Indian Rupee Under Pressure Amid USD Demand
The Indian Rupee (INR) faces downward pressure as it weakens against the US Dollar (USD) due to increased demand from state-run and foreign banks. Finance Minister Nirmala Sitharaman acknowledged the government’s vigilance over the exchange rate, particularly in response to the recent decline in the Indian Rupee. The finance minister emphasized the country’s strong macroeconomic fundamentals while acknowledging challenges posed by external factors, including decreased demand in advanced economies, exchange rate fluctuations, and high interest rates.
Key Economic Indicators and Fiscal Deficit Data in Focus
Investors are closely monitoring India’s economic indicators, with the spotlight on the Gross Domestic Product (GDP) Quarterly for the second quarter (Q2) scheduled for release on Thursday. Other crucial data, including Indian Fiscal Deficit figures, RBI Monetary and Credit Information Review, and Infrastructure Output, will contribute to the overall assessment of the economic landscape. Additionally, the final phase of state elections on Thursday remains a focal point, as potential changes in government policies could impact investor sentiment.
Anticipated Slowdown in GDP Growth
Analysts anticipate a slowdown in India’s GDP growth, projecting a decrease to 6.8% in the July-September quarter from the previous quarter’s 7.8%, according to a Reuters poll. Despite this expected moderation, India’s GDP is projected to outpace major economies, with estimates suggesting growth higher than 6.0% in the coming years. The government’s capital spending has seen a notable increase in the first six months of the fiscal year, reaching 4.91 trillion Indian Rupees ($58.98 billion), compared to 3.43 trillion Rupees in the same period the previous year.
Government’s Commitment to Systemic Reforms
Minister Sitharaman underscores the necessity for ongoing systemic reforms to position India as a $7 trillion economy. This commitment aligns with the government’s focus on sustained growth and economic resilience. Equities analysts anticipate new highs in the Indian stock market over the next six months, with a projected rise of more than 10% by the end of 2024, according to a Reuters poll.
Positive Economic Forecasts and Global Economic Indicators
The Reserve Bank of India (RBI) and the International Monetary Fund (IMF) offer positive growth forecasts for India, with the RBI projecting 6.5% growth for July-September and the IMF revising its fiscal year 2024 growth forecast to 6.3%. The global economic landscape, as reflected in recent US economic indicators, shows mixed results, including a decline in US New Home Sales and the Dallas Fed Manufacturing Index, but stability in the US S&P Global Composite PMI and slight variations in Manufacturing and Services PMI figures.