Geopolitical Update: Red Sea Maritime Security and Trade Impact

• Conflict Driver: Continued drone and missile attacks orchestrated by the Houthi movement targeting commercial vessels in the Bab al-Mandeb Strait and Gulf of Aden.
• Response: Formation of a multinational naval coalition (Operation Prosperity Guardian) led by the U.S. to ensure freedom of navigation.
• Economic Impact:
  • A significant percentage of global container shipping has been diverted around the Cape of Good Hope (South Africa).
  • This detour adds an average of 10–14 days to transit times between Asia and Europe.
  • Increased insurance premiums (war risk surcharge) for vessels entering the high-risk area.
  • Observed drop in revenue for the Suez Canal Authority due to rerouting.

National Infrastructure Initiative: Green Energy Transition Scheme (GETS-2025)

• Objective: To accelerate the integration of renewable energy sources into the national grid and modernize transmission infrastructure.
• Key Pillars of GETS-2025:
  1. Distributed Generation: Mandating rooftop solar capacity for all new commercial infrastructure projects over 5,000 sq. meters.
  2. Grid Hardening: Allocation of $5 billion for smart grid technology implementation in coastal regions highly susceptible to climate events.
  3. Storage Capacity: Incentivizing the establishment of four large-scale Pumped Hydro Storage (PHS) facilities by 2029.
• Funding Mechanism: A blend of central government grants (70%) and private Public-Private Partnership (PPP) investment (30%).

Economic Policy Review: Monetary Policy Committee (MPC) Decisions

• Policy Rate Status: The MPC unanimously decided to maintain the existing Repo Rate at 6.5%.
• Rationale for Rate Hold:
  • Inflation Target: Although CPI inflation is trending downwards, core inflation remains sticky, necessitating a cautious approach.
  • Growth Projections: Current GDP growth forecasts remain robust (projected 6.8% for the fiscal year), supporting the decision to prioritize inflation stability over stimulating further growth.
  • Liquidity Management: The central bank will continue using Variable Rate Reverse Repo (VRRR) auctions to absorb excess systemic liquidity.

International Appointments and Reports

• New Leadership: Dr. Elara Vasant appointed as the head of the International Technology Standards Body (ITSB), effective Q3 of the current fiscal year.
• Global Health Report (WHO):
  • Report highlighted a 15% increase in non-communicable diseases (NCDs) mortality globally over the last five years.
  • The primary recommendation focused on national implementation of stricter regulations on trans-fats and high-sodium processed foods.
• World Trade Organization (WTO) Dispute Resolution: A ruling was issued favoring Country A against Country B regarding steel dumping allegations, recommending compensatory tariffs be lifted within 90 days.