for the year.
While India retained its position as the largest recipient of remittance in 2023, an important point to be highlighted here is that this fact underscores the prominent role played by the Indian diaspora in supporting families and contributing to the country’s economic resilience.
The top five remittance recipient countries include Mexico (USD 67-billion), China (USD 50-billion), the Philippines (USD 40-billion) and Egypt (USD 24-billion).
West Asia Oil Shipments Could Be Affected in Short-Term Due to Drone Attacks
The recent attacks on crude oil tankers in and around the Red Sea has the potential to adversely affect crude shipments from the Middle-East in the short-term. Here it must be pointed out that two ships connected to India were recently attacked.
Last Saturday (December 23), a crude oil tanker—the M/V Sai Baba—was hit by a one-way attack drone, the United States Central Command (CENTCOM) said.
CENTCOM is one of the eleven unified combatant commands of the US Department of Defence. It operates in the Central Asia region.
No injuries were reported in the attack.
A merchant vessel—the MV Chem Pluto—with around 20 Indian crew members was hit by a suspected drone about 217 nautical miles off the Porbandar coast (Gujarat) in the Arabian Sea.
The vessel was shipping petrochemicals to Mumbai. The area where it came under attack is far from the Houthis’ main base in western Yemen and was sailing about 860 nautical miles off the Yemen coast when it was hit.
The Indian government is reportedly keeping a watch on the situation. However, if such attacks continue, the flow of crude from West Asia will be adversely affected in the short-term.
Because of the tension in the area, shipping charges are also expected to increase further as consignments from Europe are already avoiding the Suez Canal-Red Sea route and instead opting for the Cape of Good Hope route.
If oil prices rise, then it could fuel inflation in the country. Therefore, the government will keep a sharp eye on the developments in the Middle East and the sea-routes through which crude oil is shipped in particular.
UP Moves Ahead of Several States, Becomes India’s Second-Largest Economy
The north Indian state of Uttar Pradesh (UP) has become the country’s second-largest economy. It has surpassed several key states in the process. The state’s chief minister Yogi Adityanath has made it his aim to achieve the USD 1-trillion mark by 2027.
According to a report by SOIC Finance, the state now has the second highest share in India’s GDP, just behind the western state of Maharashtra. The report stated that UP commanded a very encouraging and healthy 9.2 per cent share of the country’s GDP. With this, UP thus moves up to second spot from its earlier third position.
A point that needs highlighting here is that Uttar Pradesh has forged ahead of Tamil Nadu (9.1 per cent), Gujarat (8.2 per cent) and West Bengal (7.5 per cent).
The northern state has also left behind it other states such as Karnataka (6.2 per cent), Rajasthan (5.5 per cent), Andhra Pradesh (4.9 per cent) and Madhya Pradesh (4.6 per cent).
Uttar Pradesh has achieved another distinction as well—it has also climbed up to the second position from the 14th position it previously held in the Ease of Doing Business rankings.
Presently, the state is exporting goods worth nearly Rs 2-lakh-crore and the loan deposit ratio of banks has increased from 42-43 per cent to 56 per cent with plans to further up it to 60 per cent.
Significantly, Uttar Pradesh has now transitioned into a revenue surplus state with 56 per cent of its population employed and the establishment of around 96-lakh MSMEs.
Fitch Ratings Says India’s Resilient Economic Growth to Boost Demand of Corporates
Renowned international firm Fitch Ratings has said that it expects India’s resilient economic growth to boost demand of corporates. This follows the robust performance of corporates in 2023 and this will offset weakness from slowing growth in key overseas markets, it said in its latest report on India Corporates: Sector Trends 2024.
Rising demand and easing input cost pressure should boost the margins of corporates in the next financial year ending March 2025 (FY 25), the credit rating agency said.
India will be among the world’s fastest-growing countries with a GDP growth of 6.5 per cent during FY 25 backed by a strong domestic demand growth, it said.
Sectors such as cement, electricity and petroleum products were expected to register a strong demand with high-frequency data in 2023 sustained well above pre-Covid pandemic levels, Fitch said.
Another sector, according to the firm, that is expected to fare well is the steel sector as its demand is expected to receive a boost from India’s infrastructure sector which is expected to continue its growth.
According to Fitch, India’s economy will be resilient and grow rapidly despite a challenging global backdrop and the cumulative impact of the recent monetary tightening.
Pointing out that travel and tourism conditions had improved this year, Fitch said that increasing domestic auto sales volume would help boost revenues of auto suppliers. Monthly passenger vehicle and retail sales continue to rise Year-on-Year (YoY) since March 2022, the firm said.
Adani Grp to Invest Rs 8.700-cr in Bihar
Leading Indian corporate group, the Gautam Adani-spearheaded Adani Group plans to invest an additional Rs 8,700-crore in Bihar where it has already invested Rs 850-crore.
This was announced by Adani Enterprises Director Pranav Adani at the plenary session of Bihar Business Connect—2023, a two-day global investors summit held early this month.
“Our group has decided to invest Rs 8.700-crore n additional sectors in Bihar. This will create direct or indirect employment for approximately 10,000 people in the state,” he said.
Sectors such as cement, logistics and the agro-industry have been identified by the group for investment.
An investment of Rs 2,500-crore has been earmarked for cement manufacturing units and the group aims to produce 10-million metric tonnes in a year. This should create around 3,000 jobs in the state.
Other investments include augmentation of existing godown capacity, development of two large godowns, including one at Patna, a new compressed bio-gas plant and an EV charging centre. Around 1,500 people are expected to get employment through the above investments.
An investment of Rs 1,200-crore has been earmarked to expand the group’s warehousing capacity from the present 1-lakh sq ft to over 65-lakh sq ft while another Rs 900-crore has been made in agri-logistics to increase storage capacity from 1.5-lakh metric tonnes to 2.75-lakh metric tonnes in six locations.
These locations are Purnia, Begusarai, Darbhanga, Samastipur, Kishanganj and Araria. The above investment has the potential to provide employment to a further 2,000 people.
According to Mr Pranav Adani, Adani Wilmar plans to invest Rs 800-crore in the initial phase to build a flour mill plant, RFM plant, a solvent extraction plant, a co-gen power plant as well paddy processing plants at Sasaram and Rohtas.
Around 200 people are expected to be employed in these plants.
This is a big investment by the Adani group in Bihar and this could give a massive boost to the state’s economy.