Modi 3.0 Budget: Navigating In Choppy Waters

The world is in turmoil. The Russia-Ukraine conflict is well into its third year with no end in sight. Israel's pounding of Gaza is eight months old, with nearly 40,000 dead due the bombing.

- Ajit Ranade

The U.S. Presidential favourite just survived an assassination attempt. The United Kingdom just had a massive electoral reversal, with the Conservative Party swept out of power after fifteen years, and the Labour Party gaining nearly two-third majority with just one third of the votes cast. And while these geopolitical upheavals are going on, we also had the world's biggest IT failure, of the ever-reliable Microsoft system. This was presumably a bug in the cyber security module and not a cyber attack. The global outage caused hundreds of flights to be cancelled and disrupted government functioning. The country not affected by the Microsoft outage was China, and to a large extent India. There is perhaps some subtle geopolitical message in this quirky fact!

The global macroeconomic context is that big economies are still fighting inflation which refuses to come down to the target level of 2 percent. That is why monetary tightening continues even though industry keeps asking for an increase in money supply, and lower interest rates. Because of the still high interest rates industrial and housing investment is not rising as fast as it should to support employment. Unemployment worries are bringing out strong antiimmigrant sentiment, which has been tapped by the campaign of Donald Trump, and the farright parties in France and elsewhere in Europe. It has also led to a protectionist sentiment. Trump has already promised further penal import duties on Chinese goods. China too has its own economic woes. There is a glut of production of electric vehicles which are being dumped on the world.