Fitch Ratings on Monday said India's pace of debt reduction is gradual, leaving room for a downside risk to sovereign rating in the eventuality of a significant economic shock. However, the rating agency expressed confidence in India's ability to stick to its medium-term fiscal framework, which aims to reduce debt and bring it on a downward trajectory over time.
While this will incur a revenue loss amounting to 0.2 per cent of GDP, it will provide a strong boost to consumer sentiment and spending, points out Rajani Sinha.
The Budget should undertake further reductions in import tariffs and seriously consider an announcement of India's intention to join one or both of the two Asian mega-regional free trade agreements, suggests Shankar Acharya, former chief economic adviser to the Government of India.
"The new structure will substantially reduce taxes on the middle class and leave more money in their hands, boosting household consumption, savings and investment," Sitharaman said presenting what was dubbed as 'reformist' budget for the next fiscal in Lok Sabha.
The finance minister could improve the quality of public spending, which could mean placing greater emphasis on capital expenditure and a closer review of revenue spending, such as subsidies, to ensure they are targeted only at the poor and are less of a drag on public finance, notes A K Bhattacharya.
The liquidity deficit in the banking system crossed Rs 2 trillion again on Monday, despite the second instalment of cash reserve ratio (CRR) reduction coming into effect from December 28.
'... that it once again shies away from renewing its commitment to strategic divestment,' points out A K Bhattacharya.
The government in FY26 Budget should announce an "effective" personal income tax cut to support consumption and demand, Barclays said on Thursday. In its FY25-26 Union Budget preview, Barclays said the key ask from the Budget, to be presented on February 1, is to support growth while adhering to fiscal consolidation path.
'If the Trump administration decides to put guardrails on H-1B visas, that will surely impact both US and Indian firms.'
'It has also outlived its initial purpose of reducing physical gold imports.'
While liquidity in the banking system has turned surplus in the last few weeks, it could go back to deficit again, mainly due to corporate advance tax outflows. The net liquidity surplus of the banking system rose to touch Rs 1 trillion on Tuesday on the back of government spending, according to the data released by the Reserve Bank of India.
The impact of Trump's announcement of increasing import tariffs will have negligible benefit for India not because of companies trying to shift from China to other countries or their supply chains being affected due to their Chinese operations but because of our faulty policies, explains Mudit Jain.
New investors should gradually build a 5 to 10 per cent allocation to gold.
Fitch Ratings on Tuesday said the FY25 Budget demonstrated the government's ongoing commitment to reducing fiscal deficit and ensured policy continuity during the NDA government's new term. Finance Minister Nirmala Sitharaman on Tuesday presented the first Budget of the Modi 3.0 government in which she revised the deficit target for current fiscal lower to 4.9 per cent of the GDP, from 5.1 per cent projected in the interim Budget.
Union Finance Minister Nirmala Sitharaman, along with her team of bureaucrats, delved into the fine print of the 2024-25 Budget documents in a press conference, detailing the government's road map on bringing down the debt-to-GDP ratio and bold tax measures.
Whether she will pare the fiscal deficit target of 5.1 per cent of GDP, using the record dividend received from the RBI, or expand flagship government programmes will be keenly watched.
With the fiscal deficit target staring at the government, the FY25 Budget has limited expenditure options, points out A K Bhattacharya.
Three years after India declared its goal to become a net-zero economy by 2070, the policy design for achieving the target has begun, with the NITI Aayog forming dedicated multi-sectoral committees to prepare a transition plan. In 2021, India joined a select group of nations that set a target year for becoming net-zero carbon economy. At COP26 in Glasgow, Prime Minister Narendra Modi outlined a five-pronged 'Panchamitra' climate action target for India and committed to a net-zero target by 2070, joining nations like the US, the UK, and China.
'We have essentially tried to set out an agenda for the next five years and it, in essence, represents the political commitment to that agenda.'
'What happens in the real estate market is that once the prices go up it goes on to stay at that level.' 'It might not increase and at the same time the prices will not come down too.'
The Budget should use the extra RBI surplus to better effect, suggests A K Bhattacharya.
More than 80 per cent of Indians live in districts vulnerable to climate risks. Among these, Assam, Andhra Pradesh, Maharashtra, Karnataka, and Bihar are the most vulnerable states to extreme climate events.
Intermittent fasting, when not carried out under professional guidance, comes with its fair share of woes and health issues, warns Jashan Vij, a health coach and fat loss expert.
The finance ministry expects a broad-based moderation in inflationary pressures on the back of an anticipated reduction in food prices as a result of the uptick in summer sowing. The retail inflation rate remained stubbornly clung to the 5 per cent mark in seven of the past eight months. "Core inflation is trending downwards, indicating a broad-based moderation in price pressures... Driven by strong domestic growth and benign global commodity prices, core inflation is declining continuously.
Domestic customers will get access to high-quality Swiss products such as watches, chocolates, biscuits, and clocks at lower prices as India will phase out customs duties under its trade pact with the EFTA bloc on these goods over a period of time. India and the four-European nation bloc EFTA signed a trade and economic partnership agreement (TEPA) on Sunday to boost trade and investments between the two regions. The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland.
Domestic customers will get access to high-quality Swiss products such as watches, chocolates, biscuits, and clocks at lower prices as India will phase out customs duties under its trade pact with the EFTA bloc on these goods over a period of time. India and the four-European nation bloc EFTA signed a trade and economic partnership agreement (TEPA) on Sunday to boost trade and investments between the two regions. The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland.
Besides the additional $1.8 trillion in deficit reduction, which will put the total reduction target at $4.3 trillion, the budget proposals envisage more than $2 in spending cuts for every $1 of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest.
Modi said that for nearly one and a half years he has been putting in place details of new schemes to give new pace to the country's development and curb poverty.
The central government is likely to further consolidate its fiscal deficit by 50 basis points (bps) to 5.9 per cent in FY24 from 6.4 per cent in FY23, according to a recent report released by Goldman Sachs on Tuesday. In the current fiscal year, there is going to be an upside of 0.5 per cent on the receipts side due to higher nominal GDP growth, and higher tax buoyancy because of the formalisation, the report said. The upside to expenditure is mainly going to come from incremental subsidies (0.8 per cent of GDP), in both food and fertilizer, it said. The upcoming pre-election Budget will carry forward the trend of the increased capital expenditure seen in recent years.
'We now look at divestment as an opportunity for maximising the value of public assets, not necessarily as a short-term resource-raising measure.'
Following are comments from economists at leading financial institutions, banks and rating agencies on the interim Budget:
Now that the economy is growing at a higher-than-expected rate, it is time to accelerate the pace of fiscal consolidation, and the Budget could be a good starting point, argues Rajesh Kumar.
Growing concerns over slower-than-expected margin recovery, amid weak deposit growth have caught HDFC Bank's investors off guard. HDFC Bank's stock on Wednesday plunged nearly 9 per cent to hit an intraday low of Rs 1,527 on the BSE after reporting weaker-than-expected earnings in the third quarter (October - December) of the current financial year (Q3FY24). The shares of India's biggest private lender closed at Rs 1,536.9, down 8.46 per cent.
Market participants attribute the stability to the Reserve Bank of India's timely intervention in the foreign exchange market, both in terms of selling and buying dollars.
The finance minister's assertion that industry should not expect any spectacular announcements in the 2024 interim Budget suggest that the electoral imperatives of more tax concessions or higher expenditure on welfarist programmes could be far less pronounced than they were before the 2019 interim Budget, expects A K Bhattacharya.
The rising goods and services tax (GST) and personal income-tax collections may bolster the Narendra Modi government's ability to announce new schemes or enhance existing ones.
If the Budget makes no big announcements on new schemes, projects, or tax giveaways, the government would face a major political dilemma as it may have to reluctantly consider shunning the practice of unveiling pre-election sops to woo voters, notes A K Bhattacharya.
The scarcity of resources is particularly evident in the case of Rajasthan compared to many other states.
Fitch on Tuesday affirmed India's sovereign rating at 'BBB-' with a stable outlook, on robust growth and resilient external finances, but said weak public finances remain a challenge. India's rating has been unchanged at 'BBB-', which is the lowest investment grade, since August 2006. "Fitch Ratings has affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook," it said in a statement, adding strong growth potential is a key supporting factor for the sovereign rating.
India's trade account could come under pressure and there could be an inflation push if crude oil prices remain above the $90 per barrel (Brent) for a prolonged period since India imports over 85 per cent of its oil and roughly 50 per cent of its gas. A rebound in economic activity is bound to lead to higher fuel demand. While India is the third-largest importer of crude, it is a net exporter of refined products, which helps to compensate to some degree.
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