INR: No fiscal profligacy but prudence

The new Modi government unveiled a responsible and prudent budget yesterday that focused on job creation, upskilling the youth and women, and improving infrastructure, Commerzbank FX strategist Charlie Lay notes.

Government maintains commitment to fiscal consolidation

“The Indian government maintained its commitment to fiscal consolidation and there were no signs of fiscal profligacy. Some had feared a ramp-up in populist spending after the weaker-than-expected performance by PM Modi’s Bharatiya Janata Party (BJP) in this year’s federal election. The government even lowered the fiscal deficit projection for the current fiscal year 2024-2025 to 4.9% of GDP vs the interim projection of 5.1% in February and against 5.6% for the previous year.”

“These are positive signs and pave the way for a rating upgrade in the next year or two. S&P upgraded India’s rating outlook to positive from neutral in May this year. It cited the robust growth environment and the improving quality of government spending. The budget allocated INR11.1trn or 3.4% of GDP to capex spending for the current fiscal year, aimed to improve the country’s infrastructure.”

“The SENSEX dipped initially but closed just slightly lower and the 10Y government bond yield was just 1bp higher at 6.98%. USD/INR was also just modestly higher around 83.70. The monthly PMI reports for the manufacturing and services sectors published this morning surprised to the upside and continue to point to a healthy expansion.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.