Let us begin with Budget 2023 that was unveiled this week, the Narendra Modi 2.0 government displayed courage by eschewing populism and kept on top of macroeconomic stability, in the face of external headwinds. Finance minister Nirmala Sitharaman clung to the ideas of high-quality fiscal correction and a durable, investment-led, “green” growth with a decisive thrust on digital infrastructure, as she presented the Budget for financial year 24 in Parliament on Wednesday. The Budget, therefore, lacked any meaningful consumption booster. Despite a rejig of the exemption-free personal income tax regime, its adoption by large sections of taxpayers is still doubtful. A cut in the highest surcharge on income tax may provide a modicum of support to consumption, which is seen to be very weak, in the second half of this fiscal, if not beyond. The fiscal deficit target for the next fiscal has been cut to 5.9% of GDP, against 6.4% in financial year 23. The minister also reaffirmed her resolve to bring down the gap to below 4.5% by financial year 26. The deficit target for next year is contingent on an assumed tax buoyancy of 1, higher than 0.8 this year. This looks difficult, given the likely slowdown in economic growth.
Moving on to Market, Shares of Adani Group companies slid for the sixth straight session on Thursday with the group’s combined market capitalisation seeing a drop of $106 billion since last Tuesday’s close as a video statement by group chairman Gautam Adani failed to assuage investor concerns. Adani Enterprises called off its Rs 20,000-crore follow-on public offering late on Wednesday, citing sustained market volatility and the interest of investors. There’s trouble brewing in the bond market as well. Bonds of firms related to Gautam Adani’s flagship Adani Enterprises have come under pressure after the FPO was withdrawn. According to reports, Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani Group companies. The Reserve Bank of India has sought details from banks about the exposure to Adani companies amid the sustained fall in the shares of group firms and the withdrawal of the follow-on public offer of Rs 20,000 crore. Separately, market regulator Securities and Exchange Board of India (Sebi) is examining the fall in shares of Adani Group and possible irregularities in the share sale by its flagship company, according to a Reuters report.
Meanwhile, India’s economic growth in real terms could slow to 6-6.8%, from an estimated 7% in the current fiscal and 8.7% last year, the Economic Survey 2022-23 tabled in Parliament on Tuesday predicted. It said the inflation challenge in financial year 24 “must be a lot less stiff than it has been this year”, but added that the monetary and fiscal authorities would need to be as proactive and vigilant as they have been this year. Having moved on after its encounter with the pandemic, the Indian economy returned to “the pre-pandemic growth path” in FY23 and is “prepared to grow at its potential in the medium term”, the Survey said, pinning hopes mainly on structural reforms already undertaken. For the medium term, the Survey pegged average growth at 6.5%, and said the potential GDP growth would rise to 7-8%, without a specifying any timeframe. The Survey marks a first in years by not making any reforms recommendations and is more an analysis of the government’s achievements on the economic front so far.
Let us have talk on consumer goods, the country’s Fast-moving consumer goods industry witnessed a consumption slowdown in the December quarter, with an overall “negative” volume growth, as consumers continue to reel under inflationary pressure, says a report. According to the report, in October-December, the FMCG industry grew 7.6 per cent in terms of value but its volume growth was -0.3 per cent.” Overall FMCG volume growth is negative, the absolute values, as well as volumes, continue to be above pre-Covid levels across markets,” it said. The rural markets declined 2.8 per cent registering the sixth consecutive quarter with negative volume growth, while the urban market maintained stable positive growth of 1.6 per cent.
Lastly, The Goods and Services Tax Council is likely to meet later this month to take up the long-pending issue of setting up of appellate tribunals. According to sources, the date of the meeting is yet to be finalised but it will be towards the middle of the month around February 18. The Council typically meets once after the presentation of the Union Budget. The top agenda would be setting up of the appellate tribunals for GST. The Council is also expected to take up the report on online gaming that was submitted by a Group of Ministers.