There have been some interesting developments lately with respect to India’s economic growth. While international financial institutions continue to forecast stable or even upward revisions, foreign portfolio investors are acting quite differently. There is renewed focus on alternate dispute resolution mechanism with a proposed amendment to the existing arbitration statute.
World Bank – The World Bank has recently released its South Asia Development Update October 2024 report. As per the report, in India, growth accelerated in the fiscal year that ended in March 2024 to 8.2 percent year-on-year, higher than expected and up from 7 percent in FY2023/24. Better-than-expected manufacturing performance in the first quarter of 2024 was supported by declining input costs as global oil prices moderated. Growth normalized to 6.7 percent in the second quarter of 2024 and reflected a strong recovery in private consumption and resilient services exports. Robust growth is likely to have continued into the third quarter of 2024. In July, India’s composite PMI stood at 61.4, well above both its long-term trend and the global average—with strong performance in both manufacturing and services. Further, the monetary policy rate remains at 6.5 percent. Domestic credit to the commercial sector grew by 13.5 percent in July—the fastest in South Asia. To slow lending, the Reserve Bank of India has increased regulatory scrutiny of lenders. In India, inflation has remained within the Reserve Bank of India’s target range of 2–6 percent since September 2023, falling to just below the mid-point of the target range in July and August 2024 on easing food inflation. Inflation in food and beverage prices, which accounts for around half of the consumer price inflation basket, has been elevated since July 2023. Growth in goods exports has remained muted, while services exports have continued to be resilient.
International Monetary Fund – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO) October 2024 report covering ‘Policy Pivot, Rising Threats’. As per the report, in India the outlook is for GDP growth to moderate from 8.2 percent in 2023 to 7 percent in 2024 and 6.5 percent in 2025, because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential. Both these forecasts for 2024 and 2025 remain unchanged from the WEO July Update, which was covered by Asia Law Portal here. The report mentions that global growth is projected to hold steady at 3.2 percent in 2024 and 2025, even though a few countries, especially low-income developing countries, have seen sizable downside growth revisions, often as a result of increased conflicts.
FPIs Net Sellers – Foreign Portfolio Investors (FPIs) have been net sellers of Indian equities at Rs 85,790 crore in October so far, wiping out a substantial portion of the overall inflows in 2024. The total investments by them now stand at Rs 14,820 crore versus Rs 1,00,245 crore at the end of September. In September, FPIs bought domestic equities worth Rs 57,724 crore while in August, they had purchased shares worth Rs 7,322 crore which was down month-on-month from July when the total buying figures stood at Rs 32,359 crore. In June, they were net buyers at Rs 26,565 crore after remaining net sellers in April and May when they sold equities worth Rs 8,671 crore and Rs 25,586 crore respectively.
Arbitration Act Amendment – The Government of India has taken several steps to strengthen the dispute resolution environment in the country and to promote Ease of Doing Business and enforcement of contracts inter-alia through legislative interventions from time to time. The Department of Legal Affairs is presently in the process of considering further amendments in the Arbitration and Conciliation Act 1996. The aim and purpose is to provide further boost to institutional arbitration, reduce court intervention in arbitrations and ensuring timely conclusion of arbitration proceedings. In view thereof, the Arbitration and Conciliation (Amendment) Bill, 2024 and a tabular statement depicting existing provision and proposed amendment have been prepared. The Department, now invites comments/feedback from the public as part of the public consultation exercise on the draft amendments.
