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India Likely to Set GDP Estimate Near to 7% on Spending Boom

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(Bloomberg) — India’s government is likely to estimate economic growth close to 7% in the current fiscal year, keeping it on track to be the fastest-growing major economy in the world.

The first official estimate for gross domestic product, due to be released on Friday, will probably be set at 6.7%, according to economists surveyed by Bloomberg. The Reserve Bank of India has already raised its projection for the fiscal year ending March 31 to 7%, while Bloomberg Economics is predicting 7.3% growth.

Strong consumer and government spending, a robust services sector, and a boost in manufacturing has helped buoy India’s economy in the face of a weaker global economy and six RBI rate hikes since 2022. Prime Minister Narendra Modi’s government has ramped up spending on infrastructure, while foreign businesses are investing more India, especially in tech manufacturing, as they look for alternative locations to China.

Several major banks, including Barclays Plc and Citigroup Inc., have already raised their full-year projections for the current fiscal year.

Lower commodity prices are also giving a boost to growth. India’s basket of crude oil averaged $77.42 a barrel in December, its lowest level since July.

“Falling energy and other commodity prices will give room for corporates to improve their margins, which should positively influence GDP growth ahead,” said Barclays economist Rahul Bajoria.

The Indian government uses the official GDP estimate to assess spending priorities in its budget. Finance Minister Nirmala Sitharaman will present an interim budget on Feb. 1 ahead of elections due in coming months.

What Bloomberg Economics Says

Supportive policies and rapid infrastructure build-out are powering the industrial sector and helping accelerate India’s integration into global supply chains.

Abhishek Gupta, India economist

For the full report, click here

Growth may be more challenging in the fiscal year beginning in April. The global economy remains uncertain, while India’s inflation is still a worry for policymakers, especially food prices. The RBI has kept interest rates unchanged for five policy meetings now.

“India could see growth over its coming fiscal year slow at the margin, as sticky inflation exerts a drag, but interest rate cuts could come into view just when the country holds national elections,” HSBC Holdings Plc’s economist Frederic Neumann wrote in a note. HSBC expects cuts of 50 basis points over 2024.

After witnessing some moderation in the past two months, services activity picked up pace in December. The HSBC India Services Purchasing Manager’s Index climbed to 59.0 in December from 56.9 a month ago as sellers were able to increase prices despite cost pressures receding to their lowest in nearly three-and-a-half years.

—With assistance from Anup Roy.

(Updates with Services PMI.)

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Economy

September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

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