{"id":97055,"date":"2024-07-18T12:18:10","date_gmt":"2024-07-18T12:18:10","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/07\/18\/budget-2024-expectations-india-to-stick-to-prudent-financial-plan-survey-shows-times-of-india\/"},"modified":"2024-07-18T12:18:11","modified_gmt":"2024-07-18T12:18:11","slug":"budget-2024-expectations-india-to-stick-to-prudent-financial-plan-survey-shows-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/07\/18\/budget-2024-expectations-india-to-stick-to-prudent-financial-plan-survey-shows-times-of-india\/","title":{"rendered":"Budget 2024 expectations: India to stick to prudent financial plan, survey shows – Times of India"},"content":{"rendered":"
\"Budget<\/div>\n
India looks set to swim against the current of emerging market officials loosening the purse strings, with debt sales by Prime Minister Narendra Modi\u2019s new government seen in line with earlier projections.
New Delhi is expected to retain its earlier target of raising 14.1 trillion rupees ($169 billion) via bond sales in the fiscal year that began in April, according to the median forecast in a Bloomberg survey of economists.Not a single respondent expects the budget deficit to widen, underscoring just how keen officials are to maintain their hard-earned credibility at a time when global investors are piling into Indian debt thanks to its inclusion in JPMorgan Chase & Co indexes.
A modest expenditure plan could give an extra fillip to India\u2019s bond market, where benchmark yields are edging toward a two-year low. The budget will be unveiled on July 23.
If Modi\u2019s administration maps out more deficit reduction, \u201cit might lead to a further rally in bonds,\u201d said Vikas Jain, Bank of America Corp.\u2019s India head of fixed income, currencies and commodities. \u201cThis government has always delivered on its fiscal prudence\u201d and investors believe it\u2019ll stick to that course, he said.
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Government spending plans have attracted scrutiny across emerging markets of late. India\u2019s longstanding efforts to tackle indebtedness gave its bonds an edge over Indonesia\u2019s last month amid reports authorities in Jakarta were mulling a big rise in spending. Colombia\u2019s credit outlook was cut due to pressure on government accounts, while just this week Brazil\u2019s president triggered a slide in its currency after raising doubts about fiscal targets.
While Modi may raise some spending in the budget to address jobs creation and to alleviate rural distress, no one is expecting a blowout. A revenue windfall and a central government windfall is helping the government allot money to projects to mollify their new allies without increasing the deficit.
Investors cheered the outgoing government\u2019s prudent interim budget in February, when it outlined the 14.1 trillion-rupee borrowing target, sending the 10-year yield to a seven-month low. But news of Modi\u2019s party losing its parliamentary majority, which raised the prospect of populist policies, triggered a spike in yields in June. The yield stood at 6.96% on Thursday.
The move later reversed, as the reappointment of Nirmala Sitharaman as finance minister helped to reassure the market. So did an unexpectedly large dividend from the central bank.
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The deficit target is seen slightly lower at 5% of gross domestic product for the current fiscal year, the Bloomberg survey of economists showed. The government is expected to bring the deficit down to below 4.5% for the 2026 fiscal year, almost all of the economists said.
But Modi will be under pressure to dole out funds for his coalition partners. A key ally has demanded financial support of more than 1 trillion rupees for the state in southern India he runs, Bloomberg reported on July 5, citing people familiar with the matter.
\u201cIf the fiscal deficit comes in at or below 4.9% of GDP with a borrowing cut, we may see a 15-20 basis points slide in yields,\u201d said Akshay Kumar, head of global markets-India at BNP Paribas SA. \u201cOur base case is for the current borrowing to be retained and the extra space can be targeted towards welfare-oriented spending.\u201d
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While the Reserve Bank of India appears in no hurry to cut interest rates due to sticky inflation, the steady stream of capital inflows linked to the inclusion of India\u2019s bonds in JP Morgan\u2019s debt gauge are likely to help push yields lower. So might further clarity on authorities\u2019 longer-term plans.
Sitharaman pledged in February to lower the fiscal deficit below 4.5% by the 2026 fiscal year.
The yield on the 10-year bond is seen at 6.9% by the end of 2024, according to median of forecasts in the survey.
\u201cDemand for government bonds is expected to exceed supply in FY25, supported by index inflows and long-only investor demand,\u201d said Gaura Sen Gupta, chief economist at IDFC First Bank Ltd., who expects the yield to drop to 6.85%.<\/p>\n<\/div>\n