The International Monetary Fund on Tuesday upped its growth projection for India by 20 basis points from 6.1 to 6.3% for the calendar year 2024. IMF hailed India as one of the “growth engines in the world economy”. The multilateral bank revised its estimate of growth for India on the basis of “a stronger than expected consumption during the April-June period”. Inflation though is set to remain high at about 5.5%. However, IMF kept the world economic outlook unchanged at 3% for the current calendar year, setting it lower than the earlier 3.5% due to the real estate crisis in China which had adversely impacted overall growth in the country.
On the same day when the IMF Chief Economist Pierre-Olivier Gourinhas was quoted in the media conveying the good news about a little higher growth than projected earlier, there were at least two other developments duly noted by a majority of the newspapers. The first concerned the rebound in the share markets on Tuesday after the slump a day earlier following the Hamas attack on Israel. Almost all the losses recorded on Monday were recouped on Tuesday. The Sensex gained 567 points to end the session on Tuesday at 66,079 points. Foreign institutional investors sold stocks worth about ₹1,000 crore while the domestic institutions picked up shares nearly twice that amount. Clearly, the market men had concluded that though the Israel-Hamas war is likely to get more intense, it is unlikely to spread further into West Asia or trigger a wider global conflict.
After the initial shock from Saturday’s Hamas attack, there were widespread fears of a sharp jump in global crude oil prices. These did go up on Monday but a day later had stabilised about $88 a barrel. As of now, there were no fears of disruption in production and supply of crude oil. Higher prices of crude oil can push up inflation and cause the RBI to revise the prime lending rate to contain consumer inflation. It is the election season, any increase in the international price of crude oil may be hard for the oil marketing companies to pass on to the consumers. Already, the government has ensured that there is no change in the pump prices of petrol and diesel since May last year, the loss, if any, being absorbed by the oil marketing companies.
Uncertainty still dogs global crude prices since the fears of the Israel-Hamas war spreading further into West Asia cannot be completely ruled out. India is fortunate enough to have contracted supplies from sanctions-hit Russia at a discounted price, but if there is a sharp increase in the global price of crude oil even Russia might be tempted to seek a higher price. In other words, the return of normalcy in West Asia is important for the world at large.
Meanwhile, the second piece of good news we referred to above concerned the direct tax mop-up between April 1 and October 9. According to the Central Board of Direct Taxes, the gross tax collections so far were higher by 17.95% year-on-year. CBDT chief Nitin Gupta on Tuesday expressed confidence in exceeding the direct tax collections estimates in the budget.
Interestingly, the online gaming companies yielded ₹600 crore, deducting the source on all winning amounts above ₹100 since April this year. The figure underlines the growing popularity of online gaming which has emerged as a new source of revenue for the government. During the same period, cryptocurrencies or virtual digital assets yielded another ₹105 crore. Meanwhile, fears of a rash of freebies by the states going to the polls were set at rest with the notification of the poll dates in the five states.
Thus, the overall economy may have been spared an irrational burden on the state economies which could impair overall growth.