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The Unified Payments Interface (UPI) has solidified its position as the world’s leading digital payment platform by processing transactions worth nearly Rs 81 lakh crore during the April-July period of 2024, according to a recent report by global payments hub, Paysecure. This achievement represents a 37% year-over-year (YoY) growth, further cementing UPI’s dominance in the global digital payments landscape

UPI's impressive surge in transaction volume saw it processing an average of 3,729.1 transactions per second, marking a 58% increase compared to the 2,348 transactions per second recorded in 2022. This remarkable growth has enabled UPI to surpass major global payment platforms such as China’s Alipay, PayPal, and Brazil’s PIX in terms of the number of transactions processed.

In 2023, UPI handled a staggering 117.6 billion transactions, making it the highest in the world. Notably, July witnessed UPI processing Rs 20.6 lakh crore worth of transactions, setting a new record for the highest-ever monthly transaction value for the platform. This marked the third consecutive month that UPI transactions surpassed the Rs 20 lakh crore threshold.

The Paysecure report highlights that India is now leading the global digital payments space, with over 40% of all payments in the country being digital. UPI accounts for the majority of these transactions, playing a crucial role in India's rapid adoption of digital payments.

Dilip Asbe, CEO of the National Payments Corporation of India (NPCI), expressed confidence in UPI’s future growth, predicting that the platform could reach 100 billion transactions within the next decade. This growth is expected to be driven by the upcoming launch of credit facilities on UPI, further enhancing its appeal to users.

While June saw a slight dip in UPI transaction volume to 13.89 billion from May's 14.04 billion, the outlook for UPI remains extremely positive. A report by PwC India forecasts that UPI transactions will experience a threefold increase from 131 billion in the 2023-24 fiscal year to 439 billion by 2028-29. This would account for a staggering 91% of all retail digital transactions in India.

UPI’s success is not limited to India. The platform has been adopted in several other countries, including the UAE and Malaysia, where it is increasingly being used as a preferred payment method. The Reserve Bank of India (RBI) Governor, Shaktikanta Das, has emphasized the RBI’s focus on making UPI and RuPay global brands. This includes initiatives such as deploying UPI-like infrastructure in other countries, enabling QR code-based UPI payments at international merchants, and linking UPI with other nations' Fast Payment Systems.

With its unparalleled growth and adoption, UPI is not only revolutionizing digital payments in India but is also setting a global standard. As UPI continues to expand its reach, both domestically and internationally, it is poised to become a cornerstone of global digital financial infrastructure. The potential for UPI to drive digital transactions worldwide is immense, and its impact is expected to grow even further in the coming years, particularly with the upcoming introduction of credit on UPI and its increasing adoption in international markets.

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Introduction

India's trade landscape has witnessed remarkable shifts in recent years. According to a recent report by the Global Trade Research Initiative (GTRI), India experienced a trade surplus with 151 nations in the first half of 2024 while grappling with trade deficits from 75 countries. These figures underline India’s growing export prowess and the challenges posed by specific nations, particularly in industrial goods and essential imports. This article delves into India’s trade surplus highlights, the impact of trade deficits, and the crucial steps India must take to strengthen its trade balance.

India's Trade Surplus: Key Highlights

Between January and June 2024, India achieved an impressive trade surplus with 151 countries, accounting for 55.8% of its exports and 16.5% of its imports. This surplus totaled USD 72.1 billion, a testament to India's growing global trade influence. Major contributors to this surplus were the United States and the Netherlands, where India enjoyed a surplus of USD 21 billion and USD 11.6 billion, respectively.
The significant trade surplus underscores India's increasing exports in various sectors, particularly technology, pharmaceuticals, and services. The strong performance in these areas allowed India to offset its imports from these nations, contributing positively to the country's overall trade dynamics.

The Trade Deficit Dilemma

Despite a robust trade surplus with 151 nations, India faces a daunting trade deficit with 75 countries. These countries represent 44.2% of India's exports but a staggering 83.5% of its imports, resulting in a USD 185.4 billion trade deficit. This deficit highlights India’s dependence on specific imports, particularly industrial goods, crude oil, and coal.
India’s largest trade deficits were recorded with China, Russia, Iraq, Indonesia, and the UAE. China remains India’s largest trade deficit partner, with a deficit of USD 41.88 billion between January and June 2024. The lion’s share of India's imports from China consists of industrial goods, which account for 98.5% of the total imports from China. This situation emphasizes India's reliance on Chinese industrial products and highlights the need for India to develop its manufacturing sector to reduce this dependency.

Key Deficit Drivers : Crude Oil and Industrial Goods

While India’s trade deficit is significantly impacted by the import of crude oil and coal, the GTRI emphasizes that this is not a cause for concern. These imports are essential to power India’s growing economy, and the deficit related to energy imports is considered manageable. However, the think tank stresses that India must focus on reducing imports of industrial goods, particularly from China, as these imports threaten India's economic sovereignty.
Goods such as man-made filaments, rolling stock, glassware, and toys make up a large portion of imports from China, with over 50% of India’s global imports of these goods coming from China. This dependency underscores the urgent need for India to ramp up domestic production of critical industrial products and reduce its reliance on foreign imports, particularly from China.

Top Trade Deficit Nations

India’s top five trade deficit partners include China (USD 41.88 billion), Russia (USD 31.98 billion), Iraq (USD 15.07 billion), Indonesia (USD 9.89 billion), and the UAE (USD 9.47 billion). These countries represent a significant portion of India’s overall trade deficit, driven by high imports of crude oil, petroleum products, and industrial goods.
In addition to these nations, India’s trade deficit exceeds USD 1 billion with 18 other countries, including Saudi Arabia, Switzerland, South Korea, Japan, and Qatar. Despite these deficits, GTRI highlights that trade imbalances with countries exporting crude oil and coal are less concerning than deficits driven by industrial goods imports.

Strategic Approach to Trade Deficits

GTRI suggests that India should prioritize reducing its reliance on industrial goods from countries like China while maintaining strategic imports of essential resources like oil and coal. Deep investments in domestic manufacturing are critical to achieving this objective. By doing so, India can safeguard its economic independence and ensure a more balanced trade relationship with its global partners.
Moreover, the report also points out that India must be vigilant regarding imports of gold, silver, and diamonds, particularly from countries such as Switzerland, the UAE, and Hong Kong. Recent tariff cuts on precious metals have the potential to further increase imports, which could widen the trade deficit with these nations.

Changing Trade Partners: USA Overtakes China

A notable development in India's trade scenario is the shifting role of its top trading partners. In a significant revision, updated trade data for FY24 shows that the USA has overtaken China as India’s top merchandise trade partner. This shift is driven by an increase in imports from the USA, which now stands at USD 42.2 billion, making the USA India’s leading trade partner with a total trade value of USD 119.7 billion.
This shift reflects India's growing economic ties with Western nations and underscores the importance of diversifying trade relationships to reduce reliance on any single country, particularly China.

Conclusion

India’s trade landscape in the first half of 2024 reflects both its growing strength as a global exporter and the challenges posed by its reliance on imports, particularly from China. While a trade surplus with 151 nations is a positive sign, the significant deficits with countries like China and Russia highlight the need for India to enhance domestic production and reduce dependency on foreign industrial goods. By prioritizing deep manufacturing and diversifying its trade relationships, India can safeguard its economic future and position itself more securely in the global trade ecosystem.

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Introduction :

Moody's has raised its real GDP growth projections for India on Thursday expecting a robust 7.2% growth in 2024 (up from 6.8%) and 6.6% in 2025 (up from 6.4%). This revision reflects strong, broad-based growth, driven by resilient private consumption and improved business conditions.
The Indian economy grew 7.8% year-over-year in the first quarter of 2024, despite tight monetary policy and efforts toward fiscal consolidation, Moody's said in a report. Both industrial and services sectors are thriving, with services PMI staying above 60 since early 2024, Moody's added in the report.
As inflation eases towards the RBI's target, household consumption is set to rise, especially with rural demand showing signs of revival amid a strong monsoon, the report said.
India finds itself in a macroeconomic "sweet spot" with solid growth and moderating inflation, which fell to 3.5% in July from 5.1% in June, Moody's said.
Over the long term, sustaining 6%-7% growth will depend on effectively utilising its young workforce, the report added. With a median age of 28 and two-thirds of the population of working age, the country has a unique demographic advantage that could power its growth—provided employment generation and skill development policies succeed.

Healthy balance sheets :

Corporate and bank balance sheets are healthier, with increased capital raising through equity and bonds. Private capital expenditure is projected to surge by 54% this financial year, fueled by rising capacity utilization, positive business sentiment, and government infrastructure investments, Moody's said. Though manufacturing has struggled in recent years, improving domestic conditions and global trends suggest a brighter future for India's manufacturing sector, it added.

Digitalization : A pivot

Digitalization is also playing a pivotal role, driven by government initiatives like the United Payments Interface (UPI), which now accounts for nearly 80% of digital payments, accelerating financial inclusion and formalization of the economy, Moody's said. Meanwhile, India’s external position has strengthened, with a current account surplus recorded for the first time in ten quarters, thanks to robust services exports and remittance inflows. Additionally, ample foreign reserves give the RBI more room to manage rupee volatility.

Fitch affirms rating

Fitch also affirmed India's long-term foreign currency issuer rating at 'BBB-' with a stable outlook, citing a strong medium-term growth outlook.
The agency said the growth outlook will continue to drive improvement in structural aspects of its credit profile, including India's share of GDP in the global economy as well as its solid external finance position.
Strengthening fiscal credibility from meeting deficit targets, along with enhanced transparency and buoyant revenues have increased the likelihood that government debt can follow a modest downward trend in the medium term, it added