By Pavas Gupta
Last week, the world economy seemed to have a brighter hue to it, with a DBS report stating 10 Asian economies will overtake the US in terms of GDP by 2030, while the rupee went neck-to-neck against the dollar and won. Even the US brings its fair share of good news, with its annual growth rate of 4.1% – the highest since 2014. On the other side of the coin, there still seem to be tensions lingering from the trade war, such as precarious steel tariff agreements between the US and India. Read on to know more about the world economy.
10 Asian economies, including India, to beat US in terms of GDP by 2030
Per a report by the DBS, the 10 fastest-growing economies in Asia – China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand – are expected to move ahead of the US in terms of Gross Domestic Product (GDP) by the year 2030. The report predicts a robust growth pattern that amounts to over $28 trillion in real GDP terms on aggregate values. The US, on the other hand, is expected to amount to $22.33 trillion.
“We expect Asia-10 to pull ahead of the US by 2030,” quoted the DBS. Asian economies, while boasting a bright future, face a host of common issues – climate change, rising inequality, worsening trade environments, and technological disruption – all of which can drag growth figures down. “Several dynamics that have supported the economic development of the Asian economies in recent decades are weakening, and there are many changes in the international environment,” said the DBS in a research note.
Rupee climbs to 68.62 against the greenback
On Thursday, the rupee strengthened by 17 paise to Rs 68.62 against the US dollar, extending its rebound for the second day straight.
This came as a result of increased selling of the dollar by exporters and banks amid a strong domestic equity market. Forex dealers claimed that other than increased selling, a strong domestic equity market supported the rupee. To add to it all, the dollar’s weakness against some currencies overseas as the country’s new home sales data came out disappointing also propped up the rupee.
US economy growing at fastest annual rate of 4.1%
In the second quarter of 2018, the US economy moved ahead leaps and bounds to achieve an annual growth rate of 4.1%. The Commerce Department announced on Friday that this was the fastest pace it had reached in four years.
This growth rate, if maintained, will come as an advantage to the Trump administration, which sustained itself through $1.5 trillion in tax cuts at the beginning of 2018 with promises that these would be counter-balanced by economic growth.
Ahead of the auspicious announcement, President Trump claimed the growth would sustain itself; however, economists warned of the unsustainable nature of the mini-boom, citing as evidence the fact that benefits have gone only to the richest Americans.
The last time the US economy witnessed a comparable expansion in economic growth was in 2014 when rates hit a high of 5.2% in the third Quarter.
Iran now India’s second-largest oil-supplier
Taking advantage of steeper discounts offered by Tehran, Indian state refiners have allowed Iran to overtake Saudi Arabia as India’s second-largest oil-supplier between April and June of this year, as reported by India’s Oil Minister, Dharmendra Pradhan, on Monday.
India, Iran’s top importer of oil after China, shipped in 5.67 million tonnes or about 4,57,000 barrels per day (bpd) of oil within the first three months of the fiscal year, said Pradhan. State refiners, which account for almost 60% of India’s 5-million-bps refining capacity, had earlier stifled imports from Iran in protest against Tehran’s decision to grant development rights to the giant Farzad B gas field to other parties.
However, it seems unlikely that halcyon days for Iranian exporters will last as India is facing pressure after Washington withdrew from the 2005 Iranian nuclear deal in May and decided to re-impose sanctions on one of the OPEC’s most-prominent members. The first set of sanctions will take effect on August 6 and the rest, notably in the petroleum sector, following a 180-day ” wind-down period” ending November 4.
GST cuts deprive Modi government of $2 billion in annual revenue
The Modi government’s decision to slash taxes on more than 50 goods under the Goods and Services Tax (GST) scheme, while beneficial to consumers, will deny the Treasury as much as 150 billion rupees (approximately $2.2 billion). This raises alarms for the economy, with the daunting prospect of it missing its budget goals again, this year.
The decision could result in a revenue loss that’s as high as 1% of tax budgeted to accrue to the Federal Government, according to officials who wished to remain unidentified. Such a potential loss comes at a time when Prime Minister Modi needs to ramp up health and welfare schemes in preparation for the 2019 General Elections.
US open to steel duty waiver if India lowers export volume
In an indicative move by the US, it has said it will consider waiving its 25% additional tariff of Indian steel, provided India offers an acceptable accompanying proposal to lower the volume of its steel supplies.
The agreement is all that stands between exacerbating a trade tussle between the two countries, India has already made clear its plan to slap retaliatory measures worth $235 million against 29 American products from August 4.
Pavas Gupta is a writing analyst at Qrius