Panorama – February 2024

Panorama February 2024 edition is out now!

Panorama is a meticulously crafted report that offers a comprehensive view of the macro factors and market trends shaping India’s economic landscape.

Here are the key insights from the report:

  1. The increase in capital spending has been the main factor contributing to the higher fiscal deficit compared to FY19. However, improved direct tax collections and lower devolution to states have helped alleviate the impact on the Centre’s finances.
  2. The quality of government spending continues to improve, with capital expenditure as a percentage of GDP and total budgeted expenditure both showing improvement in the FY25 budget estimates. Post-pandemic, the government has also significantly reduced spending on subsidies to achieve fiscal consolidation.
  3. Rural-centric spending experiences modest growth of 2.6% YoY in the FY25 interim budget. However, the allocation to rural housing significantly increases as the government prioritises housing for the middle class.
  4. Gross borrowings are budgeted to be lower by Rs 1.3 tn in FY25. Aggressive fiscal consolidation benefits the debt market by restricting the borrowing required to finance the deficit. Small savings collections could also surpass budget estimates, reducing the government’s borrowing requirements in the future.
  5. The G-sec supply-demand outlook appears favourable, with large FPI debt flows expected due to the inclusion of Indian government securities in the JP Morgan emerging market bond index suite.
  6. Liquidity conditions in the banking system remain in deficit, primarily due to substantial government balances held with the RBI. Short-term rates should ease as government spending picks up and the RBI’s rate-cut cycle starts to get factored in.
  7. OMO sales by the RBI and changing market expectations of the Fed rate cut cycle pose potential risks to the debt market outlook.

Click here to read the full report

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