Can Budget Calm the Markets?

31 Jan 2025 , 01:09 PM

Low GDP growth, decreasing consumption, a declining rupee, a rising dollar index, FIIs selling, Trump’s position on Indian exports, DeepSeek, and—above all—valuations are some of the many causes that are inducing uncertainity in the Indian markets.

But for the time being, everyone is focused on the next budget. Will it be able to stop the current decline in any way? Let’s attempt to respond to that.

Although Rs 11.1 lakh crore was set out for capital expenditures in the FY25 Budget, we are probably going to fall short of the goal by about 10–12%. Overall capital expenditures as a percentage of GDP have doubled over the past five years and are currently at 3.2%.

When it comes to dealing with low liquidity and a weak currency, the RBI is acting appropriately. The currency has been under pressure, thus stabilizing it involves injecting Rs 600 billion into banks through bond purchases and selling $5 billion at the same time.

This balance is important since lowering rates by themselves might make the rupee even weaker, while maintaining high rates could cause the economy to slow. The RBI is attempting to promote both growth and monetary stability with these actions.

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