With fy24 budget, india shows signs of shift in growth strategy

With fy24 budget, india shows signs of shift in growth strategy

  • The Modi administration’s latest budget will have a mildly contractionary stance for the economy. This is broadly appropriate to balance consolidation and growth concerns.
  • The boost in public capital spending is welcome given the growing demands on India’s infrastructure, although questions remain on the pacing and quality of investments.
  • Consolidation is largely helped by a reduction in expected subsidy spending, as the price shocks of the previous year dissipate and selected schemes are revisited.
  • The budget also shows signs of subtle shifts in the government’s economic and political strategy as it aims to boost both India’s growth and Modi’s electoral prospects.

China: the growth rebound will be restrained

  • We disagree with the rush to aggressively upgrade growth forecasts for China and continue to expect economic growth this year to be around 4.5%.
  • The drag from the property sector and diminished space for policy support will restrain the strength of the economic rebound.
  • Nevertheless, China’s rebound, however partial, will have positive effects on other economies via outbound tourism, commodity tailwinds, and looser financial conditions.

Regional updates

  • US-China ties will not be derailed for long by the bizarre incident of the Chinese surveillance balloon intruding into American air space.
  • Hong Kong faces a full year of GDP contractions amidst trade and investment woes.
  • Taiwan’s export orders continue to face difficulties, but 2022 was a good year overall.
  • South Korea faces a record trade deficit induced by plummeting exports, while also experiencing a setback in disinflation due to high energy prices.
  • The ongoing controversy over the Adani Group raises broader questions about the government’s economic strategy and India’s corporate and regulatory governance.
  • Thailand: a recovery underpinned by robust turnarounds in tourism and consumer spending is underway. Inflation risks are, however, rising.

Read more: CAA-Weekly-6-feb-2023.pdf