Unfavourable: Oil price and US-China dispute

Reform agenda will turn more inclusive, alongside fine-tuning initiatives that have already been undertaken, if Prime Minister Narendra Modi-led coalition government returns to power as indicated by exit polls after voting ended for the general election on 19 May 2019.

Giving this early outlook on India’s next government challenges, Singapore-based DBS Bank said in a market report: “Global catalysts, particularly oil prices and US-China trade dispute are unfavourable (to India) at this juncture.

“We expect the Indian rupee to weaken past 70 (to the US dollar) again considering global risks, gains on effective exchange rate terms and domestic drivers,” DBS Group Research Economist Radhika Rao pointed out in the bank’s market report on 21 May 2019.

As for ongoing developments, infrastructure will remain a key area, continuing the strong performance by the roads and transport sector, which has already fast-tracked many stalled and ongoing projects.

“Boosting rural growth will also be a priority through expanding the already announced PM-Kisan scheme but is unlikely to include a nationwide farm loan waiver,” said Rao.

The goal of narrowing the fiscal deficit to 3% of GDP for the Central government in New Delhi entre continues to be delayed, with the February Interim Budget already making room for a small slippage in the fiscal goals.

An additional ~10bp slippage in the fiscal deficit target might be on the cards at the full-year (June/July) Budget, but not diverging widely from the path of fiscal consolidation.

“Borrowings will remain high and remain a driving force for the bond markets,” Rao wrote.

The government would also need to get fiscal consolidation back on track and rely on monetary policy to support growth.

Exit polls predict a return of the ruling coalition – National Democratic Alliance (NDA), for a second term led by Prime Minister Modi. Final voting results are due on 23 May 2019. fiinews.com