New reform agenda has strengthened Indian economy: US

Amid weaker outlook across emerging market economies, India's recovery has strengthened under a new reform agenda, but it is not yet a "major driver" of global growth, a US Treasury Department report has said.

Buoyed by savings of USD 44 billion from drop in prices of oil imports, India's total foreign exchange reserve has reached an all-time monthly average high of USD 328 billion – thus making it the eighth country from the top in terms of foreign reserve, it said yesterday in its semi-annual 'Report to Congress on International Economic and Exchange Rate Policies'.

In its report, the Treasury said weaker outlook is evident across emerging market economies, which exerts a growing influence over global economic prospects. The slowdown in domestic Chinese investment and Chinese demand for imported commodities and components is having wide-ranging implications for other economies, it said.

"On a positive note, India's recovery has strengthened under a new reform agenda; since it is not a large importer, however, it is not yet a major driver of global growth," the Treasury said.

While Brazil is entering its second year of recession and will not be a source of growth in latin America, Russia is struggling due to economic mismanagement, lower oil prices, and the impact of economic sanctions, it said.

According to the report, the sharp drop in the price of oil is having a large impact on global current account imbalances. On an annualised basis, the roughly USD 50 per barrel decline in the price of oil is generating shifting income of over USD 600 billion annually from oil exporters to oil importers, holding all else constant, with Europe and Asia the key beneficiaries.

"Asia benefits the most from a lower oil price. Asia's gain in the first half of the year was nearly USD 340 billion in savings from oil imports. China's savings amounted to nearly USD 120 billion—the largest single country gain from lower oil prices. Japan saved USD 76 billion, India USD 44 billion, and Korea USD 36 billion," the report said.