by Pavas Gupta
Last week, the world economy saw progress on the NAFTA deal among the United States, Mexico, and Canada. At the national front, India’s growth is projected at 7.3%, while the Central Bank grapples with a fast-depreciating rupee. Here is more from last week:
ADB projects India’s growth at 7.3%
On Wednesday, the Asian Development Bank (ADB) projected India’s growth for the current fiscal year at 7.3%. The multi-lateral agency also expects India to grow at 7.6% in the 2019-20 fiscal year.
“We are now starting to see the benefits of reforms that the Government of India has implemented over the past year as the economy recovers from a brief adjustment to these policies including the Goods and Services Tax (GST),” said ADB Chief Economist Yasuyuki Sawda. He also added that the agency expects the growth trend to continue and even pick up next year as the economy adjusts and investor sentiment improves.
Fed raises US interest rates, expects three more years of growth
The United States Federal Reserve, on Wednesday, raised interest rates, while leaving its plans to steadily tighten monetary policy intact. This comes amidst a forecast of the US economy enjoying at least three more years of growth.
In a statement that marked the end of an “accommodative” monetary policy, policy-makers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2% to 2.25%. This move puts the benchmark overnight lending rate at 3.4%, roughly half a percentage point above the Fed’s estimate “neutral” rate of interest, at which rates neither boost not restrict the economy.
The US Central Bank expects another rate hike in December, three more next year, and one in 2020.
Centre hikes import duties to curb rupee free-fall
The Centre, on Wednesday, announced that it was raising customs duties on aviation turbine fuel and 18 other non-essential items. The other items include air-conditioners, refrigerators, small washing-machines, as well as every-day consumer products like footwear, table-ware, suitcases, gold and silver jewellery, and semi-processed diamonds.
This measure comes as a move to arrest the slide in the rupee versus the dollar. With oil prices rising, there are also fears that the Current Account Deficit will widen.
According to the Centre, the total value of imports of the aforementioned items in 2017-18 was about ₹86,000 crore.
RBI ready to meet liquidity requirements of the banking system
On Thursday, the Reserve Bank of India (RBI) affirmed its stand to meet the liquidity requirements of the banking system through the various instruments available to it. This decision was based on an assessment of evolving market conditions.
In a statement released by the RBI on Thursday morning, the apex bank mentioned the several steps taken in the past few days. “The Reserve Bank has conducted/will be conducting Open Market Operations (OMO) in successive weeks on September 19 and September 27, 2018,” the report said.
Further, the central bank said it would stand ready to meet the durable liquidity requirements of the system going forward “through various available instruments depending on its dynamic assessment of the evolving liquidity and market conditions”.
US and Canada close to reaching NAFTA deal
Negotiators from the US and Canada are close to reaching a deal on the NAFTA front. The two countries are on the brink of a deal after making progress on certain contentious issues, people familiar with the deal said.
“Most of the big issues are solved with Canada,” White House trade adviser Peter Navarro said on Saturday in an interview with Fox News. “It’s a great deal for all three countries in that it would make this hemisphere strong again from a manufacturing point of view,” he added.
Pavas Gupta is a writing analyst at Qrius
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