January 2024

Political & Policy Issues to Watch

Parliament’s short Winter Session was both, highly acrimonious and unusually productive. 146 opposition MPs were suspended for ‘disorderly conduct’ and one was expelled for ethical misconduct. Despite the opposition’s repeated protests and walkouts, the government managed to introduce 10 bills and pass a total of 17. These included 3 bills to replace colonial-era criminal laws and procedures; a bill repealing 65 redundant laws; one that changes the selection procedure for Election Commissioners; and a new telecommunications law that may potentially impinge on personal privacy. Outside of the legislature, the Supreme Court’s formal nod to the abrogation of Article 370 was a shot in the arm for the government and clears the way for the restoration of full statehood for Jammu & Kashmir.

Ayodhya’s Ram Temple and the Interim Budget will be in focus this month

Two upcoming events will set the tone for national elections, expected in April-May. The inauguration of the Ram Temple in Ayodhya later this month will serve as an informal launchpad for the BJP’s campaign. It may also leave the INDIA bloc parties in a bind over how to handle what remains a deeply sensitive matter. Meanwhile, even as February’s Union Budget will by, convention, be a stop-gap, interim statement of account, it may provide some succour to voters and industry alike. Expectations are rife that the FM will announce concessions that leave more money in the hands of consumers, as well as a few new incentives for manufacturers.

Outlook for the Market

The just-released first advance estimates for national income in 2023-24 paint a picture of robust growth, but with a few dark spots. Overall, the government currently expects the economy to expand by 7.4% in FY24, marginally better than last year’s 7.3% – but considerably faster than the 6-6.5% consensus estimates that prevailed until quite recently. Manufacturing (6.5%), mining (8.1%), utilities (8.3%) and construction (10.7%) have all either accelerated or held ground. On the other hand, agricultural growth is expected to slow from 4% last year to 1.8%. Services are a mixed bag, with trade, hotels and transport and communication services projected to dip from 14% to just 6.3% while financial, real estate and professional services gather pace, growing by 8.9% – up from 7.1%. Confirming reports from industry, private consumption remains tepid, falling as a share of GDP from 58.5% to 56.9%, but the investment cycle appears to be slowly reviving. The latest lead indicators are broadly in line with the advance estimates: GST receipts (+10% in December) and e-Way bills (+8.5% in November) remain strong, as do auto sales (up 21% in December and 11% in calendar 2023, led by two-wheelers). The PMI indices tell a mixed story, with manufacturing slowing (54.9, down from 56) but services rising (59, up from 56.9) to a 3-month high.