Analysis : India’s growth budget raises concerns over inflation

In the wake of the seven-year high price of crude oil and strong expectations from the US Federal Reserve, traders fear the government’s plans and the Reserve Bank of India must take action early.

India In 2022/23, it reported a 7.5 trillion rupee ($ 100 billion) capital expenditure, or 2.9% of GDP, which is 35.4% higher than the previous fiscal year.

The government is expected to borrow 14.95 trillion rupees, which is higher than the market target of 12 trillion to 13 trillion rupees.

“We expect RBI to focus on growing to 4% from its current level,” said Uupas and Baradwaj, an economist in Kotak Mahindra. Bank.

The Central Bank of India (CBN) has maintained a 4% lower reserve target since May 2020 and has reaffirmed its market position until economic recovery is strong.

Consumer prices rose to 5.59 percent in December for the first five months, but inflation has soared to 2-26 percent.

“They need to improve their handling of the RBI expansion budget,” said Sandy Baglala, chief economist at the Trust Mutual Fund.

“The more RBI is normalized, the more markets lose confidence in the RBI’s ability to control inflation and inflation.”

Hardwaj said the February 9 policy review should reverse the 40 BPS speed and bring transparency.

“However, sentiment in the bond markets has weakened further after the budget and therefore the RBI would prefer to postpone its decision to April policy.” She added.

Economists believe that Benchmark bond yields, which rose to 55 bps by 2022 last year, will increase in the near future without open markets or liquid-independent operation transitions.

“The budget will definitely make RBI’s work even more difficult in terms of product management,” said Yuvika Singgal, a Quantum Eco-research economist.

Economists who commented before the budget said that in June, revenue will increase by 25 percentage points and increase by a total of 75 bps next budget.

He predicted that the reciprocal rate would increase at next week’s policy review and increase by 90 bps on FY23.

Six economists and market participants say the RBI alone should tackle inflation and now expect rapid growth and growth.

“Beyond the productive curve, during the year, we now expect bond yields to increase by 20 bps to 30 bps.”

Quantum Advisers Chief Investment Officer Arvind Charry said.

“RBI should start raising policy rates and we expect at least 100 bps increase in FY23.”

($ 1 = 74,9330 Indian rupees)

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