Corporate Grapevine     

Published: February 15, 2025
Updated: February 15, 2025

MARKETS UNHAPPY WITH FM

Uncertain benefits of budget tax cuts

The stock market may have overestimated the budget’s positives. While the budget will put an additional Rs 1 trillion in taxpayers’ pockets, this benefit must be viewed in the context of a negative economic impulse due to a 40 bps decrease in yoy Gross Fiscal Deficit (GFD/GDP), sagging private consumption, limited impact on high-income households’ consumption patterns beyond discretionary spending, and no impact on low-income households which are below the income-tax exemp tion limit.

The muted growth in Central government capital expenditure may temper the budget’s potential benefits, leading to a more nuanced market assessment, say analysts. Lack of new jobs and extremely low salaries at the entry level for young graduates is another big worry.

Besides, the markets are also worried over the Trump administration’s decision to impose tariffs on imports from Canada, Mexico and China. These decisions are likely to increase global macro-economic uncertainty, affecting growth and inflation. This move will also cre ate micro-level uncer tainty for US companies and exporters impacted by the tariffs, leading to risk-off sentiment in glo bal markets.

Investors are con cerned about the poten tial extension of import duties to other countries like India and the retali ation from affected na tions, and possible earn ings downgrades due to lower global growth and investment.

Markets are cer tainly not happy with the ongoing narrative.