Decoding the Budget: Two Cheers, the third depends on Trump effect
tax cuts in the budget, but the stock markets barely moved. Why so? Because finance minister Nirmala Sitharaman's speech about a bright future was silent on the sharp, continuing fall of Indian stock markets and the rupee ever since it became clear that Donald Trump was going to become US President and disrupt global relations.
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He is expected to announce high tariffs on Mexico, Canada and China on Saturday night, and on steel, aluminium, chips, oil and gas soon after. His words will matter more for markets than anything Sitharaman said, showing how large his shadow falls on India. This is just his first tariff barrage: nobody knows how far he will go.
His unpredictability is killing animal spirits in the world economy, and in India too. Global money is rushing to the ultimate safe haven, the US, leaving emerging markets like India stranded. The schemes announced by the FM to spur growth may be more than nullified by the Trump effect.
Remarkable Achievement
The best thing in her budget is the reduction of the fiscal deficit to 4.4% of GDP, fulfilling a promise of reduction from 9.2% made five years ago. To have combined that with rising capex and GDP growth of 7% is a remarkable achievement, even if it owes a lot to record RBI dividends.
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