Dear Members,
Namaskar and Greetings,
Wishing all ANMI members a Happy Republic Day ! As we
celebrate this significant milestone, let us reaffirm our commitment to
upholding the core values of unity, integrity, and progress, which are
essential for building a brighter and more prosperous future for our nation and
our markets.
The regulatory landscape governing our industry continues to
evolve at a rapid pace. While our members have demonstrated commendable
resilience in adapting to these changes, it is undeniable that this constant
adaptation comes at a cost, both in terms of financial resources and
operational complexity. At ANMI, we remain steadfast in our efforts to engage
constructively with regulators and market infrastructure institutions. We are
committed to voicing the concerns of our members and advocating for a regulatory
environment that fosters both stability and growth. However, we acknowledge
that these efforts have met with varying degrees of success.
As we embark on this new calendar year, it is crucial to
take stock of the significant developments unfolding on both the national and
international fronts, as these events invariably have ripple effects on our
markets. The global economic and political environment is in a state of flux.
Political shifts and evolving economic policies in major economies around the
world can have significant implications for global trade, investment flows, and
market sentiment. These international developments have indirect but tangible
consequences for our domestic markets, influencing investor behavior and market
dynamics.
On the domestic front, the upcoming Union Budget for 2025,
scheduled for presentation on February 1st (a Saturday, breaking with
established tradition, with exchanges remaining open), holds immense
significance. This annual fiscal roadmap sets the tone for the nation's
economic priorities and can have a profound impact on various sectors of the
economy, including the financial markets. We have submitted our pre-budget
memorandums, which are based on rigorous analysis and compelling arguments. We
are hopeful that these submissions will receive careful consideration from
policymakers and that the budget will reflect a supportive stance towards the
healthy functioning and growth of our markets.
Let's delve into some key economic trends that are shaping
the current economic environment:
·Forex
Reserves: India's forex reserves have seen fluctuations recently. These
movements can be attributed to a combination of factors, including revaluation
adjustments and interventions by the Reserve Bank of India (RBI) aimed at
managing rupee volatility in the foreign exchange market. The dynamics of
foreign currency assets and gold reserves, key components of the overall
reserves, play a significant role in these changes.
India's forex reserves dropped by $8.7 billion to $625.87
billion in the week ending January 10, 2025. This follows a previous decline in
early January, largely due to revaluation and interventions by the Reserve Bank
of India (RBI) to curb rupee volatility. Foreign currency assets, a major
component, fell by $9.47 billion, while gold reserves saw a slight increase by
$792 million.
·FDI
Trends: Foreign Direct Investment (FDI) inflows, a crucial indicator of
investor confidence in the Indian economy, have exhibited a changing pattern.
While gross FDI inflows have shown positive trends, net FDI inflows have
experienced a slowdown. This can be attributed to factors such as increased
repatriation of investments and overseas investment activities undertaken by
Indian companies. Understanding the sectoral distribution of FDI and the source
countries of these investments provides valuable insights into the areas
attracting foreign capital.
Net foreign direct investment (FDI) inflows slowed to just
$0.5 billion between April-November 2024, down from $8.5 billion in the same
period the previous year. This is primarily due to increased repatriation and
overseas investments by Indian firms. Despite this, gross FDI inflows rose to
$55.6 billion, with sectors like manufacturing, financial services, and energy
receiving the largest shares. Singapore, Mauritius, the UAE, Netherlands, and
the US were the top contributors.
·Crude
Oil Imports: India's reliance on crude oil imports, a substantial component of
the nation's import bill, has been a subject of ongoing attention. The
interplay of domestic production, increasing energy demand, and global crude
oil prices has a direct bearing on the country's energy security and fiscal
health. Recent geopolitical events have also influenced the dynamics of crude
oil supply and pricing, adding further complexity to this sector.
·India's crude oil import bill increased by 3.7% to $102.5
billion during April-December 2024. The country's reliance on imported crude
rose to 88.1%, from 87.5% the previous year, amid stagnant domestic production
and rising demand. While Russia remained the largest supplier in December,
imports from Russia declined, which could push up costs for Indian
refiners, especially with new US sanctions on Russia.
·Fiscal
Deficit: The nation's fiscal deficit, a key indicator of government finances,
is projected to undergo adjustments due to anticipated growth in tax revenues.
These changes are expected to contribute to overall fiscal consolidation.
Tracking the debt-to-GDP ratio and government debt servicing costs provides a
clearer picture of the nation's fiscal sustainability. In terms of growth,
India is forecasted to be the fastest-growing major economy with an expected
GDP growth rate of 6.7% in FY2025 and Fy2026.
· IMF
Economic Outlook: The IMF has projected
India's growth at 6.5% for FY2026 and FY2027, in line with its potential. The
International Monetary Fund (IMF) provides regular economic assessments and
forecasts for various economies, including India. These projections offer
valuable insights into the anticipated growth trajectory of the Indian economy
and its relative performance compared to other major economies. Understanding
the underlying factors driving these forecasts, such as the performance of the
services and manufacturing sectors, is essential.
·Future
Skills: India's preparedness for the evolving demands of the future job market,
particularly in areas such as artificial intelligence (AI), digital
technologies, and green industries, is a critical factor for long-term economic
growth and competitiveness. Assessing India's performance on global indices
that measure future skills readiness provides a benchmark for progress and
highlights areas requiring further attention. Ranked 25th in the QS World
Future Skills Index, India scored highly on metrics like the future of work,
positioning itself as a 'contender' in developing future-ready skills.
·Mobility
Sector Investment: The mobility sector, encompassing transportation and related
industries, is undergoing a significant transformation globally. India's
efforts to attract investments in this sector, with a focus on green
technologies, electric vehicles, and alternative fuels, are aligned with global
trends towards sustainable transportation. Government initiatives such as
"Make in India" and the Production Linked Incentive (PLI) scheme play
a crucial role in driving growth in this sector.
·Maritime
Security: Maritime security plays a pivotal role in safeguarding India's
economic interests, particularly considering the country's extensive coastline
and dependence on sea-borne trade. Ensuring the security of territorial waters,
freedom of navigation, and protection of sea routes are essential for
maintaining the uninterrupted flow of goods and services. The increasing
importance of cyber security in the maritime domain adds another layer of
complexity to this critical area.
In conclusion, the dynamic interplay of global and domestic
economic factors necessitates a prudent and adaptable approach to market
operations. The trends outlined above present a blend of opportunities and
challenges, underscoring the need for robust risk management strategies and a
proactive approach to navigating the evolving market landscape. As we move
forward, fostering open communication, collaboration, and knowledge sharing
within our community will be essential to ensure we successfully navigate these
dynamic times.
With regards,
CA Vinod Kumar Goyal
National President