Author name: nullbrackets@gmail.com

The reascension of President Donald Trump to the helm of the United States has precipitated a series of economic reverberations, notably impacting India’s financial markets. The imposition of tariffs and the promulgation of protectionist trade policies have engendered a palpable sense of trepidation among investors, culminating in discernible fluctuations within the Indian stock market. In a recent sequence of trading sessions, India’s benchmark indices have exhibited a downward trajectory. The Nifty 50 index experienced a decrement of 0.12%, concluding at 23,045.25, while the BSE Sensex witnessed a decline of 0.16%, settling at 76,171.08. This downturn signifies an aggregate diminution of approximately 3% over a span of six sessions.  Not to forget, the aggregate market capitalisation of companies listed on the Bombay Stock Exchange (BSE) contracted by a staggering ₹9.3 lakh crore, settling in at ₹408.52 lakh crore. Concurrently, small-cap stocks have approached bear market territory, descending 21.4% below their historical zeniths, and the mid-cap index has retracted by 17% from its apex. These perturbations are largely attributable to apprehensions surrounding U.S. tariffs imposed on India and substantial divestments by foreign investors.  The promulgation of tariffs by the U.S. administration has ostensibly catalysed an exodus of Foreign Institutional Investors (FIIs) from the Indian markets. Factors such as a fortifying U.S. dollar, elevated U.S. bond yields, and the overarching ‘America First’ doctrine have collectively impelled FIIs to reallocate their capital. This capital flight has exerted downward pressure on Indian equities, further compounding the prevailing market downturn. The ramifications of President Trump’s policies manifest heterogeneously across various sectors of the Indian economy. The IT and Pharmaceutical sectors, with a substantial reliance on exports to the U.S., confront potential adversities stemming from heightened tariffs and stringent immigration policies. The imposition of elevated tariffs could erode the competitive pricing advantage of Indian IT and pharmaceutical firms in the U.S. market. Moreover, restrictive immigration reforms may impede the mobility of skilled professionals, thereby inflating operational costs for IT enterprises. The U.S. administration’s inclination towards fossil fuels, coupled with prospective tariffs on wind turbines and solar panels, poses hurdles for India’s rising renewable energy sector. Indian companies engaged in green energy initiatives may encounter escalated costs for technology and raw material imports, potentially stymieing the momentum of sustainable energy projects. The imposition of a 25% tariff on steel and aluminum imports by the U.S. has precipitated a 3% decline in India’s metals index. Prominent entities such as Tata Steel and JSW Steel have borne the brunt of this policy, registering significant stock devaluations. Amidst the prevailing economic uncertainties, India’s retail inflation has exhibited a decrement, descending to 4.31%. This development offers a modicum of respite, potentially augmenting consumer purchasing power and creating economic stability. Nevertheless, the overarching apprehensions pertaining to U.S. trade policies continue to cast a shadow over the economic outlook. In response to these multifaceted challenges, it is imperative for India to recalibrate its economic and diplomatic strategies. PM Modi’s just commenced engagements in the US, particularly with President Trump presents a timely opportunity to negotiate trade terms, mitigate tariff-related adversities, and fortify bilateral economic ties. Also, diversifying export markets beyond the U.S. and reinforcing domestic consumption could serve as viable avenues to insulate the Indian economy from external shocks. The resurgence of President Trump’s administration heralds a complex interplay of challenges and opportunities for India’s stock market. A nuanced understanding of these dynamics, coupled with agile policy responses, will be instrumental in navigating the evolving economic landscape.

The Union Budget of this year has been a boon for the middle class, specially the salaried class, which felt a wee bit overlooked over the years. Despite the fact, that with about 10 million taxpayers out of a total of 30 million, getting off the tax net, shaving 1 trillion INR off the Indian exchequer’s reserve, the FM has still managed to pare the Fiscal Deficit for the coming fiscal to 4.4% from the RE for the present fiscal of around 4.8%. The basic ingredients behind this fine balancing act are a toned down Capex of Rs 11.2 Lakh crore (1% increase over last fiscal budget), albeit including Grants-in-aid to States, Rs 15 lakh crore; an estimated 14.4% rise in personal income tax from Rs 12.6 lakh crore to Rs 14.4 lakh crore, next fiscal; Corporation tax and GST growth expected to grow by 10%; growth in revenue from Dividend income and profits from PSEs from Rs 2.9 lakh crore to Rs 3.3 lakh crore in FY 25. As such, the economy is well poised on the fiscal consolidation path to keeping the target below the threshold of 4.5% of GDP, as outlined in the Budget 2021. Along with the above, the Budget enjoins the Government to seek to bring down the ‘Debt to GDP’ to about 50% by the end of FY31 (End of the 16th Finance Commission’s term) from 56.1%, projected for FY 26. By the calculations of a few economists, this would dovetail well with a Fiscal Deficit of 3 to 3.3%, coupled with a capex of 3 to 3.5% of GDP. This is the outcome of an admixture of fiscal prudence and development measures undertaken by the Government (with an added dose of infra), that would lay down the edifice of a resilient and growing economy duly buttressed by fiscal buffers, ever ready to face the global and other economic headwinds, going forward. The major takeaway for the salaried class translates to a tax free salary income of up to Rs 12.75 lakh, rebate on annual income up to Rs 12 lakh, as against the extant limit of Rs 7 lakh. As per the rejigged tax slabs, the extent of tax savings would range from Rs 30K to Rs 1.1 lakh, with the highest tax rate being applicable to income above Rs 24 lakh vis-a-vis Rs 15 lakh, at present. Government’s emphasis on revamping the sagging demand growth by strengthening the purchasing power of the middle class is amply borne out by this budget, as also keeping a hawk eye on the Indian economy’s trajectory to a ‘Viksit Bharat” by way of sumptuous allocation of funds to the major sectors like Defence (Rs 4.91 trillion), Rural Development (Rs 2.66 trillion), Agriculture & Allied activities (Rs 1.71 trillion), Education (Rs 1.28 trillion), Health (Rs 98.3 K), Urban Development (Rs 96.7 K), IT & Telecom (Rs 95.2 K), and the list goes on. The Budget FY 25 revolves around 4 major planks of development, viz., Agriculture, Investment, MSME and Exports. Taking cognizance of the dominance of AI, going forward, the Government has come out with an outlay of Rs 500 Crore on the Centres of Excellence in AI for education. Further, the Udan Scheme has been given a fillip to cover 120 new destinations; Jan Vishwas Bill would be introduced to decriminalise 100 provisions in various statutes; FDI limit for insurance increased to 100% from the extant 74%. That said, there are certain facts of concern which engages the Union Government, like a gradual economic slowdown, a markdown in the RE of many crucial economic parameters like Disinvestment, Capex, Corporation tax and Excise duties, to name a few. No wonder, the FM’s stress in the Budget on upliftment of rural economy, MSMEs, boost to investment with Private sector taking a big stride with Government creating an enabling environment and boosting exports to arrest a slide in the balance of trade. Although the Government’s efforts in keeping the overall inflation in check through fiscal and monetary measures cannot be overlooked, yet the food inflation horse needs to be reined in to preempt a gallop – hence the imminent need for that fillip to production with a matching consumer demand! The Budget 2025, therefore, amply deserves to be appreciated, for nothing less than it being a brilliant trapeze act, encapsulating courage, conviction, optimism and astuteness.

The Economic Survey of FY 25 has an underlay of AI, that poses “unprecedented opportunities and significant challenges” for the job market spanning the globe, warranting building of “robust institutions” to alleviate its deleterious impact. India, taking a cue from its past experiences with pathbreaking technological disruptions, understands the importance of robust institutions playing a key role in steering these to ensuring equitable outcomes for the economy. Substantial investments in education and skilling ring fenced by an enabling institutional ecosystem would go a long way in the vibrant workforce adapt to and adopt the new technology that has taken the world by storm. With a services-led economy, and the country boasting of its demographic advantage, the nation is quite rightly besieged by AI’s potential of upending its extant advantages by potential displacement of a massive labour force. An IIM survey exhibits a disturbing prognosis of about 40% of the surveyed employees to the effect that the human skills would be outdone by AI in the next about half a decade. A healthy and robust economic and social infrastructure would greatly contribute to a truly inclusive economic growth in the new world order. With an estimated GDP growth of 6.4% in FY 25 and within a band of 6.3-6.8% in the coming fiscal, against the backdrop of strong economic fundamentals, a robust external account and rigorous adherence to fiscal consolidation path with sustained impetus on private consumption, the GoI’s strategy would revolve around giving impetus to Industries (added push to capital goods sector) bolstered with R&D support, MSMEs, and the requisite infra push to a sustainable upward trajectory in India’s GDP path with a substantial thrust on services and industrial exports, that is a sine qua non for a ‘Viksit Bharat’ by 2047. With a positive outlook on the food inflation front, with a steady core inflation, buttressed by reduced global energy and commodity prices, India looks poised to scale the frontier, despite climate issues and geo political instability. The forex health looks sturdy enough to weather the intermittent capital flight, and can support 90% of its external debt and 10 months of imports, on account of an evolved domestic capital market and steady capital inflows. The formal sector has registered an impressive growth with EPFO subscriptions more than doubling in the 5 year time frame from 2018-19. An issue of concern, however, is the lack of correlation between growth in corporate profits and wages. While profits soared to 22% in FY 24, employment grew by a paltry 1.5%, due to a sharp focus of the corporate sector on cost-cutting through workforce layoff. This flags the issue of rising income inequality, striking at the very foundation of inclusive growth. Overall, a balanced outlook despite global challenges (geo political, commodity and energy prices and trade barriers); there is an urgent need for structural reforms, deregulation of economy, investment uptick, corporate wage growth for a buoyant consumer demand and a sustained infra push for a sustainable growth trajectory of the Indian economy.