Connect with us
हिंदी اردو
Friday,17-July-2026
Breaking News

Business

Budget’s growth focus to face macro challenges

Published

4 years ago

on

The Budget is focused on growth, but will face macro challenges, Japanese brokerage Nomura said in a report.

First, the ability of the government — both central and states — to spend 2.9 per cent of GDP on capex will face execution hurdles. Identification of projects, on-the-ground implementation, coordination with different agencies — all typically lead to a smaller amount being spent than allocated.

Second, if revenues disappoint or other expenses rise (higher subsidies or more allocation towards rural employment, for example), then there is a risk of the capex amount being pruned.

Third, we see other growth challenges. India is currently in the midst of a business cycle recovery. However, we expect India’s growth to decelerate from H2 CY2022 onwards, reflecting weaker consumption demand from low income households (due to scarring effects and high inflation), weaker export growth and continued sub-par private capex due to low capacity utilisation.

Rising oil prices (a negative term of trade effect) and tighter global financial conditions are also growth headwinds.

Hence, if the capex-led push is not fruitful, then the growth slowdown could be material. We currently expect GDP growth of 8.7 per cent y-o-y in FY22 (reduced recently from 9.2 per cent owing to the impact of Omicron.

Nomura said we continue to expect higher inflation and wider current account deficits, largely due to rising commodity prices, although an expansionary budget may also play an incremental role. On inflation, while food prices appear in check, core inflationary pressures are rising across clothing, household goods and services and personal care items.

Firms are passing higher input prices onto consumer prices. Domestic fuel prices are currently on hold, but will likely be adjusted higher after the state elections. We expect services price inflation to also rise as the economy opens.

We expect elevated global commodity prices, high inflation and steady domestic demand to result in higher imports, widening the current account deficit to 2.6 per cent of GDP in 2022, up from a deficit of 1.3 per cent in 2021.

The Budget is unambiguously focused on reviving growth, via higher public capex. Capital expenditure generally results in a higher growth multiplier, so the continued focus on infrastructure spending, including support to states to spend on capex, is important at a time when private capex is sluggish.

The government expects to miss its budgeted fiscal deficit target of 6.8 per cent of GDP for FY22 (year ending March 2022) marginally, with an actual outturn of 6.9 per cent (Figure 1). The sharp rise in receipts of corporate taxes, robust income taxes and strong indirect taxes (in part due to higher fuel excise duties in the first half of the year) have resulted in net tax revenues exceeding budget estimates by Rs 2.2trn (1.0 per cent of GDP). However, contrary to our expectation, the government has revised up its capex commitment for the year by Rs 485bn (0.2 per cent of GDP), though this primarily reflects the government clearing its liabilities of the recently divested Air India. Also, in line with our expectations, revenue expenditure (revex) has been higher by Rs 2.4trn (1.0 per cent of GDP), reflecting the second wave support package, food and fertiliser subsidies, export incentives and extra spending by some departments. Finally, the disinvestment target has now been calibrated lower by Rs 970bn (0.4 per cent of GDP).

Post Views: 240
Related Tags:

Business

Govt proposes new fuel economy norms for cars from April 1, 2027

Published

20 hours ago

on

July 16, 2026

By

New Delhi, July 16: The Ministry of Power on Thursday circulated the draft Corporate Average Fuel Economy 2027 Norms (CAFE-III) for stakeholder consultation, which propose a fresh five-year fuel efficiency regime for passenger vehicles, beginning from April 1, 2027.

The draft norms apply to M1 category vehicles, a classification that covers passenger cars carrying up to eight people besides the driver, which includes all hatchbacks, sedans and SUVs sold for personal use. The category excludes commercial goods carriers and buses, according to an official statement.

The existing CAFE-II norms are likely to lapse on March 31, 2027. Compliance under CAFE-III will be assessed in two phases, the first covering three years and the second the remaining two, with fuel efficiency targets progressing to more stringent levels through each passing year.

The framework, overseen by the Bureau of Energy Efficiency under the Ministry of Power, aims to bring down average fleet emissions from current levels to a significantly lower threshold by FY32, according to earlier drafts reported in the media.

Compliance credits have been priced at Rs 2,500 each, rising by Rs 500 every year through the period, with unused credits expiring once the compliance period ends. Automakers that fail to meet targets could face penalties, though the detailed amounts have not been mentioned. Manufacturers selling fewer than 1,000 vehicles annually will remain exempt.

Industry has differed in its response to earlier versions of the draft. The Society of Indian Automobile Manufacturers (SIAM) has backed the proposal as balanced, while some carmakers have pushed for relief on small petrol cars and others have opposed differentiated treatment for that segment.

The ministry has invited suggestions from stakeholders and the public. Feedback can be sent to the Under Secretary, Energy Conservation, at the ministry’s New Delhi office, or can be emailed.

The last date for submissions is August 6, 2026. The draft norms will also be uploaded on the websites of the Ministry of Power and the Bureau of Energy Efficiency shortly, the statement said.

M1 vehicles are subject to stringent fuel efficiency and emission targets under Corporate Average Fuel Economy (CAFE) norms, which are regularly updated to reduce greenhouse gases.

Post Views: 69,172
Continue Reading

Business

Govt hikes windfall duty on diesel, ATF exports

Published

23 hours ago

on

July 16, 2026

By

New Delhi, July 16: The Centre has raised windfall taxes on exports of diesel and aviation turbine fuel (ATF) while lowering the levy on petrol exports, as surging global oil prices driven by the escalating US-Iran conflict boosted refining margins, with the revised rates taking effect from Thursday.

According to a Finance Ministry notification, the export duty on diesel has been increased to Rs 15.5 per litre from Rs 8.5 per litre, while the levy on aviation turbine fuel has been raised to Rs 14.5 per litre from Rs 7.5 per litre.

At the same time, the government has reduced the export duty on petrol to Rs 2.5 per litre from Rs 4 per litre.

The revised rates came into effect from July 16, according to the notification.

The latest revision comes amid a sharp rise in global crude oil prices following an escalation in hostilities between the United States and Iran.

Oil prices climbed on Wednesday before easing slightly after US President Donald Trump reimposed a naval blockade on all Iranian ports, prompting Iran to launch retaliatory strikes on US infrastructure in the region.

Earlier this month, the government had revised the windfall tax on exports of petroleum products by raising the levy on petrol while reducing the duties on diesel and aviation turbine fuel.

The Special Additional Excise Duty (SAED) on petrol exports was increased to Rs 4 per litre from Rs 1.5 per litre. At the same time, the export duty on diesel was reduced to Rs 8.5 per litre from Rs 14 per litre, while the levy on ATF exports was cut to Rs 7.5 per litre from Rs 12.5 per litre.

The government reviews windfall taxes on domestically produced crude oil and exports of petroleum products at regular intervals to align the levies with changes in international crude prices and refining margins.

Post Views: 67,701
Continue Reading

Business

Sensex, Nifty trade higher led by consumer durables and IT stocks

Published

23 hours ago

on

July 16, 2026

By

Mumbai, July 16: Indian equity benchmark indices traded higher in the morning session on Thursday despite mixed global cues.

Sensex jumped over 300 points or 0.42 per cent to hit an intraday high of 77,514.30 in early trade, while Nifty rose 88 points or 0.36 per cent to 24,167 amid buying in consumer durables, IT and auto stocks.

Nifty Consumer Durables index surged 1.63 per cent, followed by Nifty IT, which gained 1.38 per cent, Nifty MidSmall IT & Telecom, up 1.13 per cent, and Nifty Auto, which advanced 0.72 per cent.

On the downside, financial stocks remained under pressure, with the Nifty MidSmall Financial Services index falling 1 per cent and Nifty Financial Services Ex-Bank declining 0.88 per cent. Nifty Realty, Nifty PSU Bank and Nifty Private Bank indices also traded lower.

SBI Life, HDFC Life, ONGC, Axis Bank, BEL, Max Healthcare Institute, Grasim Industries and Apollo Hospitals Enterprise were among the top laggards on the Nifty.

Analysts said the market is likely to trade in a narrow range with a positive bias as crude oil prices remain broadly steady and global markets stabilise.

Investors will closely track the June quarter earnings season, with banks and NBFCs expected to post healthy numbers backed by robust credit growth, according to them.

They further noted that automobile companies are also likely to remain in focus amid expectations of strong quarterly growth, supported by GST cuts and easier availability of finance, while profitable digital platform companies could continue to attract investor interest.

Meanwhile, Brent crude rose 0.71 per cent to around $85 a barrel, while US West Texas Intermediate (WTI) crude gained 1.24 per cent to $80.59 a barrel.

Among Asian markets, Japan’s Nikkei traded over 2 per cent lower and South Korea’s KOSPI declined around 6 per cent, while Hong Kong’s Hang Seng gained about 2 per cent.

Post Views: 70,097
Continue Reading

Trending