Category: Economy

India’s finance minister unveils budget, promises reforms to drive growth India’s Finance Minister, Nirmala Sitharaman, unveiled the budget promising comprehensive economic reforms to stimulate growth in her final budget speech in the Lok Sabha ahead of the impending national elections in May.

Some of the key highlights of her speech include the commitment to construct more than two crore houses under a housing scheme targeting deserving middle-class people, the conversion of 40,000 regular rail bogies to Vande Bharat standards, and the determination to propel India towards becoming a developed nation by 2047.

Sitharaman affirmed that export rates, indirect taxes, and direct taxes would remain unchanged. Additionally, she announced an 11% increase in capital expenditure allocation for the next fiscal year, amounting to ₹11.1 lakh crore, while successfully reducing the budgetary deficit to 5.8% of the gross domestic product for the current fiscal year.

Noteworthy allocations for the fiscal year 2024–2025 include a substantial budget of Rs 6,500 crore for the Border Roads Organisation under the Ministry of Defence, marking a 30% increase over the previous year. The Indian Coast Guard’s funding saw a 6.31% boost to Rs 7,651 crore, and the budget for the Defence Research and Development Organisation (DRDO) grew to Rs 23,855 crore.

The Bank of England has maintained its stance on borrowing costs, holding them unchanged for four consecutive months while hinting at potential rate cuts soon. The central bank anticipates that inflation will soon dip below 2%, prompting cautious optimism.

Before considering a reduction in borrowing rates, the Bank emphasized the need for further evidence of sustained inflation aligning with the government-set target. It emphasised the continuous problem and the continued hazards that come with fast-rising costs.

The Monetary Policy Committee (MPC) opted to retain interest rates at 5.25%, the highest since the 2008 financial crisis. According to analysts, inflation, which stood at 4% in December, may reach target levels by April, a year earlier than the Bank of England had predicted.

In October 2022, inflation peaked at 11.1%, which prompted the Bank to take a cautious stance. In response, the Bank of England warned that rates could rise further over an “extended period.”

A key contributor to medium-term inflation trends, three of the nine policymakers at the Bank of England advocated for raising interest rates to 5.5% from 5.25%. Furthermore, they highlighted the delicate balancing act between containing inflation and stimulating economic growth.

In 2023, France’s economy experienced a notable surge of 0.9%, yet the momentum waned in the last two quarters, marking a period of stagnation. This growth marked a deceleration from the nation’s 2.5% annual growth rate in 2022, slightly below the government’s forecast of 1%.

Throughout much of 2023, France, the second-largest economy in the eurozone, grappled with near-zero growth, barring a modest uptick of 0.7% in the second quarter. Household consumption, a significant economic driver, contracted by 0.7% over the year and notably declined in the final three months.

Comparatively, Germany, the eurozone’s powerhouse, faced projections of recession in both 2023 and 2024, underscoring France’s relatively resilient performance in the preceding year.

Addressing the National Assembly, the chief economist of the Bank of France cited a more favourable global environment and said external demand for France was better than feared.

Looking ahead, the French government anticipates a further uptick in economic growth, forecasting a robust 1.4% expansion. However, François Villeroy de Galhau, the central bank governor, holds a more cautious outlook, foreseeing a more moderate growth trajectory of 0.9% for 2024.

Singapore’s central bank kept its monetary policy setting unchanged for the third consecutive month. Despite estimates that inflation will decline later this year, officials claim that a relaxation may occur later this year.

In a statement issued on Monday, the Monetary Authority of Singapore (MAS) maintained the currency band’s slope, width, and centre. It aims to keep the local dollar on an appreciating path, which will help prevent imported inflation.

The statement read, “Core inflation is likely to remain elevated in the earlier part of the year. However, it should decline gradually and step down by the fourth quarter before falling further next year.” It further stated that reduced import costs and a slower rate of increase in local costs should support the moderating trend in inflation.

Despite relatively tight labour markets and strong house-price growth, Singapore’s economic growth has shown signs of resilience since the last review in October. However, it has increased the risk of ongoing price pressures and the Middle East crisis, which could drive up energy prices.

After peaking at 5.5% early last year, core inflation slowed in December to 3.3%.

On Monday, the International Monetary Fund (IMF) projected Brunundi’s economy to expand by 4.3% in 2024 from the previous year’s 2.7%.

According to the statement, agricultural production, productive investment, and ongoing reforms will primarily support growth’s acceleration. Burundi’s agricultural sector heavily relies on agricultural revenues, particularly tea and coffee, which improved the growth rate.

The IMF report claimed that fuel shortages were the main reason for 2023’s slower growth rate. Before this, years of political unrest and conflict severely damaged key sectors. Following a political crisis in 2015 that compelled donors to halt aid, the country encountered a scarcity of real currency under the presidency of Pierre Nkurunziza.

In 2022, the European Union agreed to resume financial support, while the US also agreed to provide aid to Burundi.

As per the IMF, the country’s foreign exchange reserve stood at USD 96.4 million in 2023, which is equivalent to 0.8 months of import cover. The IMF disbursed funds as well as inflows from remittances and gold exports, which gave some relief to the country. However, Burundi still faces significant economic challenges and needs to take further measures to improve its financial stability.

On Monday, Saudi Arabia’s Justice Ministry declared the establishment of its first administrative enforcement court with jurisdiction over government entities and officials, marking a significant step towards enhancing investors’ confidence. Crown Prince Mohammed Bin Salman implemented it as part of a broader judicial reform. It will aim at modernising the nation’s economic condition and reducing its dependency on oil exports.

Furthermore, the recent enactment of civil law will be a key component of these reforms. Saudi’s first civil code replaced the unwritten system that allowed judges to decide commercial disputes based on Islamic law without any guidelines. The newly established administrative court and the civil transaction law will provide transparency in the legal system. The strategic move was particularly made to attract foreign investors who are considering business engagement in Saudi Arabia. It will allow local and foreign investors to file complaints in the administrative court against government entities and officials. In 2021, Riyadh set the goal of reaching $100 billion in FDI by 2030, but the most recent data show just under $33 billion in inflow. However, with the recent reforms, Saudi Arabia aims to boost the legal framework for better investors.

On Monday, Brazil President Luiz Inacio Lula da Silva launched an industrial development plan of investing 300 billion reais into Brazil’s ageing industries for the next decade. He referred to the plan as a “re-industrialization” initiative designed to change policies that prioritised agricultural production and exports over national industry. At the launch event, he said, “For once and for all, we need to overcome the problem of Brazil always being on the verge but never quite becoming a developed country.”

Lula aims to boost the sluggish growth with state credits and subsidies with a playbook identical to the previous strategy he used from 2003 to 2010. However, these efforts went in vain after a fall in commodity prices, a corruption scandal, and Lula’s imprisonment.

Soon after the leftist announcement, investors considered it a possible threat to the country’s fiscal health. Additionally, the Brazilian real (BR) increased its fall against the US dollar, and BR concluded the trading day with a loss of 1.2%.

Jefferson Rugik, director of brokerage Correparti, stated that the programme may incur government expenditures. According to him, the market is currently adjusting by seeking protection in the dollar.

According to the recent data released on Sunday, Dubai’s GDP grew by 3.3 per cent between January and September 2023. The information was made public by the state’s new agency, WAM.

During this period, accommodation and food service saw a hike of 11.1%, transportation and storage by 10.9%and information and communication by 4.4%.

D33, a ten-year economic strategy that aimed to double Dubai’s economy and position it among the top four global financial centres, was unveiled in January of last year. The initiative also encompassed one hundred transformation projects, such as expanding Dubai’s foreign trade by twofold, incorporating an additional 400 cities into its foreign trade map, and establishing ‘Sandbox Dubai’ to facilitate the testing and commercialization of novel technologies, thereby establishing Dubai as a prominent centre for innovation.

His Highness Sheikh Mohammed Bin Rashid Al Maktoum, VP and PM of the UAE and Ruler of Dubai, launched it. Foreign trade is anticipated to increase to AED 25.6 trillion, FDI to AED 650 billion, government expenditure to AED 700 billion, private sector investment to AED 1 trillion, and domestic demand for goods and services to AED 3 trillion. Digital transformation projects are anticipated to generate an annual contribution of AED 100 billion.

India’s Minister of Information Technology, Ashwini Vaishnaw, made a significant announcement about India’s aim to attract $100 billion in annual Foreign Direct Investment (FDI) in the next few years.

In an interview at the ongoing World Economic Forum in Davos, Switzerland, he presented a comprehensive growth strategy with a vision of a consistent growth rate of 6–8% for the next ten years. This strategy will primarily focus on increasing manufacturing, uplifting the bottom of pyramids, investing in digital and physical infrastructure, and enhancing trouble-free business processes.

Vaishnaw said that since PM Modi took office in 2014, India has been a magnet for foreign investment, and major players like Apple, Samsung, Kia, and Airbus have made substantial investments in India. Despite previously criticising Modi’s protectionist policies, India recorded $ 33 billion in foreign direct investment inflow in the first half of 2023-2024, whereas, it was $ 71 billion in FDI in 2022-2023. He emphasised that, according to investors, India is currently the most important investment destination.

The RBI increased its growth forecast for the current financial year to 7 per cent from 6.5 per cent. Meanwhile, as per the National Statistics Office, India’s GDP is expected to increase by 7.3 per cent, making it the fastest-growing economy.

On Wednesday, PM Narendra Modi inaugurated three major infrastructure projects worth more than Rs 4,000 crore in Kochi, Kerala. These projects include Cochin Shipyard Limited (CSL), the New Dry Dock (NDD), the International Ship Repair Facility (ISRF), and the LPG Import Terminal of Indian Oil Corporation Limited.

The NDD facility was built at the nation’s largest dry dock, the Cochin Shipyard. The total cost of constructing the dock facility was Rs 1799 crore, and it can accommodate large ships, oil rigs, and LNG. The 600-tonne gantry crane-equipped dual-purpose dry dock can be used for both shipbuilding and ship repairs.

The International Ship Repair Facility was built for 970 crore, consisting of six workstations, to help it establish itself as a major ship repair centre. The IOC LPG Import Terminal was built for 1236 crore to cater to the LPG scarcity in southern India.

The project will benefit bottling industries and ensure LPG delivery through pipeline and road transfers. It aims to save 150 crore rupees in logistics costs annually and cut 18,000 metric tonnes of carbon dioxide emissions annually.

These projects were inaugurated by Mr Modi with a vision to transform Indian ports, the waterways sector, and the shipping sector.