Unintended consequences.

"Chair Jerome Powell said the time had come for the Federal Reserve to cut its policy rate, affirming expectations that officials will begin lowering borrowing costs next month and making clear his intention to prevent further cooling in the labor market." ET. Lower interest rates in the US will result in more money coming into Indian markets looking for higher returns. This will strengthen the rupee against the dollar and, since India imports 80% of its oil, a stronger rupee will reduce our import bill. ET. The US was India's largest trading partner during January-June 2024 while our trade deficit was the highest with China at $41.6 billion. BS. Our exports to the US was $44.715 billion and imports from the US was $21.008 billion, giving us a trade surplus of $23.707 billion. Our trade surplus with the US was $43.311 billion in calendar year 2023. census.gov. "After remaining in the positive zone for three months, India's exports contracted 1.2% to USD 33.98 billion in July, while trade deficit widened to USD 23.5 billion." ET. A stronger rupee could hurt our exports by making our goods more expensive. In FY 2023-24, India's merchandise exports fell by about $14 billion and imports fell by $38 billion compared to FY 2022-23. Service exports rose by $14 billion and imports fell by $5 billion. Total exports stayed the same at $776 billion but imports fell by $44 billion, so that combined trade deficit fell from $121.62 billion in 2022-23 to $78.12 billion. pib.gov.in. "India, despite being one of few developing countries self-sufficient in food, still shipped in $33 billion of farm products in 2023 with more than half of it just accounted for by vegetable oils." "The imports in 2023 were 10% lower than last year's $36.7 billion as vegetable oil prices eased during the year." FE. "The household (HH) situation in India has continued to deteriorate in recent months, with real income levels persistently declining, highlighted a report by 'Systematix Institutional Equities'." "The report added that for now, however, the decline in real HH income, which accounts for 78% of GDP, suggests that any recovery will be gradual at best." ET. A report by the World Health Organisation showed that, "Hunger in India declined from 21.4% of the population in 2004-06 to 13.7% in 2021-23." But, "One major problem that limits access to nutrition is lack of affordability. The cost of a healthy diet has consistently increased in the country. About 56% of the population could not afford a healthy diet." Proportion of obese children has risen from 2.2% to 2.8%. DH. What the US Fed does is thus very important for us. Who knows what the consequences will be?