Economy

Introduction: Monetary Policy Decision

As the Reserve Bank of India (RBI) gears up for its crucial monetary policy decision on February 8, market analysts are closely examining the potential shifts in the central bank’s approach. In a recent CNBC TV18 panel discussion, renowned economists shared their perspectives on the current economic landscape, growth projections, and the likelihood of a rate cut. Let’s delve into the key points raised by the esteemed panel members, including Former Chief Statistician Pronab Sen, Nomura’s Chief Economist Sonal Varma, Citi’s Chief Economist for India Samiran Chakraborty, SBI Group Chief Economic Advisor Soumya Kanti Ghosh, and JPMorgan’s Chief India Economist Sajjid Chinoy.

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Key Points from the Panel Discussion:

1. Current Economic Scenario and the Monetary Policy Decision:
   • As the discussion commenced, the panel focused on India’s robust growth rate, projected at 7.3% for the current year by the National Statistical Office (NSO). However, concerns surfaced regarding the uneven growth between the corporate and non-corporate sectors, setting the stage for the upcoming monetary policy decision.
2. Growth and Corporate Performance in the Context of Monetary Policy:
   • Acknowledging corporate India’s impressive growth, the panel highlighted the non-corporate sector’s challenges. The consensus emphasized the significance of achieving a balanced growth trajectory, a critical factor to be considered in the forthcoming monetary policy decision.
3. Global Economic Headwinds and Their Impact on Monetary Policy:
   • The discussion shifted towards global economic challenges, including a slowdown in goods and service exports. The panelists deliberated on the potential effects of commodity price stabilization and the importance of fiscal policy support, factors integral to the impending monetary policy decision.
4. Inflation Dynamics in the Monetary Policy Context:
   • Inflation dynamics became a focal point, with a nuanced analysis of goods and services inflation. While goods inflation experienced an upward trend due to heightened input costs, the subdued services inflation hinted at underlying economic slack. These dynamics played a pivotal role in shaping the panel’s outlook for the monetary policy decision.
5. Concerns about Headline Inflation and Their Relevance to the Monetary Policy Decision:
   • High food inflation emerged as a concern, impacting the overall headline inflation rate. The panel members underscored the necessity of sustaining lower headline inflation to support purchasing power and foster sustainable consumption growth, integral considerations for the impending monetary policy decision.
6. Liquidity Challenges and Potential Policy Adjustments in the Monetary Policy Decision:
   • Liquidity emerged as a common concern among panel members, sparking discussions on potential policy adjustments. Recommendations included implementing longer-term VRR (variable rate reverse repo) and considering countercyclical buffers, factors that could significantly influence the impending monetary policy decision.
7. Stance and Rate Cut Expectations in the Context of the Monetary Policy Decision:
   • The panel exhibited a division on whether the RBI should maintain the current stance or signal a change. While some advocated for a more neutral stance, others leaned towards preparing the market for a potential shift in the future. However, a unanimous decision was reached on keeping policy rates unchanged for the upcoming monetary policy decision.
8. Future Rate Cut Predictions and Their Impact on the Monetary Policy Decision:
   • Panelists presented diverse timelines for the next rate cut, with August being a frequently cited month. Factors such as global economic conditions and the Federal Reserve’s actions were considered influential in determining the timing of a rate cut, adding complexity to the anticipation of the upcoming monetary policy decision.

Conclusion:

As the RBI approaches its critical monetary policy decision on February 8, stakeholders closely monitor potential shifts in strategy. Insights from the expert panel highlighted the need for a balanced approach to support various economic sectors, underscoring the significance of addressing liquidity concerns. The consensus suggests a cautious approach, with the possibility of a rate cut in the latter part of the year, contingent on numerous economic variables. Investors and analysts alike await the monetary policy decision’s implications for India’s economic trajectory.

Explore India’s fiscal vision through insights from Moody’s and former Chief Economic Advisor. Uncover the nation’s growth trajectory and economic strategies.

In a recent discussion at CNBC TV18, Moody’s Investors Service’s Christian de Guzman and former Chief Economic Advisor KV Subramanian shared valuable insights into India’s fiscal vision. This article delves into key aspects of India’s economic trajectory, government initiatives, and growth implications, as India navigates its fiscal vision.

India’s Fiscal Vision Unveiled: Moody’s Insights

The recent video discussion featuring Christian de Guzman from Moody’s Investors Service and former Chief Economic Advisor KV Subramanian provided valuable insights into India’s credit rating and market growth outlook. The discussion centered around the Union Budget’s implications for the economy, shedding light on key government initiatives aimed at fostering economic growth.

Vision for Growth

Subramanian highlighted the budget’s overarching vision, emphasizing India’s aim to achieve 7% plus growth over the coming decade. The allocation of 1 lakh crore for zero-interest loans dedicated to research and innovation stood out as a pivotal step. This move underscores the importance of innovation in positioning India among the top economies globally, especially as it broke into the top 50 for innovation in 2020.

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Capital Expenditure and Infrastructure

The discussion touched upon the 11% increase in capital expenditure, signaling positive strides in infrastructure development. However, Subramanian emphasized the need for further increases to meet the substantial demand for infrastructure, essential for India to compete with advanced economies. The incentives provided to states for investing in infrastructure have already seen a 47% increase, reflecting a positive response.

Conservative Fiscal Approach

Analyzing the budget’s fiscal stance, Subramanian suggested a case of underpromising and likely overdelivering. He pointed out that the assumed 5.8% growth might be conservative, considering the tax revenue’s run rate at 14%. The former Chief Economic Advisor stressed the importance of recognizing India’s fiscal transparent path, expressing hope for credit rating agencies to acknowledge the credible fiscal consolidation.

Moody’s Perspective

Christian de Guzman, representing Moody’s Investors Service, acknowledged India as one of the world’s strongest economies. Despite this recognition, he emphasized the challenges India faces, including the stock of debt and interest payments to revenue. Moody’s lauded India’s fiscal deficit reduction but cautioned about potential global challenges such as climate shocks and geopolitical tensions affecting the nation.

Future Expectations

Looking ahead to the final budget, both speakers expected the government to maintain its commitment to fiscal discipline. However, they highlighted potential challenges, such as climate shocks and geopolitical tensions, which might necessitate fiscal action in the future.

Conclusion

The video discussion provided a comprehensive analysis of India’s credit rating and market outlook, featuring insights from both Moody’s Investors Service and former Chief Economic Advisor KV Subramanian. As India navigates its fiscal vision for the future, it remains crucial for policymakers to navigate global challenges while ensuring sustained economic growth. The government’s commitment to fiscal discipline and strategic investments will play a pivotal role in shaping India’s financial landscape in the coming years.

Explore insights on the Interim Budget with Arundhati Bhattacharya and Vinayak Chatterjee. Expert analysis, fiscal strategies, and future expectations are unveiled in this discussion.

The Interim Budget:

The Interim Budget With their insights on its implications for the Indian economy. In a recent conversation on CNBC TV18, Shereen Bhan engaged with Arundhati Bhattacharya, a seasoned banker, and Vinayak Chatterjee, known for his contributions to the infrastructure landscape. This article delves into their perspectives on key budgetary aspects and their expectations for the full budget announcement.

Fiscal Expenditure on Infrastructure:

Vinayak Chatterjee expressed his views on the government’s capital expenditure (capex) figures, emphasizing the crucial role of infrastructure spending in driving economic growth. While the interim budget proposed a capex of 11%, Chatterjee believes this may be a temporary measure for the next two to three months. He predicts a reinstatement to 30 lakh crores in the full budget, emphasizing the importance of maintaining momentum for a robust GDP growth of 7%.

Fiscal Consolidation Roadmap:

Arundhati Bhattacharya highlighted the fiscal consolidation roadmap as a significant aspect of the budget. The government’s commitment to reducing the fiscal deficit to 5.1% indicates a confident and continuity-focused approach. Bhattacharya appreciated the emphasis on vulnerable sections—youth, farmers, and women—in various schemes, aiming to uplift them socioeconomically.

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Innovation and Research Investment:

The announcement of a 1 lakh crore corpus for research and innovation drew positive attention. Bhattacharya commended the government’s focus on innovation as a key driver of economic growth. She emphasized the need for India to rely on innovation and entrepreneurship to create formal jobs, aligning with the global economy’s trajectory.

Disinvestment and Market Signals:

The conversation touched upon the government’s shift from setting disinvestment targets to adopting a value-unlocking approach. Bhattacharya expressed her reservations about setting targets, emphasizing that the government should sell assets opportunistically when market conditions are favorable. The discussion noted the cautionary approach, aligning with the government’s current revenue buoyancy.

Conclusion and Future Expectations:

The interim budget, as discussed by the experts, reflects confidence and continuity. While certain details are still in progress, the focus on innovation, fiscal consolidation, and a cautious approach to disinvestment suggests a strategic economic vision. As both Bhattacharya and Chatterjee recommended, a more in-depth analysis awaits the full budget in July, providing a clearer picture of the government’s long-term economic strategy.

In summary, the budget sets the stage for economic resilience and growth, with a keen eye on innovation and fiscal discipline. As experts anticipate the full budget for a more comprehensive analysis, it is evident that the government aims to balance economic development with strategic financial decisions. Stay tuned for further insights in July when the complete economic roadmap will be unveiled.

The anticipation around Budget 2024 is heightened, considering its potential impact on the economic landscape. In this exclusive interview with HSBC’s Pranjul Bhandari, Niraj Shah delves into crucial aspects, such as fiscal consolidation, capital expenditure, and the rural economy’s outlook.

Fiscal Strategy: Quality Over Quantity

Bhandari emphasizes the government’s shift towards focusing on the quality of spending rather than sheer volume. The overarching theme is fiscal discipline and consolidation. Expectations are that the fiscal deficit will align with the consolidation path, signaling a commitment to responsible financial management. The intention is to bring down overall expenditure while prioritizing capital expenditure over current expenditure.

Capital Expenditure: A Delicate Balance

Examining the budget 2024 from the lens of capital expenditure (CAPEX), Bhandari provides insights into the government’s approach. Despite fiscal consolidation, there’s a commitment to maintaining CAPEX thrust, albeit without acceleration. Bhandari notes the significance of state governments contributing significantly to CAPEX, driving construction and rural demand, with a potential 10.5% YoY increase in rupee terms.

Rural Economy: Resilience Amid Challenges

The discussion shifts to the rural economy, a critical aspect of India’s financial landscape. Bhandari acknowledges the challenges posed by an uneven monsoon but highlights the unexpected resilience driven by state governments’ CAPEX. The construction sector has become a crucial source of rural income, cushioning the impact of agricultural challenges.

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State Governments’ Role: Unveiling a Growth Driver

While central government CAPEX has been noteworthy, Bhandari sheds light on the pivotal role played by state governments. Their substantial increase in CAPEX, particularly in construction, has fueled growth, emphasizing the need to view CAPEX holistically as a combination of central and state efforts.

Key Areas to Watch in Budget 2024

As Budget 2024 approaches, Bhandari identifies key focal points:

1. Fiscal Consolidation Path: Will the government adhere to its fiscal deficit targets, considering the pre-election year dynamics?
2. Borrowing Patterns: Bond markets are attentive to the quantum of government borrowing. Any deviation from expectations may impact market sentiments.
3. CAPEX Estimates: The budget estimate for CAPEX in FY24 was 10 trillion rupees. Observers are keen to know if there will be an increase for FY25.
4. State Governments’ Initiatives: Monitoring state governments’ initiatives and their contribution to growth remains crucial.

Post-Budget Scenario: RBI’s Role

Bhandari anticipates a unique scenario post the budget 2024, where fiscal policy takes a step back, marking the first fiscal drag in years. However, she sees an opportunity for monetary policy to step forward. With inflation easing and fiscal policy tightening, she suggests the RBI may focus on liquidity measures to provide a soft landing, potentially easing by 40 to 50 basis points.

External Factors: FED’s Influence

Considering the global economic landscape, Bhandari underscores the importance of monitoring cues from the Federal Reserve. A potential rate cut, not expected before June, could impact markets and global economic dynamics.

Conclusion: Navigating Uncertainties

Budget 2024 unfolds against a backdrop of uncertainties, both domestic and global. Bhandari’s insights provide a nuanced understanding of the challenges and opportunities, signaling the need for a cautious yet optimistic approach to navigating the economic terrain.

Disclaimer: The content of this blog is based on an interview with Pranjul Bhandari, and the views expressed are her own. The information provided is for general informational purposes only and does not constitute financial advice or recommendations.

Introduction to the Interim Budget:

As the much-anticipated interim budget approaches, economists and investors eagerly assess the landscape, speculating on potential changes in tax slabs, capex, and the fiscal deficit. In this discussion of CNBC TV18, respected economists Samiran Chakrabarty (Citi), Soumya Kanti Ghosh (SBI), Kaushik Das (Deutsche Bank), and R-Kavita Rao (NIPFP) offer valuable insights into the key expectations from the interim budget set to be presented on Feb 1.

1. Populist Announcements and Election Dynamics:

The video commences by addressing the impact of upcoming elections on budgetary decisions. Samiran Chakrabarty notes historical trends, indicating that interim budgets typically avoid introducing entirely new schemes. However, the panel suggests that smaller adjustments, such as increasing the PM Kisan scheme amount, might be considered as part of the populist expectations in this pre-election year.

2. Tax Cuts and Income Growth:

Shifting the focus to tax-related expectations, the experts discuss the potential for tax cuts, especially in light of the substantial growth in income tax witnessed in the current year. The panel suggests that while limited tax giveaways may be expected for the lowest income bracket, any exemptions should align with encouraging taxpayers to migrate to the new tax regime, which offers fewer exemptions.

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3. Tax Buoyancy and Revenue Expectations:

Addressing the question of tax buoyancy, the experts share their perspectives. Samiran Chakrabarty acknowledges the government’s conservative estimates but anticipates a slightly higher tax buoyancy this year due to improved compliance. The discussion then emphasizes the anticipated boost in non-tax revenue, driven by higher RBI dividends and continued profitability in PSU enterprises.

4. Capex and Fiscal Deficit:

Economists express optimism regarding capital expenditure (capex), expecting a positive surprise. Soumya Kanti Ghosh anticipates double-digit growth in capex, reaching around 3.5% of GDP. The discussion emphasizes the shift from disinvestment to non-tax revenue, driven by the profitability of public sector companies. The economists also discuss the likelihood of divestment reaching expected levels and its positive economic impact.

5. Fiscal Deficit Projections:

While discussing interim budget expectations, the critical question of fiscal deficit projections arises, with varying opinions among economists. Kavita Rao and Kosik Das lean towards a fiscal deficit between 5.2% and 5.4%, allowing room for increased revenue expenditure. Samiran Chakrabarty and Soumya Kanti Ghosh expect a higher fiscal deficit of 5.5%, citing the need for the government to balance fiscal consolidation goals with current economic conditions.

Conclusion:

As the interim budget date approaches, insights from the panel of economists shed light on the expectations and speculations surrounding fiscal policies. The delicate balance between populist measures, tax reforms, and fiscal consolidation will undoubtedly shape India’s economic landscape in the coming year. Investors and citizens alike will keenly await the budget presentation on Feb 1 to witness how these expectations materialize.

Introduction: Union Budget 2024

As the anticipation builds around Union Budget 2024, CNBC TV18 hosted a panel discussion featuring prominent economists to delve into the key expectations for the upcoming budget. Latha Venkatesh moderated the discussion, engaging in a conversation with experts including Samiran Chakrabarty of Citi, Soumya Kanti Ghosh of SBI, Kaushik Das of Deutsche Bank, and R-Kavita Rao of NIPFP. In this article, we will analyze the insights shared by the experts regarding fiscal deficit expectations, market dynamics, and the overall economic outlook.

Fiscal Deficit Expectations: Union Budget 2024

The discussion opened with a poll on fiscal deficit expectations for the forthcoming fiscal year, with varying opinions among the economists. Samiran Chakrabarty expressed a pragmatic view, suggesting that achieving a 5.5% fiscal deficit might not be a cause for concern, given the unique circumstances of the year. He emphasized the global Bond index inclusion, which is expected to generate an extra demand of $25 billion for bonds. Chakrabarty argued that a marginally higher fiscal deficit may not pose a significant challenge, especially considering the government’s historical credibility in presenting fiscal numbers.

Soumya Kanti Ghosh echoed similar sentiments, highlighting the historical trend of revisions in fiscal deficit numbers between interim budgets and the actual budgets. He suggested that the government might announce a 5.5% fiscal deficit, with the possibility of the number declining later due to statistical artifacts and an anticipated higher GDP growth rate.

Kaushik Das, on the other hand, emphasized the importance of sticking to the fiscal consolidation agenda. He argued that achieving a 5.3% fiscal deficit is feasible and crucial, especially with the opportunity provided by Bond index inclusion. Das stressed the need to demonstrate seriousness about reaching the 4.5% fiscal deficit target in the future.

Market Dynamics and Borrowings: Union Budget 2024

The experts emphasized that the market’s reaction would depend on the expected market borrowings. Regardless of whether the fiscal deficit is 5.3% or 5.5%, the crucial factor is the magnitude of net and gross market borrowings. If the gross market borrowings exceed expectations, it could lead to a market sell-off, irrespective of the fiscal deficit number.

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Nominal GDP Projections: Union Budget 2024

The panel discussed the significance of nominal GDP projections, considering their impact on the fiscal deficit, which is a percentage of the nominal GDP. The advanced estimates, indicating a lower nominal GDP than budgeted, raised questions about real growth and inflation assumptions. The experts suggested a nominal GDP projection of at least 10.5% to 11%, aligning with the expected economic growth and positive wholesale inflation.

Conclusion:

As the countdown to Union Budget 2024 continues, economists remain optimistic about the government’s ability to manage fiscal deficits and demonstrate prudence in economic decision-making. The discussion highlighted the delicate balance between meeting fiscal targets, market dynamics, and the need for credible economic projections. Investors and analysts will be closely watching the budget announcement for cues on the government’s fiscal stance and its impact on the broader economy.