FISCAL STIMULUS
Union Budget 2024: Goldman Sachs forecasts 'golden' fiscal future for India
India's FY25 deficit target is set at 5.1% of GDP, aiming for 4.5% by FY26. Presented by Nirmala Sitharaman on July 23, it stresses job creation, MSME credit, vocational programs, food processing, public debt sustainability, land reform, rural economy, green finance, and political capital. Focus areas include services exports and the domestic food supply chain, according to Goldman Sachs.
India's high public debt offers limited space for welfare spending: Report
A recent report by Goldman Sachs highlighted India's constrained fiscal space due to high public debt, suggesting limited room for stimulus measures. The report anticipates Finance Minister Nirmala Sitharaman to adhere to fiscal consolidation targets in the upcoming budget, possibly focusing on welfare spending over capital expenditure.
China's June factory activity contracts again, services slows
China's economic indicators for June painted a challenging picture, with manufacturing activity stagnating and services slipping to a five-month low, according to an official survey released on Sunday. The Purchasing Managers' Index (PMI) remained unchanged at 49.5, below the growth threshold of 50, indicating ongoing economic struggles despite some positive signals in industrial production. Analysts noted that while exports have been a strong driver, both domestic and external demand remain insufficient to fully utilize China's manufacturing capacity, prompting calls for additional policy support to stimulate growth.
Fiscal discipline key to India's growth prospects: Sanjay Nayar
So, we will have to also think about how we channel the energies towards more advanced and more modern techniques and technology, because that is what we need right now.
China's fiscal revenue drops 2.8% in January-May
China's fiscal revenue declined by 2.8% in the first five months of 2024 compared to the same period last year, reflecting a deepening economic slowdown. Weak demand continued to weigh on the recovery, with fiscal expenditure rising by 3.4% during the same period. In May alone, fiscal revenue was down by 3.2% year-on-year, while fiscal spending grew by 2.6%. China has pledged greater fiscal stimulus to support its economy, including the issuance of special treasury bonds and incentives to boost consumer spending.
China inflation holds steady amid need for more stimulus
Weak consumption in China has kept a lid on consumer prices since 2023 despite many rounds of support measures as confidence remains low amid a protracted property sector crisis. Economists say a further round of stronger and coordinated fiscal and monetary stimulus steps are required to boost demand.
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New govt may cut FY25 fiscal deficit target amid robust growth and windfall RBI dividend
In the interim budget in February, the government had set the FY25 fiscal deficit goal at 5.1% of GDP and revised the FY24 target to 5.8%. However, the actual fiscal gap for FY24 was contained at 5.6%. With exit polls projecting Prime Minister Narendra Modi to retain power with a strong majority, policy continuity is expected, and the government may aim to further improve the fiscal deficit target for the upcoming fiscal year starting April 1, 2025.
The emerging fiscal constrictor knot & tightening logjam for market
Strengthening private capex and boosting employment gains are crucial for escaping the fiscal constrictor knot. Improving global demand and household incomes can provide a potential escape route.
RBI's record dividend presents a delicious dilemma for new Indian government
As India prepares for a new government by June 4, a significant Rs 2.11 lakh crore windfall awaits allocation. Options range from faster deficit reduction to increased spending. Analysts anticipate positive investor sentiment, though preferences vary between deficit reduction and expenditure. The BJP-led government's cautious approach contrasts with opposition promises
Is Congress aware of cost of implementing Rahul Gandhi's 'Khata Khat' schemes: FM Nirmala Sitharaman
Finance Minister Nirmala Sitharaman questioned Congress' understanding of the costs associated with social welfare schemes, including the proposed Rs 1 lakh transfer to women below the poverty line. She highlighted the BJP government's improved fiscal management compared to the UPA era, despite challenges like the Covid-19 pandemic. India's debt-to-GDP ratio is relatively low compared to other economies.
Fight climate change with fiscal discipline
The transition to clean energy requires enormous public investment in electricity generation and distribution, in addition to the far larger expense of mitigating the damage caused by rising temperatures.
BOJ keeps rates steady, projects inflation staying near 2% in coming years
The Bank of Japan kept interest rates unchanged on Friday and issued fresh estimates projecting inflation to stay near its 2% target in the next three years, signalling its readiness to hike borrowing costs later this year.
Expected bump in Japan inflation may add to BOJ's communication challenge
An expected end to government subsidies to curb fuel bills will likely bump up Japan's inflation rate later this year, analysts say, complicating the central bank's efforts to communicate its intention to go slow in raising interest rates.
Post-pandemic stimulus well managed by India: Study
RBI study reveals minimal impact of post pandemic fiscal stimulus on Indian inflation compared to major economies. Empirical analysis shows positive relationship between fiscal expansion and inflation, urging fiscal consolidation in India by 2025-26.
Diamond exports set to fall by 25-30% to multi-year low this fiscal
India is the world's largest centre for diamond cutting and polishing, accounting for around 95 per cent of the world's polished diamond production, while the US and China are the primary consuming markets, together accounting for around 65 percent of the country's exports.
China government bond yields plumb lows after PBOC comments
Chinese government bond yields declined on Wednesday with the 10-year yield falling to a 22-year low on expectations that authorities will keep monetary conditions easy as they aim to revive domestic consumption and meet economic growth targets.
Asia stocks struggle even as China slashes rates
China's five-year loan prime rate was lowered by 25 basis points to 3.90%, bigger than the five to 15 bp cuts forecast by economists. The Shanghai Composite, however, fell 0.7% in early trade and blue chips fell 0.6%.
Thrust is on letting economy grow on its own momentum: CEA Anantha Nageswaran on next-gen reforms
India's fiscal deficit had shot up to 9.2% of GDP in FY21 following the additional spending to provide stimulus to the economy hit by Covid. The Chief Economic Adviser asserted that the latest target of 5.1% of GDP is realistic.
Fiscal impulse should result in higher consumption in rural, mass market and bottom of the pyramid: Nilesh Shah, Kotak AMC
The commentary on the budget has had a more positive impact on the bond market compared to the stock market. The unexpected drop in yields has cheered the bond market. The fiscal deficit number of 5.1% has exceeded the debt market's expectations. The lower net borrowing program and the possibility of rate cuts in the second half of CY24 have given confidence to the market. The capital expenditure target for this year has been revised down to 950,000 crore, but there is still a 17% increase compared to last year.
It will be smart to reduce risk in capex themes: Ravi Dharamshi
Ravi Dharamshi, CIO of ValueQuest Investment, discusses the challenges in the Indian market. He mentions that exports and rural consumers are not performing well, and liquidity is tight from RBI's perspective. He believes that sector-specific PLI schemes and better implementation could provide a boost. The delicate balance between growth and fiscal consolidation is being maintained. Dharamshi suggests focusing on improving divestments and increasing revenue for more spending. He also highlights the importance of energy transition, specifically transmission capex, for India's success. Regarding the banking sector, he clarifies that the issues faced by HDFC Bank are not sector-specific.
Interim Budget 2024-25: Key numbers to watch out
Interim Budget 2024: Finance minister Nirmala Sitharaman will soon present her sixth budget on February 1 and the last one before the general elections in April-May. The Centre will seek to build on the growth momentum witnessed in the past two years without undermining fiscal discipline.
Budget Basics: What exactly are the govt's priorities in a budget?
Budget Explainer: The budget reflects the government's priorities, economic growth, human development, and technological progress. It allocates money to different ministries and departments, indicating the government's commitment to various sectors. Capital expenditure promotes economic growth, while subsidies and freebies focus on political objectives and stimulating consumption.
$139 B: China weighs more stimulus with rare bonds
China is considering a special sovereign bond plan to issue 1 trillion yuan ($139 billion) of new debt. The proposal involves the sale of ultra-long sovereign bonds to fund projects related to food, energy, supply chains, and urbanization. This plan is part of President Xi Jinping's government efforts to shift spending responsibility from local officials to central authorities.
ET Explains: Modern monetary theory
MMT which gained mainstream attention in the late eighties and early nineties is based on the premise that governments should be allowed to spend by printing currencies without imposing any constraints or be concerned about fiscal deficit to fund growth and achieve economic goal like full employment and price stability.
China disappoints investors by skipping signals for big stimulus
China's President Xi Jinping and top leaders declared that making industrial policy a main economic focus in the coming year. This disappointed investors expecting stronger measures to boost growth. The Communist Party's annual conference shifted focus to building a "modern industrial system" as the top goal, emphasizing technology and artificial intelligence over boosting domestic demand.
Japan PM Fumio Kishida unveils $113 bn stimulus as poll numbers slump
Japanese Prime Minister Fumio Kishida has unveiled a stimulus package worth over $100 billion aimed at addressing rising inflation and bolstering his plummeting poll ratings. Rising prices, partly due to the impact of Russia's invasion of Ukraine, have strained Japanese households.
Israel-Hamas conflict, FOMC outcome to challenge gold traders' resilience this week
The US dollar saw a boost from a combination of lackluster corporate earnings, safe-haven demand, and signs of the US economy's resilience. Notably, the US economy posted robust annualized growth of 4.9% in Q3 2023, despite higher interest rates. Core PCE prices and personal spending further reinforced the notion of sustained economic strength.
Budget: How Sitharaman smartly balanced economic stimulus with fiscal discipline
But stiff targets can serve as pressure for officials to find the enthusiasm for letting go of public assets. Sadly, that is no longer the case. This point is important not just for the fiscal math, but the opportunity cost of lost efficiency in the economy due to the continued presence of public sector enterprises in non-strategic sectors.
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