Economic Review for November 2024

The Finance Ministry's monthly economic review for November 2024 highlights several factors influencing India's economic trajectory.

Monetary Policy and Macroeconomic Challenges

• The combination of the RBI's monetary policy stance and macroprudential measures may have contributed to a slowdown in demand.
• Structural factors, along with hiring and compensation practices in the corporate sector, have impacted economic growth in the first half of the financial year.

Growth Outlook for 2024-25

• The second half of 2024-25 is expected to see improved growth due to: 
  1. Reduction in the cash reserve ratio.
  2. Lower inflation outlook.
  3. Healthy progress in rabi sowing.
  4. Expected rise in capital expenditure in sectors like cement, iron, steel, mining, and electricity.
• New uncertainties for 2025-26 are emerging due to global economic factors, including aggressive policies and uncertain global trade growth.

Monetary Policy Considerations

• Emerging market currencies are under pressure due to US policy rate considerations, impacting domestic monetary policy decisions.
• The increase in borrowing costs for advanced economies and weakening of emerging market currencies are key concerns.

GDP and Inflation

• India's GDP growth slowed to 5.4% in July-September, the lowest in nearly two years.
• The RBI reduced the cash reserve ratio from 4.5% to 4% to boost credit growth.
• Inflation is projected at 4.8% for FY25, with Q3 at 5.7% and Q4 at 4.5%.
• Food price pressures have eased due to fresh produce influx and healthy rabi sowing.

Sectoral Outlook and Demand

• Cement, iron, steel, mining, and electricity sectors are expected to benefit from increased government capital expenditure.
• Industrial activity is anticipated to gain momentum, supported by a strong services sector performance.
•  Demand trends indicate: 
  1. Rural demand remains strong with significant increases in two & three-wheeler and domestic tractor sales.
  2. Urban demand is recovering, evidenced by a 13.4% year-on-year growth in passenger vehicle sales and robust domestic air passenger traffic.

Revised GDP Series Scheduled for 2026

The Ministry of Statistics and Programme Implementation (MoSPI) is set to release a revised gross domestic product (GDP) series in 2026. This revision aims to incorporate new and real-time data sources for enhanced accuracy.

Incorporation of New Data Sources

• eGram Swaraj:
  A portal by the Ministry of Panchayati Raj that includes panchayat profiles, budget monitoring, and progress tracking on the utilisation of central and state schemes.
• E-Vahan:
  A dashboard from the road transport and highways ministry providing comprehensive data on vehicle registrations, categorized by fuel type and states. This data will replace the current reliance on data from the Society of Indian Automobile Manufacturers (SIAM).
• GST and PFMS:
  Data from Goods and Service Tax (GST) and Public Finance Management System (PFMS) will also be incorporated.

Implementation Timeline

• Release Date:
  The revised GDP series is scheduled for release in February 2026, coinciding with the publication of the first revised estimate of 2024-25.

New Base Year

• 2022-23:
  The Advisory Committee on National Account Statistics (ACNAS) has decided on 2022-23 as the new base year for the GDP series.

Objective and Outreach

• The statistics ministry aims to enhance the use of administrative statistics and is reaching out to various ministries for sourcing new data that could be utilized either directly or indirectly in the revised series.

Fisheries Resources in India

• India is a major player in global fisheries, providing livelihoods to approximately three crore fishers and fish farmers.
  • There has been an 83% increase in national fish production since 2013-14, reaching a record 175 lakh tons in 2022-23.
  • 75% of the fish production comes from inland fisheries, making India the second-largest fish and aquaculture producer globally.
• Strengthening last-mile fisheries and aquaculture extension services is crucial. These services should:
  • Offer request-based services concerning the lifecycle of improved species, water quality, disease management, and rearing technologies.
  • Address issues faced by seed growers and hatcheries.
  • Conduct need-based training to promote sustainable practices and viable fisheries-based business models.

The Role of Matsya Seva Kendras (MSK)

• Under the Pradhan Mantri Matsya Samapada Yojana, Matsya Seva Kendras are envisioned as one-stop solutions for extension services offered by trained aquaculture professionals.
  • Government assistance is available for setting up Kendras, particularly for women and weaker sections, covering up to 60% of costs.
  • 102 Kendras have been funded across various States and Union Territories.
  • Examples include:
    • The MSK in Thrissur, Kerala features a lab for water, soil, and microbial analysis, offering disease tests. 
    • The MSKs in Nasik and Sangli districts of Maharashtra focus on capacity building with technology support.
  •  The government encourages a 'whole of government approach' for MSKs to:
    • Mobilize start-ups, cooperatives, fish farmers’ producer organizations, joint liability groups, and self-help groups.
    • Share best practices, including regenerative and conservation management practices amid climate change.

Sagar Mitras

• Deployed in coastal States and U.T.s, Sagar Mitras act as a crucial link between the government and sea-borne fishers.
  • They gather information on daily marine catch, price fluctuations, and marketing needs at fish landing centers and harbors.
  • Disseminate information on local regulations, weather forecasts, natural calamities, hygienic fish handling, and potential fishing zones.

Improving Extension Services

• To enhance fisheries and aquaculture extension services, two primary strategies are recommended:
  • Integrate existing initiatives with over 700 Krishi Vigyan Kendras and State and U.T.s extension services.
  • Enhance digital outreach through platforms like 'AquaBazaar' by the National Fisheries Development Board.

The World Bank-assisted project aims to formalize the fisheries sector by creating digital identities for fishers and fish farmers, boosting extension, capacity building, and awareness generation.

Reserve Bank of India's Initiative on Artificial Intelligence

The Reserve Bank of India (RBI) has taken a significant step towards ensuring the ethical and responsible use of artificial intelligence (AI) by establishing a dedicated panel.

FREE-AI Committee

• The committee is named FREE-AI.
• It is an eight-member panel led by Pushpak Bhattacharyya from the Department of Computer Science and Engineering at IIT Bombay.
• This initiative is supported by the RBI’s fintech department.

Mandate and Objectives

• The committee is tasked with submitting its report within six months from its first meeting.
• Key responsibilities include: 
  • Assessing the current AI adoption levels in financial services.
  • Reviewing regulatory and supervisory approaches concerning AI in the financial sector on a global scale.
  • Recommending a framework for the responsible and ethical adoption of AI models in the financial sector, focusing on governance aspects.
  • Identifying potential risks associated with AI and suggesting evaluation, mitigation, and monitoring strategies for regulated entities.

Committee Members

• The panel includes: 
  • Suvendu Pati, Chief General Manager at the RBI
  • Abhishek Singh, Additional Secretary, Ministry of Electronics and IT
  • Debjani Ghosh, Independent Director for Reserve Bank Innovation Hub
  • Dr. Balaraman Ravindran of IIT Madras
  • Rahul Matthan, Partner at Trilegal
  • Anjani Rathor, Chief Digital Officer at HDFC Bank
  • And others contributing to this initiative