Asks if the cautious budget with record bond issuance is wise in an uncertain global backdrop.
Paul Allen
Rahul Bajoria
The budget's compulsion was to address the 'tariff overhang', not further fiscal consolidation. It focuses on supporting MSMEs, capital goods imports, and attracting foreign investment in data centers.
Asks about missing reforms and market disappointment.
Paul Allen
Rahul Bajoria
Markets expected tax reforms to attract FPI equity inflows and help debt mutual funds, but these were missing. Instead, taxes on derivatives were raised.
Asks how debt markets will absorb extra issuance.
Paul Allen
Rahul Bajoria
The RBI is becoming the buyer of last resort through OMO purchases. The market has little appetite to absorb 17.2 trillion rupees of bonds alone.
Asks about implications for fiscal consolidation and India's credit rating.
Paul Allen
Rahul Bajoria
The fiscal anchor has moved from deficit-to-GDP to debt-to-GDP. Peak fiscal consolidation is behind us; the focus is now on promoting capex-driven growth and becoming a manufacturing hub.
Asks about RBI's inflation mandate versus deficit financing.
Paul Allen
Rahul Bajoria
India did away with deficit financing in the early '90s. The RBI is an inflation-targeting central bank and won't overlook its primary mandate.
Asks if the budget could have done more to support the rupee, foreign outflows, and earnings.
Paul Allen
Rahul Bajoria
Yes, the budget was more a vision statement than a measure to attract FPI inflows right away. The rupee's problem is a shrinking capital account surplus, not a current account deficit.
Asks about the impact of gold's price fall on India's economy.
Paul Allen
Rahul Bajoria
The correction in gold prices is a welcome move for India's external account because it was the price effect, not volumes, weighing on the trade deficit.