A weaker Modi mandate could put welfarism ahead of fiscal prudence

[andhra_jp]

An economist pointed out that if the BJP and its alliance do not win the numbers it has targeted, then a big-bang Budget oriented towards welfare measures to boost consumption may be on the anvil

Should Prime Minister Narendra Modi secure a third term, albeit with a weaker mandate for the NDA, fiscal policy could witness a recalibration, with a clear focus on welfare measures to bolster consumption.

So far, the government’s fiscal prudence has often come at the cost of stepping away from direct measures to spur consumption. Barring a few steps, such as the free food grain scheme that will cost the Centre Rs 11.80 lakh crore for the next five years from January 1, 2024.

Hard data points to India’s relatively weak consumption story. At a time when the country is expected to grow at 8.2 percent for FY24, private consumption of around 4 percent is at a 20-year low. And, though India's overall GDP growth is seen at a blockbuster 8.2 percent in 2023-24, farm sector growth remains at an abysmal 1.4 percent as against 4.7 percent in 2022-23.

“A weaker parliamentary mandate would imply more focus on central government-led social welfare provisions. The scale of technology expansion in government services may accordingly be higher, with legislation to regulate the use of personal data and domestic digital infrastructure, and on the use of AI systems,” said a report by S&P Market Intelligence on May 27.

An economist, on the condition of anonymity, pointed out the same that if the BJP and its alliance do not win the numbers it has targeted — the party has been speaking of “abki baar 400 paar” (this time, more than 400) — then a big-bang Budget oriented towards welfare measures to boost consumption may be on the anvil.

More expenditure to boost consumption therefore could necessitate stepping away, to an extent, from quicker fiscal consolidation.

Remember, the current BJP-led government that enjoys absolute majority on its own, has been fiscally strict of late, scaling down the deficit to 5.8 percent in FY24 and another 70 basis points lower for the current financial year. The interim Budget for 2024-25 was short of any big-bang announcements in a bid to keep to the medium-term aim of bringing the gap down to below 4.5 percent in 2025-26.

In fact, data released on May 31 showed that the fiscal deficit gap for FY24 was even lower at 5.6 percent versus the revised estimate, thanks to a cut in expenditure.

When it comes to boosting incomes and demand in the economy, the current BJP-led government has mostly relied on capital expenditure by allocating record outlays, including in the current financial year, at Rs 11.11 lakh crore.

[Joker_007]

agreed.

[andhra_jp]

Bears sweep to power on D-Street; Nifty dives 6%, PSUs hammered as NDA verdict falls short

Every single sectoral index with the exception of FMCG closed in the red, with banks, realty, and PSU stocks falling the most. Adani group stocks too were among the biggest losers of the day.

The euphoria on Monday turned to panic overnight as the NDA coalition fell way short of the emphatic performance that the exit polls had forecast. The Nifty and Sensex plunged around 6 percent each, as panicky bulls tried to exit their positions. But the real carnage was in the market fancied PSU stocks, some of which fell as much as 25 percent intra-day.

The big worry for the market is the policy decisions could slow down now that the BJP looks unlikely to get a majority of its own. This also caused the rupee to fall by 45 paise and close at 83.59 against the US dollar.

Every single sectoral index with the exception of FMCG closed in the red, with banks, realty, and PSU stocks falling the most. Adani group stocks too were among the biggest losers of the day.

The PSU Banks index and the CPSE Index on the NSE fell 15 percent, the Realty index fell 9 percent and the Nifty Bank fell 7 percent.

Among individual stocks, SAIL, BEL, PFC, REC, CONCOR, GAIL, NALCO, Hindustan Aeronautics and BHEL fell between 18-25 percent. Trading in these stocks had to be temporarily halted after they fell 15 percent.

“Maybe on taxation side, there may be a little more stricter taxation regime, and they will probably want to spend more in poverty alleviation or in terms of creating rural demand,” he said, adding that decision making could be slower.

[andhra_jp]

Markets will be shaky if BJP does not form stable govt, says Vijay Kedia

In terms of investment strategy, Kedia believes that the best strategy would be to focus on sectors that are high priority for the new government

With the election results clearly showing that the ruling BJP party will be unable to secure an absolute majority on its own, markets will remain shaky and lack confidence, said well-known stock market investor Vijay Kedia.

“If BJP is unable to form a stable government then the markets will stay shaky and lack confidence because that throws up a situation with a lot of ifs and buts for the market as the alliance partners could end up risking the overall stability,” Kedia said.

Indeed, as the stock market went in a free-fall mode from the word go on Tuesday as the initial trends of the election results started pouring in well before the markets opened for trading.