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The last month of 2024 saw the impacts of a somewhat slower economic growth forecasts for India based on developments in the year. Foreign exchanges reserves also reduced and seems to have a connection with the slowly economy coupled with foreign invstors\u2019 action of pulling out investments in the couple of months prior to December. Several State Governments have woken up to devise policies and framework to attract foreign companies desiring to set up global capability centres in India. The Government is taking steps to continue encouraging a stable and reliable intellectual property framework which is expected to give a fillip to patent filings locally here.<\/p>\n
The author wishes the esteemed readers of Asia Law Portal a very enjoyable, knowledgeable, stable and healthy new year.<\/p>\n
Asian Development Bank<\/strong> \u2013 The Asian Development Bank recently released its Asian Development Outlook December 2024<\/a> Steady Growth Amid a Shifting Global Policy Landscape. The report mentioned that economic growth in developing Asia and the Pacific remains steady, but US policy changes under the incoming Trump administration may impact the region. As per the report, India\u2019s growth forecast is lowered to 6.5% for FY2024 (ending 31 March 2025) and 7.0% for FY2025, from 7.0% in fiscal year (FY) 2024 (ending 31 March 2025) and 7.2% in FY2025 in ADO September 2024 (reported by Asia Law Portal here<\/a>). The lowering of the forecast for FY2024 reflects a deceleration of growth in Q2 FY2024 to 5.4% from 8.2% in Q2 FY2023. This is on account of lower-than-expected industrial growth at 3.6% year on year, while growth in the agriculture and services sectors has remained strong at 3.5% and 7.1%, respectively. Industrial demand, on the other hand, is affected by tighter prudential norms from the central bank for unsecured personal loans and continued elevated food prices. Government capital expenditure for FY2024 also continues to lag behind the budget target, a risk highlighted in ADO September 2024. Regardless, India\u2019s growth will remain robust, with the economy supported by higher agriculture output resulting from the summer (or kharif) crop season (which will also put downward pressure on food prices); continued resilience of the services sector; and lower-than-expected Brent crude prices in 2024 and 2025. Strong forward looking and labor market indicators (such as PMI for industry and services, urban labor force participation and Reserve Bank of India\u2019s industrial outlook) suggest that economic momentum will recover in the coming quarters. The\u00a0forecast for FY2025 has been reduced slightly due to lower-than-expected growth in private investment and housing demand, due to tight monetary policy aimed at combating inflation. Downside risks remain from geopolitical threats to supply chains and adverse weather conditions.<\/p>\n Foreign Exchange Reserves<\/strong> \u2013 India\u2019s foreign exchange reserves<\/a> fell for a third consecutive week and stood at a more-than-seven-month low of $644.39 billion as of Dec. 20, data from the Reserve Bank of India (RBI) showed on Friday.\u00a0The reserves declined by $8.5 billion in the reporting week, logging their biggest weekly fall in over a month. They had declined by a total of $5.2 billion in the prior two weeks.\u00a0Changes in foreign currency assets are caused by the central bank\u2019s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.\u00a0The RBI intervenes on both sides of the forex market to curb undue volatility in the rupee.<\/p>\n Fitch Ratings<\/strong> \u2013 India\u2019s economic growth forecast<\/a> for the financial year 2024-25 has been revised downward by Fitch Ratings, now standing at 6.4%, a drop from its earlier estimate of 7.0%. The downgrade follows the Reserve Bank of India\u2019s (RBI) recent decision to cut its own growth projection for the same period to 6.6%, down from 7.2%. However, Fitch Ratings highlighted India\u2019s relative strength compared to other global economies, stating, \u201cThe Indian economy recovered strongly from the Covid-19 pandemic shock. Although indicators point to a more mixed picture in recent months, we do not think that the softness will translate into a prolonged slump in economic activity.\u201d Fitch remains optimistic about India\u2019s economic resilience, citing domestic demand as a key driver, even amid global trade uncertainties. The agency expects continuity in policy initiatives such as infrastructure development, digitalisation, and business reforms to support growth. Public infrastructure investments and improved corporate and bank balance sheets are also expected to contribute to capital spending and economic activity.<\/p>\n