ECONOMIC POLICY
View: Now to craft the politics in policy
The Union budget is set to dominate headlines in India, with the question of whether realpolitik or coalition compulsions will dictate the budget's economic policy. The interplay between economics and politics is not new to India, as it is part of elected democracies. The BJP's performance fell short of expectations due to inflation and unemployment, both factors within the domain of economic policy.
Don't obsess on inflation targets
In my capacity, I stress the importance of preparing for the AI revolution and managing public funds wisely to navigate economic uncertainties. Governments must prioritize debt sustainability and structural reforms to ensure long-term prosperity and stability.
Indian economy poised for potentially stable high growth phase, says RBI's monetary policy panel member
RBI's monetary policy committee member Shashanka Bhide highlighted India's potential for stable high growth amidst significant risks, citing strong domestic demand, investment spending, and positive monsoon forecasts. He emphasised the importance of maintaining inflation aligned with targets to support growth, with the RBI projecting retail inflation at 4.5% for FY25. The MPC recently kept the repo rate unchanged at 6.5%, focusing on sustaining economic momentum.
Has the global economic environment turned favourable for equities?
Global economy's resilience amidst crises led to surprising growth stability and inflation control. Potential trade war threats loom, while equity markets soar to record highs, indicating positive economic outlook.
Budget 2024 will see many historic economic policies, will be a futuristic one: President Murmu at Parliament
In her address to Parliament, President Droupadi Murmu announced that the upcoming Union Budget will introduce historic economic policies and reforms at an accelerated pace. Highlighting India's contribution of 15% to the global economy, she emphasized that this budget will reflect the government's long-term policies and futuristic vision. Finance Minister Nirmala Sitharaman is set to present this Union Budget in July 2024.
RBI needs to shift focus from inflation management to growth promotion: MPC member Varma
With retail inflation nearing the Reserve Bank of India's (RBI) 4% target, RBI Monetary Policy Committee (MPC) member Jayanth R. Varma emphasized a shift towards promoting growth. He noted that core inflation is benign and projected CPI inflation for 2024-25 is only 0.5 percentage points above target. Varma advocated for a less restrictive monetary policy to balance disinflation and support economic growth, which is expected to be slightly lower in the coming years.
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Real rate of interest at 1.5 pc apt for economy: Shashanka Bhide
Shashanka Bhide, an external member of the rate-setting panel, suggests a real interest rate of 1.5% for India, closely tied to achieving the Monetary Policy Committee's 4% inflation target. He emphasizes the importance of favorable macroeconomic conditions for high economic growth.
Budget 2024: What is a Populist Budget and why is it controversial?
A populist budget is a fiscal plan focused on immediate public appeal through measures like tax cuts and social spending increases. Criticized for prioritizing short-term benefits over long-term economic stability, such budgets can lead to fiscal deficits, inflationary pressures, and disparities in resource distribution, while potentially undermining independent economic institutions.
Union Budget 2024: Key facts and insights you need to know
Union Budget 2024: India's inaugural Budget was announced in pre-independent India on April 7, 1860, by Scottish economist and politician James Wilson of the East India Company, presenting it to the British Crown. Following Independence, India's first post-independence budget was presented on November 26, 1947, by then Finance Minister R K Shanmukham Chetty.
Job creation is India's top economic challenge, policy experts say
According to a poll of policy experts by Reuters, tackling India's chronic joblessness will be the biggest challenge for the government over the next five years, despite the country's status as the world's fastest-growing major economy. The economy grew more than 8% last fiscal year, but this growth has not translated into sufficient job creation, particularly for young people. The recent parliamentary elections saw Prime Minister Narendra Modi's BJP losing its majority, partly due to issues such as widening inequality, inflation pressure, and a lack of well-paying jobs.
Economists expect big-bang reforms to continue under Modi 3.0
Modi is set to be sworn in for third term as India's Prime Minister in coalition government with key partners Telugu Desam Party and Janata Dal (United). Economists anticipate focus on economic reforms to achieve goal of Vikshit Bharat by 2047. Budget to prioritize infrastructure, manufacturing, and welfare schemes amid global economic challenges.
Modi 3.0: How different will be the third Modi government
Narendra Modi is scheduled to take take oath for the third term as India's Prime Minister in a changed political landscape. Allies demand concessions, potentially affecting economic agenda. Expectations for populist budget with focus on welfare and rural areas, though concerns raised over economic impact. Reform agenda may face challenges due to weakened mandate, but continuity likely in infrastructure investment and business environment improvements.
Budget to indicate policy priorities of coalition govt, says Moody's
Moody's Analytics highlighted that the upcoming Union Budget will set policy priorities for the coalition government, shaping the next five years' growth trajectory.
Expect repo rate cut only in October RBI policy meeting: SBI Research
The report, authored by Soumya Kanti Ghosh, SBI's Group Chief Economic Adviser, expects first repo rate cut in October meeting. The repo rate is the rate of interest at which the RBI lends to other banks.
As Modi 3.0 begins, where the economy stands, where it's headed
Narendra Modi is set to begin his third term as PM with a full-strength NDA team, amidst optimism for India's economic future. RBI Governor Shantikanta Das highlighted the country's robust economic growth, strong manufacturing sector, recovering rural demand, and promising investment activity. India's external sector remains resilient, with positive growth prospects ahead.
Lok Sabha results won't force India's budget to make significant policy shifts: Fitch
Fitch Ratings anticipates minimal policy shifts in India post-election losses. The upcoming July budget will detail economic reform plans and fiscal goals for the next five years, crucial for addressing fiscal metrics, reducing debt, potential deviations from capital expenditure commitments, the risk of heightened social spending, progress in judicial reforms at the state level, and reforms in the manufacturing sector.
RBI MPC Meeting: Das & Co may look at food bills to keep its stance, rate unchanged
RBI Policy Meeting: The Reserve Bank of India (RBI) is expected to maintain the repo rate at 6.5% with a focus on withdrawing accommodation, marking the eighth consecutive time it remains unchanged. Economists predict the unchanged stance, citing persistent inflation in food prices and global commodity price risks. RBI Governor's decision is crucial post-elections.
Lok Sabha Results: Coalition govt is back. Will policy paralysis too strike again?
Over the past decade, Narendra Modi has propelled India's economy to become one of the fastest-growing globally, positioning it to soon rank as the world's third-largest. His emphasis on reforms and dynamic policies, exemplified by initiatives like Make in India, has bolstered manufacturing and infrastructure growth. However, the recent Lok Sabha election results, leading to a coalition government, raise concerns about potential challenges and policy paralysis ahead. Expert analyses suggest that while coalition governments have historically been effective in driving economic growth, they have struggled to control inflation.
Expect broad policy continuity with focus on capex: Ratings agencies
Economists emphasize the new Indian government's need to focus on growth, job creation, fiscal stability, tax reforms, and risk management. Reforms in land, labor, and capital markets are crucial, along with fiscal consolidation and increased government spending to attract private investments. They suggest balancing pro-consumer policies in agriculture and tackling judicial delays. These efforts aim to sustainably boost job creation and income levels, with the potential to raise India's economic growth to 7.5-8% over the medium-to-long term.
RBI rate-setting panel starts deliberations on monetary policy, decision on Friday
The Reserve Bank of India's monetary policy committee (MPC) began a three-day meeting to determine the next monetary policy, with Governor Shaktikanta Das expected to announce the decisions on Friday. Analysts anticipate the continuation of the current interest rate, given persistent inflation concerns and improving economic growth.
BJP-led NDA's narrow majority shifts focus to rural spending and increased private investments
The recent election results in India saw the ruling BJP-led NDA secure a majority, though narrower than expected. A Bernstein report predicts increased focus on direct social schemes, especially in rural areas. Private sector investments are expected to drive the capex cycle, with implications for economic growth and market dynamics. Market volatility is anticipated due to policy uncertainty, while financials remain a key sector.
Modi retaining power under changed circumstances to make reforms challenging: Economists
Economists warn that PM Narendra Modi's retention in power after the general elections under 'changed circumstances' will pose challenges for implementing critical reforms.
New govt to inherit strong economy, focus on making India developed nation by 2047
India's record-breaking economic growth rate and strong tax revenues provide a foundation for future reforms aimed at transforming the country into a developed nation by 2047. The new government must address challenges such as unemployment and rural distress, while also focusing on controlling inflation. Despite potential obstacles, experts expect continued infrastructure-led growth, investor-friendly policies, and reforms to maintain India's economic momentum and attract investment.
RBI unlikely to cut interest rate on June 7, say experts
The Reserve Bank of India is unlikely to cut the benchmark interest rate in its upcoming monetary policy review amid inflation challenges and improving economic growth. Scheduled for June 5-7, the Monetary Policy Committee (MPC) is expected to maintain the current 6.5% repo rate. Experts cite steady economic conditions and ongoing inflation concerns as reasons for maintaining the status quo
If Modi wins India's mammoth Lok Sabha elections, his third regime will need tough reforms to lure foreign firms
Lok Sabha Elections: As Modi gears up for a potential third term, global firms highlight challenges facing India's economy: policy inconsistencies, bureaucratic delays, and scarcity of land. Despite improved business sentiment, actual investment remains stagnant, with foreign direct investment dropping. Key priorities for the new government include policy coordination among states, labor law implementation, skills development, land reform, trade measures, and fulfilling BJP's promises for economic growth and global manufacturing hub status.
India to stick to policy path even if Modi loses, says Raghuram Rajan
Former central bank Governor Raghuram Rajan addressed concerns about possible selloff in financial markets if the Bharatiya Janata Party loses support post-Indian elections. Rajan emphasized the need for economic reforms and infrastructure quality improvement.
If Modi is re-elected, these sectors will get his most attention
Prime Minister Narendra Modi has pledged to propel India to become the world's third-largest economy if re-elected for a third term. His ambitious 100-day agenda post-election includes prioritizing manufacturing, new-age technology, infrastructure development, and clean energy sectors. The government aims to implement reforms to boost economic growth and attract foreign investment.
RBI may delay plan to ease interest rates
The RBI has raised the benchmark policy rates by 250 basis points (one bps is 0.01 percentage point) since May 2022 as inflation surged way beyond the central bank's 4% target. But inflation is slowly aligning with the target, although concerns remain over the trajectory for food inflation.
Rate easing may have to wait, highlights RBI in its latest bulletin
“A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway” wrote the Reserve Bank of India deputy governor Michael Patra and his team in their assessment of the economy published in the latest monthly Bulletin.
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