Economic Growth and Inflation Trends FY2024

Questions and Answers

What percentage of GDP did the current account surplus equivalent to during January–March 2024, and what climatic condition contributed to it?

The current account surplus was equivalent to 0.6% of GDP, attributed to climatic shocks.

By what amount did India’s foreign exchange reserves increase by the end of FY2024?

$646.4 billion.

How much was the deficit in the Southwest monsoon rainfall compared to the long period average rainfall?

5.6% deficit.

What was the percentage decrease in the first advance estimates of kharif foodgrains production for FY2024 compared to the previous year's estimates?

0.9% lower. Signup and view all the answers

What was the reported growth in agricultural gross value added (GVA) at 2011–12 prices as per the first advance estimates of national income?

1.8%. Signup and view all the answers

What percentage was the rainfall below normal during October–December 2023?

9% below normal. Signup and view all the answers

What was the percentage of rainfall below normal during January–February 2024?

33% below normal. Signup and view all the answers

What was the implication of low reservoir levels during the rabi cropping season?

Concerns about rabi output. Signup and view all the answers

What was the primary driver of growth momentum in FY2024?

The primary driver of growth momentum in FY2024 was a 9% growth in investment, particularly in gross fixed capital formation. Signup and view all the answers

How did inflation behave in FY2024 compared to FY2023?

In FY2024, inflation moderated to an average of 5.4%, down from 6.7% in FY2023. Signup and view all the answers

What measures did the government take to manage inflation during FY2024?

The government implemented export restrictions, excise duty cuts, and released foodgrains from buffer stocks. Signup and view all the answers

What was the cumulative increase in the policy repo rate from May 2022 to February 2023?

The cumulative increase in the policy repo rate was 250 basis points. Signup and view all the answers

Which sectors experienced high growth rates during FY2024, and what were those rates?

The construction and manufacturing sectors both experienced high growth rates of 9.9% each. Signup and view all the answers

What effect did global food and energy prices have on inflation in FY2023?

Global food and energy prices caused the average CPI inflation to surge to 6.7% in FY2023. Signup and view all the answers

What was the status of core inflation during the last four months of FY2024?

Core inflation, excluding food and fuel, dropped below 4% during the last four months of FY2024. Signup and view all the answers

What impact did tightening monetary policy have on inflation in FY2024?

The tightening of monetary policy helped reduce inflation to 5.4% in FY2024. Signup and view all the answers

What does MPCE stand for and why is it important in understanding urban versus rural consumption patterns?

MPCE stands for Monthly Per Capita Consumption Expenditure and is important as it helps identify disparities in living standards between urban and rural populations. Signup and view all the answers

Based on the data from FY2000 to FY2023, what trend can be observed regarding Rural MPCE as a percentage of Urban MPCE?

Rural MPCE as a percentage of Urban MPCE shows a declining trend, starting from a higher percentage and declining over the years. Signup and view all the answers

What was the Rural MPCE in FY2012, and how does it compare to the Urban MPCE in the same fiscal year?

The Rural MPCE in FY2012 was 1,984, compared to the Urban MPCE of 6,459, showing a significant difference in consumption expenditure. Signup and view all the answers

In FY2023, how much was the Rural MPCE, and what does this indicate about the trend over fiscal years?

In FY2023, the Rural MPCE was 1,430, indicating a possible stagnation or slight improvement compared to previous years, but still significantly lower than Urban MPCE. Signup and view all the answers

Analyze the FY2005 Rural MPCE figure and explain its significance in the broader trend observed until FY2023.

The FY2005 Rural MPCE was 1,054, which signifies a growth from FY2000 but indicates a slower pace compared to subsequent urban increases. Signup and view all the answers

Calculate the percentage of Rural MPCE in relation to Urban MPCE for FY2023, given the Rural MPCE is 1,430 and Urban MPCE is 6,459.

The percentage of Rural MPCE in relation to Urban MPCE for FY2023 is approximately 22.1%. Signup and view all the answers

Describe the significance of the MPCE data trend from FY2000 to FY2023 for policy-making in rural development.

The consistent decline in Rural MPCE compared to Urban MPCE underscores the urgent need for targeted policies to enhance rural economic conditions. Signup and view all the answers

What was the difference in MPCE between Urban and Rural areas in FY2010, and what implications does this have for economic equality?

In FY2010, the Urban MPCE was 6,459 while the Rural MPCE was significantly lower, indicating over a $5,000 difference which suggests stark economic inequality. Signup and view all the answers

How many additional connections are planned to be released under the PMUY scheme from FY2024 to FY2026?

75 lakh additional connections. Signup and view all the answers

What has been the completion percentage of eligible habitations provided with all-weather road connectivity under PMGSY-I?

99.4% completion. Signup and view all the answers

As of December 2023, how many kilometers of road length have been sanctioned under PMGSY-II?

49,857 km sanctioned. Signup and view all the answers

What milestone was achieved by 28 April 2018 concerning electrification under DDUGJY?

All inhabited un-electrified villages had been electrified. Signup and view all the answers

How many households have been electrified since the launch of the PM Sahaj Bijli Har Ghar Yojana?

2.9 crore households. Signup and view all the answers

What was the total financial value involved in the sanction of roads and bridges under PMGSY until December 2023?

₹3.8 lakh crore. Signup and view all the answers

What is the total kilometers sanctioned and completed under PMGSY-III as of December 2023?

1.1 lakh km sanctioned and 69,507 km completed. Signup and view all the answers

How many kilometers of road has been completed under the Road Connectivity Project for Left-Wing Extremism Affected Areas?

8,290 km completed. Signup and view all the answers

How has sustained public-sector capital expenditure influenced private-sector investment in India?

It has improved the attractiveness of private-sector investment, leading to an expected acceleration. Signup and view all the answers

What role does improving rural demand play in the Indian economy's growth prospects?

It contributes to broad-based consumption demand momentum, enhancing overall economic growth. Signup and view all the answers

In what way has fiscal consolidation affected private sector capital costs in India?

It has eased pressures on the cost of capital for the private sector, enabling more investment. Signup and view all the answers

How has the moderation in inflation contributed to the economic environment in India?

It has helped contain inflation risk premiums, promoting a more stable investment climate. Signup and view all the answers

What effect do healthy balance sheets of corporates and banks have on risk aversion?

They help lower risk aversion, facilitating more lending and investment in the economy. Signup and view all the answers

What is the significance of the production-linked incentive scheme in boosting India's economy?

It enhances production capacities in key sectors, driving growth and attracting investments. Signup and view all the answers

How have geopolitical factors influenced India’s export landscape?

They have driven a realignment of global supply chains, enhancing India's attractiveness as a low-cost production source. Signup and view all the answers

What are the expected long-term benefits of enhancing logistics and ease of doing business in India?

These improvements are anticipated to strengthen growth forces and attract foreign investments. Signup and view all the answers

What initiative will be launched to enhance the socio-economic conditions of tribal communities in India?

The Pradhan Mantri Janjati Unnat Gram Abhiyan will be launched. Signup and view all the answers

Which financial institution will facilitate funding for shrimp farming and exports?

NABARD will facilitate funding for shrimp farming and exports. Signup and view all the answers

What is the purpose of establishing nucleus breeding centres for shrimp brood stocks?

The purpose is to boost shrimp farming and improve its export potential. Signup and view all the answers

What specific programs will be organized to increase women's participation in the workforce?

Women-specific skilling programmes will be organized. Signup and view all the answers

What policy will be formalized to ensure the systematic development of the cooperative sector?

The National Cooperation Policy will be formalized. Signup and view all the answers

What factors contributed to India's robust growth during FY2024 despite global economic challenges?

Factors included moderation in inflation, a sustainable external balance position, financial stability, and healthy corporate balance sheets. Signup and view all the answers

In what ways did India's investment-led growth process impact its economic performance in FY2024?

The investment-led growth process enhanced economic resilience and drove robust growth due to continuous reforms and sound macro policies. Signup and view all the answers

How did the global macroeconomic environment influence India's economic outlook in FY2024?

Although India faced lingering geo-economic fragmentation and high debt globally, it managed to achieve growth due to its internal strengths. Signup and view all the answers

What role did public expenditure quality improvements play in India's economic performance during FY2024?

Improvements in public expenditure quality supported effective resource allocation and enhanced the overall macroeconomic environment. Signup and view all the answers

What are the implications of having a well-balanced external position for India’s economic stability?

A sustainable external balance helps shield the economy from global shocks and enhances investor confidence. Signup and view all the answers

Discuss the impact of orderly financial markets on the Indian economy's performance in FY2024.

Orderly financial markets foster stability and investor confidence, which in turn encourages investment and growth. Signup and view all the answers

What significance does India's status as the fastest growing major economy have for global economic dynamics?

India's rapid growth position enhances its global influence and attracts foreign direct investment, impacting international trade and relations. Signup and view all the answers

How did fiscal consolidation contribute to India's economic progress in FY2024?

Fiscal consolidation led to improved financial discipline, allowing for more efficient resource allocation and long-term economic stability. Signup and view all the answers

What are the projected growth rates for India in FY2025 and what implications does this hold for inflation management?

The projected growth rate for India in FY2025 is 7.2%, posing challenges for inflation management due to underlying risks from geopolitical factors and agricultural stagnation. Signup and view all the answers

How has agriculture's resilience to climate events influenced food production in India recently?

Despite increased resilience to climate events, agricultural GVA growth has decelerated and foodgrains production has stagnated due to frequent weather disturbances. Signup and view all the answers

What role does technology play in improving agricultural yields in India amidst climate change challenges?

Technology is crucial for improving agricultural yields and sustainable input usage, but its adoption faces challenges due to India's high dependence on agriculture for employment. Signup and view all the answers

What role does the Mahatma Gandhi National Rural Employment Guarantee Act play in analyzing rural activity?

It provides insight into rural employment demand, helping to gauge overall rural economic health. Signup and view all the answers

Identify two significant risks that could affect growth and inflation in India going forward.

Geopolitical factors exerting upward pressures on oil prices and climate change amplifying structural impediments in agriculture are significant risks. Signup and view all the answers

Explain the challenges in addressing inflation within India's agricultural sector.

The challenges include frequent weather disturbances affecting food prices and lingering structural impediments that slow agricultural GVA growth. Signup and view all the answers

How are nominal rural economic indicators adjusted for comparison over time?

They are deflated by the CPI-rural inflation to enhance comparability. Signup and view all the answers

How might reducing dependence on agriculture for employment benefit India’s economic development?

Reducing dependence on agriculture could facilitate the adoption of advanced farming technologies and enhance capital formation, supporting overall economic development. Signup and view all the answers

Why is it important to analyze the average values of indicators over a 12-month period?

It helps negate seasonal variations, allowing for a more accurate year-over-year comparison of rural economic performance. Signup and view all the answers

Discuss how softening CPI inflation and core inflation below 4% impact India's economic policy decisions.

Softening CPI and core inflation below 4% may provide more room for economic policy adjustments but can also create uncertainty regarding future inflation trajectories. Signup and view all the answers

What does the terms of trade in rural activity indicate?

It shows the relative prices of food to non-food items, impacting farmers' income and purchasing power. Signup and view all the answers

Which indicators suggest a strengthening rural economy in FY2024?

Indicators like scooter sales, tractor sales, and agricultural exports show significant expansion. Signup and view all the answers

What are the implications of stagnant foodgrains production for India’s overall economic stability?

Stagnant foodgrains production could threaten food security, increase inflation pressures, and undermine economic stability due to rising commodity prices. Signup and view all the answers

Identify and explain one significant agricultural challenge stemming from climate change in India.

One significant challenge is the increased frequency of weather disturbances, which disrupt agricultural productivity and hinder GVA growth. Signup and view all the answers

What impact do reservoir levels have on the rural economy?

Low reservoir levels can adversely affect crop prospects and agricultural productivity. Signup and view all the answers

What strategies are necessary for enhancing agricultural productivity in the face of climatic and economic challenges?

Strategies should include adopting technology-enabled cropping practices and reallocating resources to reduce dependency on traditional farming subsidies. Signup and view all the answers

How do high-frequency indicators relate to rural sentiments?

They reflect the confidence of rural populations in their economic conditions and future prospects. Signup and view all the answers

What is the significance of comparing FY2024 indicators with FY2023?

This comparison helps assess the performance and momentum of the rural economy over a specific period. Signup and view all the answers

Why is it essential to monitor fertilizer and tractor sales as indicators of rural economic activity?

They indicate agricultural investment and productivity, which are vital for sustaining rural livelihoods. Signup and view all the answers

In what way does bank credit flow to agriculture serve as an indicator of rural economic health?

Higher bank credit to agriculture suggests increased financial support for rural development and farming operations. Signup and view all the answers

What has been the trend in India's agricultural exports since FY2022, particularly in FY2024?

India's agricultural exports have remained around $50 billion since FY2022, with FY2024 recording $48.8 billion. Signup and view all the answers

Which two commodities account for more than one third of total agricultural exports from India?

Rice (including basmati) and sugar account for more than one third of total agricultural exports. Signup and view all the answers

What major initiative was launched to reduce post-harvest losses in agriculture?

The World’s Largest Decentralised Grain Storage Plan (WLGSP) was launched to reduce post-harvest losses. Signup and view all the answers

In FY2024, how did government measures impact agricultural exports despite curbs?

Government measures helped keep total agricultural exports only modestly lower than previously, despite curbs. Signup and view all the answers

What role do primary agricultural credit societies (PACS) play in farmers' economic activities?

PACS act as procurement centers and supply sources for fair price shops, helping farmers reduce transportation costs. Signup and view all the answers

How did the government's initiatives aim to contain food inflation volatility?

New initiatives were launched to strengthen the agricultural supply chain, which could help contain food inflation volatility. Signup and view all the answers

What was the value of India's agricultural exports in FY2023, and how does it compare to FY2024?

India's agricultural exports in FY2023 were $50.2 billion, showing a slight decline to $48.8 billion in FY2024. Signup and view all the answers

Describe the impact of rice and sugar export curbs on agricultural exports in FY2024.

The curbs aimed to improve domestic availability and manage price pressures but resulted in only a modest decrease in exports. Signup and view all the answers

What potential benefits does the WLGSP offer to farmers in India?

The WLGSP can significantly reduce post-harvest losses and help farmers avoid distress sales, allowing for better pricing. Signup and view all the answers

What was the primary goal of the new initiatives introduced by the Government of India for the agricultural sector?

The primary goal was to strengthen the agricultural supply chain to increase farmers' income and stabilize food prices. Signup and view all the answers

Study Notes

Economic Growth and Investment

Investment growth was robust at 9% in FY2024, driven by proactive fiscal policies emphasizing capital expenditure.
Major sectors, specifically construction and manufacturing, experienced high growth rates of 9.9%.

Inflation Trends

Average CPI inflation peaked at 6.7% in FY2023 due to rising global food and energy prices amid the Russia–Ukraine War, surpassing the inflation target.
In FY2024, average inflation decreased to 5.4%, with core inflation falling below 4% in the last four months of the year.
Proactive monetary policies included a cumulative increase of the policy repo rate by 250 basis points from May 2022 to February 2023.

Government Interventions

Key supply-side measures included:
- Export restrictions to improve domestic food availability.
- Excise duty cuts on petrol and diesel.
- Market release of food grains from buffer stocks.
- Reduction of tariffs on specific food imports.
- Restrictions on sugarcane molasses for ethanol production.

Agriculture Resilience

Despite a 5.6% deficit in the Southwest monsoon rainfall and erratic distribution, agricultural gross value added (GVA) continued to grow, albeit at a lower rate.
Kharif food grain production estimates reflected a 0.9% decrease for FY2024.
Low reservoir levels and below-normal rainfall during the rabi cropping season raised concerns about agricultural output.

Rural Development Initiatives

As of July 2023, the PMUY scheme had reached approximately 9.6 crore beneficiaries, aiming for an extension to 10.4 crore beneficiaries by 2026.
The PM Gram Sadak Yojana (PMGSY) sanctioned 1.9 lakh roads and over 11,000 bridges, significantly enhancing rural infrastructure connectivity.

Electrification Efforts

The PM Sahaj Bijli Har Ghar Yojana (Saubhagya) achieved 100% household electrification, reaching 2.9 crore households.
The Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) focused on strengthening power distribution, achieving electrification of all inhabited un-electrified villages by April 2018.

Investment and Economic Outlook

Public-sector capital expenditure and improved utilization of production capacity are expected to boost private-sector investment.
The fiscal consolidation process has alleviated capital cost pressures for private sectors.
Proactive measures in logistics, digitalization, renewables, and production-linked incentives for key sectors are enhancing growth potential.
Services exports remain strong, and geopolitical shifts in global supply chains position India as an attractive low-cost production hub.

Global Economic Environment

The global economy experienced a soft landing in FY2024, avoiding a recession despite aggressive monetary tightening by major central banks.
Inflation moderated while global food and commodity prices declined, easing supply chain disruptions.
Ongoing issues include geo-economic fragmentation, high debt levels, and climate risks, affecting near- to medium-term growth outlooks.

Indian Economic Performance

India demonstrated resilience against global economic shocks, achieving robust growth surpassing expectations in FY2024.
Key macro-financial conditions included moderated inflation, a sustainable external balance, financial stability, and healthy corporate balance sheets.
Continuous reforms and an investment-led growth approach are expected to sustain India as the fastest-growing major economy globally.

Agricultural Sector Overview

Agricultural exports remained stable, at around $50 billion since FY2022, despite government-imposed curbs on rice and sugar aimed at controlling domestic prices.
Total agricultural exports in FY2024 amounted to $48.8 billion, slightly down from FY2023, with rice and sugar constituting over one-third of exports.

Agricultural Supply Chain Initiatives

New initiatives launched by the Government of India aim to strengthen the agricultural supply chain and enhance farmers’ incomes.
The World’s Largest Decentralised Grain Storage Plan (WLGSP) aims to minimize post-harvest losses and improve farmer pricing power.

Indicators of Rural Activity

High-frequency indicators of rural economic activity showed positive trends in FY2024, including sales of scooters, tractors, and fertilizer, as well as agricultural and non-agricultural employment.
Growth in rural activity is indicated by improvements in agricultural exports, bank credit flows to agriculture, and demand for rural employment programs.

Economic Projections and Challenges

Growth for FY2025 is projected at 7.2%, expected to maintain a trend of over 7% growth for four consecutive years.
Although CPI inflation softened and core inflation fell below 4%, risks from geopolitical factors and climate-related events threaten food price stability.

Agricultural Resilience and Structural Issues

Indian agriculture has shown increased resilience to climate disturbances; however, growth in GVA and food production has stagnated.
Structural impediments in the agriculture sector could exacerbate growth and inflation challenges, necessitating timely interventions and technological advancements.

Strategic Initiatives for Economic Development

Plans to boost shrimp farming and enhance export capabilities through nucleus breeding centers for shrimp broodstocks.
Launch of the Pradhan Mantri Janjati Unnat Gram Abhiyan for improving tribal communities' socio-economic conditions.
Formalization of the National Cooperation Policy aimed at cooperative sector development.
Programs to promote women’s participation in the workforce through specific skilling initiatives and market access for self-help groups.

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Description

Explore the dynamics of economic growth and inflation trends for the fiscal year 2024. Delve into how government interventions and monetary policies have influenced investment growth, changing inflation rates, and key supply-side measures implemented during this period.