SYNOPSIS

INDIA IMPACT

India is a country that like all others, had to go through the Covid-19 pandemic and its economic
stricture-like waves, fought against the economic barriers, and came out strong as one of the
fastest-growing countries in the world but as India got past the three waves and were hit with
another big macro event. That event is the Ukraine-Russia conflict that has been going on since
February of 2022. As a result, inflationary pressures have risen around the globe, prompting
central banks to tighten monetary policy and tighten liquidity conditions. Financial markets are
unsettled and volatile because of the deteriorating financial conditions, with emerging market
economies (EMEs) bearing the brunt of a surge in risk-averse sentiment among global
investors. This is causing capital flight and currency depreciation, as well as a loss of reserves.

In the face of a hostile foreign climate, India's economy has consolidated its recovery path.
Consumer confidence has risen to its greatest level since the onset of the epidemic, thanks to
increased activity in contact-intensive services. In April 2022, high-frequency indicators show
an increase in economic activity. With the decrease in infection rates, mobility indicators have
improved, and labor participation has increased in both urban and rural areas. In April 2022,
revenue collection under the goods and services tax (GST) reached a record high of Rs.1.68
lakh crore, the most in the tax's history.

In April 2022, the headline manufacturing purchasing managers' index (PMI) remained in the
expansionary range, with most businesses reporting increased new orders and production. Even
though coal supply difficulties caused disruptions, energy generation grew by double digits
during the month as demand grew in tandem with rising mercury levels. For the ninth month
in a row, the headline services PMI has remained in the expansionary territory due to new
business, rising demand, and continuing growth in employment. On the external front,
merchandise exports were strong in April 2022, at US$ 40.2 billion, putting them well above
the US$ 30 billion level for the fourteenth month in a row.

In the April 2022 print of the consumer price index (CPI), inflation pressures grew more
widespread across commodity categories, resulting in a dramatic increase in headline inflation
to 7.8%, considerably beyond the upper tolerance zone. The MPC stated that unpredictable
international crude oil prices, further lockdowns, and supply chain disruptions pose significant
upside risks to the MPC's inflation target established in April 2022. The MPC further believes
that it is critical to restrict inflation's second-round impacts and adequately anchor inflation
expectations to maintain growth's resilience and momentum while prio ritizing the price
stability mandate at this time.

The global economic outlook is clouded with downside risks due to ongoing geopolitical
volatility and its influence on trade, output, and price. The International Monetary Fund (IMF)
has dropped its global production growth forecast for 2022 by 0.8 percentage points to 3.6
percent in less than three months. The World Trade Organization has cut its global trade growth
prediction for 2022 by 1.7 percentage points to 3.0 percent.

Below are the GDP growth projections for 2022 and 2023

Imports rose across the board, with 9 out of 10 major commodity groups accounting for more
than 75% of overall imports rising year over year. Import demand was fueled by petroleum
products5, coal, coke, briquettes, and electrical devices.
Due to a significant increase in global energy prices, coal imports declined in volume. Coal
prices have risen dramatically because of the global energy crisis, which has been compounded
by the Russia-Ukraine conflict. In April 2022, coal imports more than doubled from the
previous year.

Imports of Various Commodities by India

Imports of vegetable oil increased by more than 30% year over year in April 2022. Bad weather
in top vegetable oil-producing countries, demand-supply shortages generated by the Russia-
Ukraine war in segments such as sunflower, and Indonesia's decision to limit palm oil exports
have all contributed to high vegetable oil prices. Palm oil imports account for more than half
of all imports in the vegetable oil market. Indonesia supplies more than half of India's edible
oil imports.

India's merchandise trade imbalance increased year on year (US$ 15.3 billion) and sequentially
(US$ 18.5 billion) to US$ 20.1 billion in April 2022.
Although the speed of recovery has slowed due to global events, the Indian economy is still
recovering. In recent months, the threat of inflation has been more pronounced. Increases in
international commodity prices also result in net terms of trade shock, resulting in a worsening
of trade and current account imbalances.

India faces challenges in recovering from the pandemic's wounds by expanding health and
human capital productivity investments. As the speed of digitization accelerates, the footprint
of the unicorn ecosystem in India grows, reflecting a fast-changing economy. To achieve a
higher growth path on a sustained basis, a private investment must be supported by increasing
government capital spending, which crowds in private investment.

India has been one of the world's fastest-growing economies since the year 2000. In the years
2020-2021, India's economy was severely harmed by the response to the COVID-19 pandemic.
India's GDP was around 24% lower in the second quarter of 2020 than it was in the second
quarter of 2019, as COVID-19-motivated restrictions on all non-essential firms substantially
hindered economic activity.
GROSS DOMESTIC PRODUCT (GDP):

The standard measure of the value added created by the production of goods and services in a
country during a certain period is the gross domestic product (GDP). As a result, it also
accounts for the revenue generated by that production, as well as the overall amount spent on
final goods and services (less imports). While GDP is the most significant indicator for
capturing economic activity, it falls short of providing an adequate assessment of people's
material well-being, for which other metrics may be more appropriate. This indicator is based
on nominal GDP (also known as GDP in value or GDP at current prices) and comes in two
forms: US dollars and US dollars per capita (current PPPs).

GDP Formula

The formula to calculate the components of GDP is Y = C + I + G + NX.

That stands for: GDP = Consumption + Investment + Government + Net Exports, which are
imports minus exports.

Components of GDP

1. Personal Consumption Expenditures

o Goods
Goods are tangible objects. They are further sub-divided into two even smaller
components. The first is durable goods, such as autos and furniture. These are items
that have a useful life of three years or more. The second is non-durable goods, such as
fuel, food, and clothing. The retailing industry is a critical component of the economy
since it delivers all these goods to the consumer.

o Services
Services are paid aid, help, or information. Most are non-tangible, but the BEA also
includes commodities that cannot be stored and are consumed when purchased. It
contributes 45% of GDP. Thank the expansion in banking and health care. Most
services are consumed in the United States because they are difficult to export.
2. Business Investment
The business investment includes purchases that companies make to produce consumer
goods. But not every purchase is counted. If a purchase only replaces an existing item,
then it doesn't add to GDP and isn't counted. Purchases must go toward creating new
consumer goods to be counted.

Fixed Investment

Most fixed investment is non-residential investment. That consists primarily of

business equipment, such as software, capital goods, and manufacturing equipment.
The BEA bases this component on shipment data from the monthly durable goods order
report. It’s a good leading economic indicator.

3. Government Spending

Government spending refers to money spent by the public sector on the acquisition of
goods and provision of services such as education, healthcare, social protection, and
defence.

4. Net Exports of Goods and Services

Imports and exports have opposite effects on GDP. Exports add to GDP and imports
subtract.

INDIA GDP
 GDP ANNUAL GROWTH RATE

• Tax to GDP Ratio

o The tax-to-GDP ratio is a measure of a nation's tax revenue relative to the size of
its economy.
o This ratio is used with other metrics to determine how well a nation's government
directs its economic resources via taxation.
o Developed nations typically have higher tax-to-GDP ratios than developing nations.
o Higher tax revenues mean a country is able to spend more on improving
infrastructure, health, and education—keys to the long-term prospects for a
country’s economy and people.
o According to the World Bank, tax revenues above 15% of a country’s gross
domestic product (GDP) are a key ingredient for economic growth and, ultimately,
poverty reduction.

➢ The tax to GDP Ratio in India

India’s gross tax revenues surged 34% in 2021-22 to exceed ₹27 lakh crore, lifting
the tax-to-GDP ratio to an at least 23-year high of 11.7%, from 10.3% in the
previous year
 The tax collections were ₹5 lakh crore more than the Budget estimates for 2021-22,
and even surpassed the revised estimates by ₹1.87 lakh crore, with direct taxes
shooting up 49% and indirect taxes climbing by 20%.

Tax to GDP ratio over the years

• Savings to GDP Ratio

GDP minus final consumption spending equals Gross Domestic Savings. It's measured as
a proportion of gross domestic product (GDP).

The savings of households, private corporations, and the government are all included in
gross domestic savings. Following the financial crisis of 2008, gross domestic savings
began to decline. The more significant issue is the apparent shift in investors' preferences
for physical assets over financial assets. Inflationary pressures have increased, which can
explain this. The function of gross domestic savings is gross capital formation.

Gross savings are calculated as gross national income less total consumption, plus net
transfers.

Gross savings (% of GDP) in India was reported at 30.73 % in 2020, according to the
World Bank collection of development indicators, compiled from officially recognized
sources. India - Gross savings (% of GDP) - actual values, historical data, forecasts and
projections were sourced from the World Bank on June of 2022.
• Expenditure to GDP Rate
Government spending in India was last recorded at 17.6 percent of GDP in the 2020 -21
fiscal year.

• Consumption to GDP Rate

According to the World Bank's collection of development indicators derived from officially
recognised sources, India's final consumer expenditure (percentage of GDP) in 2020 was
58.59 percent. On June 20, 2022, the World Bank provided actual numbers, historical data,
forecasts, and predictions for India - Households and NPISH final consumer expenditure
(percent of GDP).

The market value of all goods and services purchased by households, including durable
goods (such as cars, washing machines, and home computers), is known as household final
consumption expenditure (previously private consumption). It excludes house purchases
but includes imputed rent for owner-occupied homes.

GDP FROM DIFFERENT SECTORS

1. GDP FROM AGRICULTURE

2. GDP FROM MANUFACTURING

3. GDP FROM CONSTRUCTION

4. GDP FROM MINING

5. GDP FROM PUBLIC ADMINISTRATION

The Department of Public Administration determines the rate and direction of economic
growth. The Central Bank of a country is in charge of monetary policy. The central
government is responsible for fiscal policies.

Civil Servants are officials who work in accordance with Public Administration
policies; together, the Governing Body and its policies decide how efficiently
opportunities are exploited to meet public needs and lead to overall economic well-
being.

Effective policy reforms Administration can improve employment, income, and

company prosperity by reducing economic disparities between different classes of
people. Government policy includes government spending, tax programmes, outlays,
allowances, and funding schemes. The effectiveness with which such policies are
executed is determined by public administration.

Through its laws, public administration serves as a basis for economic activity and as a
stimulant for economic prosperity through its services.
 The nation is in risk without strong rules and regulations, as well as engaged civil
officials. Corruption, political instability, rioting, public protests, and other problems
can arise due to poor governance and policies.

Transportation, law enforcement, road building, police, jails, tax exemptions, medicare,
social security, and other government services may or may not directly create money
for the government, but they indirectly support other sectors to increase total economic
success.

When a country's administration fails to stimulate the economy, it is likely to stay in

power for the duration of its elected term. As a result, International Investors can derive
such information from GDP numbers from the Public Administration. They can
understand the behavioural nuances of the government and its probable impact in the
upcoming quarters.

6. GDP FROM UTILITIES

The utility industry includes companies that supply essential services such as electricity,
natural gas, and water. Utilities make a profit, but they are a public service, so they are
heavily regulated. Utility stocks are typically purchased as long-term investments because
of their dividend income and reliability. During macroeconomic downturns, the utility
sector performs well as a defensive play. Some analysts predict considerable growth for
the utility industry in the 2020s as a result of the trend toward "clean" energy, as well as
competition-enhancing legislation, initiatives, and investments in renewable energy
resources.
The IMF cut India's GDP growth prediction for 2022 from 9 percent to 7.5 percent in June
2022. The growth rate for 2023 is predicted to be 6.9%. The next revision, according to Luis
Breuer, the IMF's senior resident representative in India, will be below 8.2 percent, and it is
still a "work in progress".

While as of May 2022, India's GDP is now growing at 8.7%, which is the country's highest in
22 years. This is all due to the huge impact of the key drivers of India's GDP which are:

• The Services Industry

• The Manufacturing Industry
• The Agriculture Industry

These three Industries have always been and continue to be the driving forces behind India's
GDP.
SERVICES INDUSTRY

In April, the Indian service sector continued to grow, with a spike in new contracts increasing
business activity and instilling renewed hope. The number of people employed has grown.
Inflationary pressures rose at the same time, reaching near-record levels. An increase in input
costs is driving the most significant increase in output costs. Output levies will be imposed in
just over five years. Concerns about inflation have lowered business confidence.

In April, the seasonally adjusted S&P Global India Services PMI Business Activity Index rose
to 57.9 from 53.6 in March, reflecting the fastest rate of expansion since November. Anecdotal
data suggests that increased bookings, the removal of pandemic -related restrictions, and
favourable market conditions increased output.

Indeed, in April, new business inflows grew even further, extending the current growth streak
to nine months. The most recent sales gain was substantial, and it was the most since November
2021. According to survey respondents, the removal of COVID-19 restrictions resulted in
higher consumer foot traffic and an overall improvement in demand. Due to a mix of recovering
demand and severe cost pressures, Indian service providers hiked their selling prices at the start
of the fiscal year 2022/23. Charge inflation was significant, and it was the highest it has been
in over five years. In April, survey respondents indicated higher chemical, food, gasoline, labor,
material, and retail costs, indicating that Indian services businesses' operational costs are rising.

In April, international demand for Indian services declined, continuing a trend that began with
the start of COVID-19 in March 2020. The pace of decline in new orders from outside the
country has been the fastest since September 2021. In terms of inflation, the Consumer Services
sector experienced the greatest rise in input costs. In the meantime, price rises were particularly
visible in the transportation and information and communication industries.

• Robust Demand:
o India is the export hub for software services. The Indian IT outsourcing service market
is expected to witness 6–8% growth between 2021 and 2024.
o India's IT and business services market is projected to reach US$ 19.93 billion by 2025.
• Competitive Advantage:
o In September 2021, India moved up two spots to 46 in the Global Innovation Index
(GII) 2021, due to successful advancements in services that are technologically
dynamic and can be traded internationally.
• Policy Support:
o The government is promoting necessary services and will charge zero tax for education
and health services under the GST regime.
o In October 2021, the government announced a new helicopter policy to build dedicated
hubs and corridors, the policy will boost helicopter services in the country.

• Increasing Investments:
o The Indian services sector was the largest recipient of FDI inflows worth US$ 92.41
billion between April 2000-December 2021.
o In the first half of 2021, private equity investments in India stood at US$ 11.82 billion,
as compared with US$ 5.43 billion in the same period last year.
PMI SERVICE SECTOR GROWTH

PMI SERVICES vs GDP

MANUFACTURING INDUSTRY

With considerable and fast increases in new orders and production, India's manufacturing
industry made a strong start to the fiscal year 2022/23. Following a dip in March, overseas
sales have steadily increased. Inflationary pressures were worsened by increased commodity
prices, the Russia-Ukraine conflict, and greater transportation costs. Input costs increased at
their fastest pace in five months, while output charge inflation hit a 12-month high. The S&P
Global India Manufacturing Purchasing Managers' Index improved from 54.0 in March to 54.7
in April, showing a significant and faster improvement in operating conditions throughout the
sector.

The growth of the intermediate and capital goods divisions rose, but the consumer goods sector
declined. The removal of COVID-19 restrictions, according to poll participants, continues to
support demand. New order growth was significantly more than predicted and faster than in
March. The rate of output growth surged in April, exceeding its long-run average, following
the trend in new business. In addition, the most recent increase extended the existing streak of
consecutive increases to ten months.

According to companies, chemical, electronic components, energy, metal, plastic, and textile
costs were all expected to be higher in April than in March. Part of the increase was attributed
to rising shipping costs and the Ukraine situation. Inflation increased to a five-month high,
much above the long-term norm.

In April, consumers continued to face further cost pressures, as evidenced by yet another
increase in selling prices. The rate of inflation remained stable, and it was the fastest in a year.
Despite price hikes from suppliers, businesses purchased more inputs in April as demand
improved. The turnaround was quick, and it was the most significant since November of last
year. As a result, goods makers' input inventories grew even more. Stocks were accumulating
at a record pace, the fastest in four months.

In April, employment increased only a little as capacity pressures among Indian manufacturers
remained mild, as seen by a slight increase in backlogs. Indeed, the vast majority o f survey
respondents stated that their workforces have stayed stable since March.
PMI MANUFACTURING SECTOR GROWTH

PMI OUTPUT INDEX vs MANUFACTURING PRODUCTION

AGRICULTURAL INDUSTRY

In India, the agricultural industry is among the key drivers of India's GDP for decades, proving
to the citizens of the country that farmers and other major and minor agricultural players are
important to the nation. India is the world's leading producer o f spices, pulses, milk, tea,
cashews, and jute, as well as wheat, rice, fruits and vegetables, sugarcane, cotton, and oilseeds.
India is now the world's fourth-largest agrochemical producer. In 2019, India has the world's
highest livestock population of roughly 535.8 million, accounting for around 31% of the global
livestock population.

Ukraine and Russia are the world's 'breadbaskets,' producing more than 30% of global wheat
and barley production, 20% of global maize production, and more than 50% of global
sunflower oil production. This has resulted in a 34% increase in household food expenditures
over the previous year. With trade restrictions and sanctions, the situation is expected to
worsen, making access to these vital agricultural goods increasingly difficult for several
countries.

The war has significantly hampered Russia's and Ukraine's ability to export wheat, creating an
opportunity for India. Egypt, Israel, Oman, Nigeria, and South Africa, who previously relied
on Russian or Ukrainian wheat imports, have turned to India for wheat supply. While India
produces 14 percent of the world's wheat, equal to Russia and Ukraine combined, it only
accounts for 3% of the worldwide market because most of India's wheat is consumed
domestically. Given that India's wheat inventories are three above the 7.6 million tons level.

The war's main casualty is agricultural infrastructure, which is crippled by targeted strikes. The
agricultural supply lines have been most devastated as a result of Russia's effort to harm
Ukraine's agricultural industry by targeting the country's farms, agricultural equipment,
warehouses, markets, highways, bridges, and ports. The Indian economy has seen the effects
of this. Because Russia is one of the world's top producers of sunflower oil and wheat, the
sanctions on these foods have pushed up their costs, contributing to the Indian economy's
continuous inflationary pressure. Between February and March 2022, the prices of sunflower
oil, wheat, and flour had climbed by 19.9%, 2.2 percent, and 1.7 percent, respectively, at the
start of the war. While Russia accounts for over 18% of India's tea exports, supply chain delays,
logistical challenges, and a sharp drop in the value of the Russian Ruble against the US dollar
have rendered exports costly and uncompetitive.
The edible oil business is another victim of the Ukraine conflict. In India, demand for edible
oils is extremely high, and domestic production has been unable to keep up with expanding
consumer demands. As a result, more than half of India's edible oils, which are largely utilized
in food and health items, are imported. India, for example, gets 90 percent of its sunflower oil
from Russia and Ukraine. As a result of the war's delays, there will most likely be severe
shortages of a commonly utilized product. Since Russia invaded Ukraine on February 24, the
price of cooking oils, notably sunflower oil, has continued to rise in India, prompting industry
experts to warn that a prolonged war will devastate the business.

When it comes to the Indian food industry, the issue isn't just one of manufacturing. The sector
continues to be plagued by age-old agricultural marketing challenges. As price and event
shocks hamper the food value chain, risk management tools for mitigating such risks are
limited. Crop insurance and weather derivatives are the most common tools used to mitigate
production risks. They have a small presence in the Indian agricultural industry. Even if they
have, they are not the ones to assist in the mitigation of risks arising from the external sector,
such as the conflict between Ukraine and Russia.

Companies in the agrochemical industry are likely to benefit financially from the current
circumstances. India's rural economy is likely to increase as well, because once this crop is
harvested and the monsoon progress is known, rural demand can quickly rise, encouraging
farm growth. The government's extensive infrastructural initiatives in agriculture over the last
year will be a further growth driver.

With the official prognosis of a normal south-west monsoon (SWM) and the Union
Government's announcement of an increase in non-urea fertilizer subsidy, the agricultural and
allied industry is positioned to perform well in the upcoming Kharif season. In preparation, the
National Conference on Agriculture for the Kharif Campaign, which took place on April 19,
2022, set a food grain production goal of 328 million tonnes for the years 2022 -2023. Summer
or Zaid crops have covered 73.58 lakh hectares as of May 13, 2022, up 5.4% from the previous
year, owing to significantly increased acreage under pulses. As of May 12, 2022, total live
storage in 140 major reservoirs was higher, at 33% of the full reservoir level (FRL).
Market Overview:

India's agricultural industry reached an estimated INR 63,506 billion by 2020. Looking ahead,
IMARC Group expects the market to reach INR 125,350 billion by 2026, showing a CAGR of
12% between 2021-2026. Recalling the uncertainty of COVID-19, we continue to monitor and
evaluate the direct and indirect impact of the epidemic. This information is included in the
report as a major part of the market.

The agricultural industry represents an important part of the Indian economy both in terms of
its role in GDP and the source of employment for the majority of the country's population. The
sector currently represents great potential, and India is currently one of the largest agricultural
producers in the world in terms of value. Many changes have taken place in the sector over the
past few decades. These include - growth in the enterprise sector, growth in contract
agriculture, agro-processing, easy borrowing, increased exports, use of agricultural chemicals
and high-yielding seeds, and the growing role of private companies in processing, marking,
and manufacturing new products. marketing, etc.

Size of the Market

According to the Economic Survey of India 2020-21 report, the country's total food grain
production in FY20 was 296.65 million tonnes, up 11.44 million tonnes from FY19's 285.21
million tonnes. In FY21, the government plans to purchase 42.74 million tonnes from the
central pool, which is a 10% increase above the amount purchased in FY20. The government
has set a new milestone for farmers in FY22, requiring them to increase food grain production
by 2% to 307.31 million tonnes. Production was 303.34 million tonnes in FY21, compared to
a target of 301 million tonnes.

• India is one of the top 15 agricultural commodity exporters in the world. India's agricultural
exports totalled US$ 38.54 billion in the fiscal year 2019 and US$ 35.09 billion in the fiscal
year 2020.
• The Indian agricultural sector is expected to grow to US$ 24 billion by 2025, according to
Inc42.
• Seed production by the private sector increased from 57.28 percent in 2017 to 64.46 percent
in FY21.
• Rice, wheat, sugarcane, cotton, groundnuts, and fruits and vegetables are India's second-
largest exports. It also produced 25% of the world's pulses till 2019, as of last decade.
• Between 2015 and 2025, India's organic food industry is predicted to increase at a CAGR
of 10%, reaching Rs. 75,000 crore (US$ 10.73 billion) by 2025, up from Rs. 2,700 crore
(US$ 386.32 million) in 2015.

Based on government efforts such as planned infrastructure worth US$ 1 trillion and the
Pradhan Mantri Kisan Sampada Yojna, India's processed food market is predicted to increase
to Rs. 3,451,352.5 crore (US$ 470 billion) by 2025, up from Rs. 1,931,288.7 crore (US$ 263
billion) in FY20. About 1.77 million people work in the food processing business . Under the
automatic approach, the sector enables 100 percent FDI.

Between April 2000 and December 2021, the sector saw strong growth in investments, with a
total FDI inflow of US$ 10.94 billion. Pulses, processed vegetables, processed fruits and juices,
groundnuts, guar gum, cereal preparations, milled products, alcoholic drinks, and oil meals
were among the significant processed food exports from India. India's food processing industry
will benefit from the Comprehensive Economic Partnership Agreement (CEPA) between India
and the UAE.

Drivers of Indian Agricultural Industry Market:

1. Population:

India is the second-largest country with about 18% of the world's population. With the growing
population, the demand for various agricultural products has grown exponentially. These
increases have enabled farmers to use advanced technologies and methods of dairy, fishing,
and livestock to meet the diverse food needs of the people. Moreover, more than 50% of the
Indian population relies on agricultural products that promote market growth.

2. Revenue:

Over the past few years, India's GDP has been growing at a rapid pace which has led to an
increase in consumer revenue. This rise has driven the agricultural market both the producer
and the consumer. It has enabled farmers to invest heavily in improved agricultural
infrastructure such as irrigation, high-quality seeds, implements, fertilizers, storage, cold
storage, etc. It also enhances consumers' purchasing power which makes a positive impact on
domestic demand for agricultural products.

3. Weather:

India represents one of the most diverse countries in the world. The land includes a variety of
climates and soil types suitable for growing large amounts of grain, fruits, vegetables, flowers,
cash crops, etc. The Indo-Gangetic Plain, for example, represents one of the most fertile areas
in the world. In addition, India also represents the world's second -largest fish producer. The
land has a wide range of resources from the deep oceans to mountain lakes and more than 10
percent of the world's species of fish and mussels.

4. Government Intervention:

Government support plays an important role in the growth of the Indian agricultural sector as
agriculture remains the livelihood of more than 50% to 60% of the Indian population and thus
represents the most important voting bank in any government. The Government of India
provides subsidies to farmers with water, energy, agricultural implements, fertilizers, mixed
seeds, etc. The government also exempted agricultural income und er the Indian income tax
law, which means that income from agricultural activities is tax-free. In addition, both the
national and local governments often withdraw loans from farmers.

5. Contract Farming:

Over the past few years, India's GDP has been growing at a rapid pace which has led to an
increase in consumer revenue. This rise has driven the agricultural market both the producer
and the consumer. It has enabled farmers to invest heavily in improved agricultural
infrastructure such as irrigation, high-quality seeds, implements, fertilizers, storage, cold
storage, etc. It also enhances consumers' purchasing power which makes a positive impact on
domestic demand for agricultural products.
6. Modern Stores:

The emergence of modern shops has also been a major factor in the agricultural industry.
Modern marketing helps eliminate people in the middle of the distribution chain, thus providing
better incomes to farmers. Organized marketing helps farmers to sell their produce on modern
organized marketing networks, thus helping them to obtain a better price compared to the local
vegetable markets. These retailers have also started signing supply contracts with various
farmers which ensures that they earn a small income. In addition, these agreements help
farmers reduce waste, and travel costs and provide new food availability to the consumer.

7. Rural Banks:

The establishment of rural banks and the credit system has also been instrumental in the growth
of the agricultural industry. The transformation of agriculture from subsistence to
commercialization requires on-farm investment and the use of modern inputs. With the
availability of credit, restrictions on certain inputs such as seeds, fertilizers, pesticides, hired
workers, etc. it's gone.

Robust Demand:

o A large population and rising urban and rural income are driving the demand. External
demand is driving export from the agriculture sector.

Opportunities:

o Demand for agricultural inputs such as hybrid seeds and fertilizers and allied services
like warehousing and cold storage is increasing in India at a fast pace.

Policy Support:

o The govt. announced a PLI scheme for the food processing sector with an incentive
outlay of Rs 10,900 crore over six years starting from FY22. The Krishi UDAN 2.0
scheme proposes assistance and incentive for the movement of Agri-produce by air
transport.

Competitive Advantage:

o A high proportion of agricultural land and diverse agro-climatic conditions encourage

the cultivation of different crops.
Some Major Investments and Developments in Agriculture are as follows:

• India received $1 billion in Agritech funding from 2017 to 2020. India ranks third in terms
of Agritech funding and the number of Agritech start-ups, thanks to strong investor interest.
Indian Agritech companies are expected to receive US$ 30-35 billion in investments by
2025.
• Fact, the country's oldest large-scale fertilizer manufacturer, surpassed one million in
production and sales in March 2020.
• The development of Nestle India's ninth factory in Gujarat will cost Rs 700 crore (US$
100.16 million).
• Haldiram signed an arrangement with Amazon's worldwide selling program in November
2019 to E-tail its specialties in the United States.
• In November 2019, Coca-Cola debuted 'Rani Float' fruit juices, a departure from the
company's signature fizzy drinks.
• In October 2019, the Indian Council of Agricultural Research (ICAR) launched two
diagnostic kits: the Indian Veterinary Research Institute (IVRI) and the Japanese
Encephalitis IgM ELISA.
• India has announced an investment in ethanol production worth Rs. 8,500 crore (US$ 1.19
billion).

DEMONETIZATION (2016)

Demonetization is the process of removing a monetary unit's legal tender status. It occurs
whenever the national currency is changed. The current form or forms of money are withdrawn
from circulation and replaced with new notes or coins. Occasionally, a state will totally replace
its old currency with a new one.

Demonetization has been tried as a means of modernising a cash -based developing economy
and combating corruption and crime (counterfeiting, tax evasion). The Indian government
chose to demonetize the 500- and 1000-rupee notes, the country's two largest denominations,
in 2016. These notes accounted for 86 percent of the country's circulating cash at the time. On
Nov. 8, 2016, India's Prime Minister Narendra Modi stated to the public that the notes were
useless, effective immediately, and that they had until the end of the year to deposit or exchange
them for newly released 2000- and 500-rupee bills.
The fact that GDP growth rate began to decline sharply in the post-demonetisation years raises
even more doubts about the long-term benefits of demonetisation for the economy. From 5.2
percent in 2011-12 to 8.3 percent in 2016-17, India's GDP growth rate has been steadily
increasing. The economy began to lose economic momentum as a result of this tendency, with
GDP growth in 2019-20 reaching only 4%. With the highest record GDP drop of 7.3 percent
in 2020-21 and a large base effect in GDP statistics for 2021-22, the pandemic year will be
remembered for a long time.

Two recent events have reignited the discussion over demonetisation's long-term benefits. In
October 2021, the total value of transactions processed over the Unified Payments Interface
(UPI) surpassed $100 billion. UPIs were just launched in the country after demonetisation, and
their rapid rise is quite remarkable. UPIs help in curbing the practice of holding Black Money
and enable citizens to pay taxes.

INTRODUCTION OF GST (2017)

1. Streamlined taxation
Our country's tax’s structure has been simplified thanks to GST. Because it is a single
tax, it is easier to calculate. With this tax, the customer has a clear sense of how much
tax he or she will have to pay when buying certain things. When it comes to GST and
its impact on GDP, this is critical.
2. Increased production funding
The reduction in the overall taxable amount is another effect of GST on the Indian
economy. This money saved can be re-invested in the manufacturing process to boost
output.
3. Assistance to small and medium-sized businesses
If you have been registered under GST's Composition Scheme, the amount of GST you
pay is determined by the size of your business and its yearly turnover. Businesses with
a yearly revenue of 50 lakhs must pay 6% GST, whereas businesses with a yearly
turnover of 1.5 crores must pay 1% GST.

4. Increased export volume

Customs duty on exporting goods has been cut as a result of GST and its influence on
the Indian economy. As a result, production units are now able to save money both
 when producing items and when exporting them. Many industrial units have been
enticed to export their goods as a result of the two-way savings, resulting in an increase
in export volume.

5. Improved operations across India

Transporting goods across India has been easier because to a unified taxation structure,
which has boosted operations across the country.

6. There will be no more cascading impact.

The state and federal governments' taxes have been integrated under GST. This has
eliminated the tax cascade effect, lowering the burden on both the buyer and the seller.
So, even if it appears like you are paying a large amount of tax, you are actually paying
fewer hidden taxes.

INFLATION- THE CURRENT GLOBAL CRISIS

Inflation is defined as the rate at which prices rise over time. Inflation is usually defined as a
wide measure of price increases or increases in the cost of living in a country. It can, however,
be computed more precisely for some items, such as food, or for services, such as a haircut.
Inflation, in any context, refers to how much more costly a particular set of goods and/or
services has gotten over a specific time period, most typically a year.

What causes Inflation?

Lax monetary policy is frequently the cause of long-term high inflation. The unit value of a
currency decreases when the money supply grows too large in relation to the size of an
economy; in other words, the currency's purchasing power decreases and prices rise.

Inflationary pressures can come from either the supply or demand side of the economy. Supply
shocks that disrupt production, such as natural catastrophes, or raise production costs, such as
high oil prices, can limit overall supply and contribute to "cost-push" inflation, in which price
increases are prompted by a disruption in supply.

The Common Causes of Inflation:

• Growing Economy: In a growing economy unemployment falls and salaries normally

rise in a developing or expanding economy. As a result, more people have more money
 in their pockets, which they are willing to spend on both luxuries and necessities. This
increased demand allows suppliers to raise prices, which leads to more jobs, which
leads to more money in circulation, and so on. Because a growing economy can lead to
an increase in consumer spending and demand, it is considered a form of demand -pull
inflation.
• Expansion of the Money Supply: Demand-pull inflation can also be fuelled by a larger
money supply. This occurs when the RBI issues money at a faster rate than the
economy's growth rate. Demand rises as more money circulates, and prices rise in
response.
• Government Regulation: The government has the authority to enact new regulations or
levies that increase the cost of producing or importing goods. Those greater costs are
passed on to customers in the form of higher prices. Cost-push inflation is the result.
• Managing the National Debt: When the national debt becomes unmanageable, the
government has two options. One option is to increase taxes in order to make debt
payments. If corporation taxes are raised, companies will most likely pass the cost on
to consumers in the form of increased pricing. This is a different type of cost-push
inflation situation.
The government's second alternative is to print more money, of course. As previously
stated, this can lead to demand-pull inflation. As a result, if the government applies both
techniques to address the national debt, demand-pull and cost-push inflation may be
affected.
• Exchange Rate Changes: When the Indian rupee value falls in relation to other
currencies, it loses purchasing power. In other words, imported goods – which account
for the vast bulk of consumer goods purchased in India – become more expensive to
purchase. Their price rises. The resulting inflation is known as cost-push inflation.
Russia- Ukraine War - Impact on Inflation in India:

The Ukraine crisis has increased price pressures across the board due to rising energy and food
expenses.

Inflation in India reached a 17-month high of 6.95 percent in March, while inflation in the
United States reached a four-decade high of 8.5 percent, and inflation in the United Kingdom
reached a three-decade high of 6.2 percent.

While the data reveals soaring inflation rates across the board, the results d o not yet completely
reflect the consequences of Russia's invasion of Ukraine in late March.

The already shattered global supply lines caused by the pandemic have been further twisted by
Russia's invasion of Ukraine on March 22 and the Western countries' retaliatory sanctions.

Since Russia invaded Ukraine on February 24, global crude prices have jumped, with the
international benchmark Brent futures hitting a multi-decade high of nearly $140 a barrel last
month.

While crude costs have eased from those highs, with benchmark futures contracts falling for a
second straight week, international oil prices have remained above $100 per barrel since
Moscow attacked Ukraine.

Elevated global crude prices have sparked worries of runaway inflation.

How RBI responded to the Inflation:

RBI’s Monetary Policy (June 8 th, 2022)

1. Repo rate increased by 50 basis points to 4.90%: Repo rate is the rate by which the
RBI lends money to other commercial banks. When there is a need to inject more money
into the market and encourage economic growth, from the other hand, the repo rate is
reduced. When the economy is experiencing inflation, the RBI raises the reverse repo
rate to encourage commercial banks to deposit money with the central bank and earn
interest. As a result, excess funds are absorbed from the market, reducing the amount
of money available for public borrowing.
2. Marginal standing facility (MSF rate) increased to 5.15%: It is a penal rate at which
banks can borrow money from RBI when they are completely exhausted of all
borrowing assistance. The Marginal Standing facility allows banks to borrow money
 with an interest rate above the repo rate and can be termed as the Marginal standing
facility rate.

OTHER IMPLICATIONS OF THE WAR ON INDIA

Immediate Adversities:

Since the war started, the Sensex plummeted by 2700 points due to panic selling and investor
fear, wiping away Rs. 7.5 lakh crores from the stock market. The Russian stock market
plummeted by half, having a profound impact on other Asian stock markets. The fighting also
sparked a surge in gold and crude oil prices, which we'll go over in more detail later.

According to the SBI assessment, India has limited financial and corporate sector connections
with both nations, therefore the impact on these areas will be minimal. Due to the dispute,
several non-Russian firms operating in Russia ceased operations, the bulk of which were from
or associated with the United States, such as PayPal, McDonald's, Disney, and others.

Crude Oil and Gold Prices:

Russia is one of the largest producers and exporters of crude oil, and due to the sanctions
imposed on Russia due to their part in the war, there is a supply disruption to Europe and as a
result, the prices of crude oil have risen and is still rising to $108 per barrel. On the other hand,
India imports its oil from the Middle East and hence they will not be affected by this price rise.

Since the equity market grew unstable during the conflict, many investors switched from equity
and other investments to gold investments, which are considered a haven in such conditions.
Such market attitudes were also one of the elements that caused gold prices to rise when equity
and other markets fell.

Petrol and Diesel:

Petrol and diesel prices are already at an all-time high as a result of the prolonged crisis. The
costs of petrol and diesel have a significant impact on commodity prices in India. When the
price of gasoline and diesel rises, the cost of transportation and logistics rises as well, increasing
the price of domestic and foreign commodities. Oil prices are projected to continue to climb.
Because India imports roughly 80% of its oil, this will harm the country. India imports $205
billion in fuels and minerals from Russia, $832 million in precious stones, and $609 million in
fertilizers, thus an increase in the price of these items could cause significant inflation in the
country.

Favourable Movements:

Russia and Ukraine are both important grain producers and exporters around the world, and as
a result of the conflict, exports of such goods have been halted, creating a potential market
vacuum. For example, Russia and Ukraine are two of the world's main wheat producers; yet,
because of the conflict, wheat supply has been hampered, and India has already begun to fill
the void by expanding wheat exports.

Wheat from Gujarat, Rajasthan, and Uttar Pradesh is being provided at a rate of Rs. 2,400 to
Rs. 2,450 per quintal, as opposed to Rs. 2,100 per quintal or so, and in just 15 days. The only
thing to keep in mind is that the Indian government must carefully regulate both domestic stock
availability and exports. Edible oil, vegetable oil, and oilseed prices are also soaring.

There is also a chance that mustard oil growers in Rajasthan and Uttar Pradesh, who are
planning to offer their harvests in the coming weeks, will gain. Currently, mustard prices are
above Rs. 6,500 per quintal, which is more than the minimum support price of Rs. 5,050. Cotton
prices are also rising as synthetic fiber becomes more expensive. Brent crud e oil is one of the
most important factors driving up the prices of the commodities stated above, as well as other
commodities. India must carefully watch and analyse the existing situation before acting to
maximize the chances of a favourable outcome in many sectors as a result of the ongoing battle.

Food prices in India have soared due to inflation rates and due to the rising global food crisis,
India is now facing a 'chapati crisis' due to the major export of wheat since the Russia -Ukraine
war began.
SOURCES:

Reserve Bank of India-State of the Economy (May 17, 2022)

https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53652

Tax Guru

https://taxguru.in/corporate-law/impact-russia-ukraine-conflict-indian-economy.html

India Brand Equity Foundation

https://www.ibef.org/download/1650355071_agriculture-and-allied-industries-february-
2022.pdf

Krishi Jagran

https://krishijagran.com/commodity-news/russia-ukraine-conflict-continues-how-will-it-
impact-agricultural-sector/

Deloitte Insights,

https://www2.deloitte.com/xe/en/insights/economy/asia-pacific/india-economic-outlook.html

S&P Global, India Manufacturing PMI

https://www.pmi.spglobal.com/Public/Home/PressRelease/977b25654b454227a3bfc618d193
d5de

S&P Global, India Services PMI

https://www.pmi.spglobal.com/Public/Home/PressRelease/498c568e138d4e4ebba17c827310
dc1d

Hindustan times

https://www.hindustantimes.com/india-news/five-years-since-demonetisation-what-has-changed-
101636310390379.html