MACRO BLUES HAUNT THE BUDGET. AGAIN

WITH CONSUMPTION, EXPORTS AND PRIVATE INVESTMENT DOWN, THE GOVERNMENT NEEDS TO ACT ON WAR FOOTING TO BOOST ECONOMIC GROWTH.

- ASHUTOSH KUMAR

AFTER ALMOST four years, macroeconomic turbulence is back to haunt the finance ministry ahead of the Union Budget. Finance minister Nirmala Sitharaman and the mandarins at North Block will have to tread cautiously on the path of macroeconomic stability, ensuring a perfect balance between growth and fiscal prudence.

In Q2 FY25, India's gross domestic product (GDP) growth slumped to a seven-quarter low of 5.4%, while inflation eased to 5.48% in November after going through the roof in October (6.21%), jettisoning the monetary policy headroom to spur economic growth. Consumption, exports and private investment, too, have taken a backseat. On inflation, the FM has already pointed out that global wars are stoking price rise and no country, despite best efforts, is successful in dousing the inflationary conflagration.

"Inflation does not respect borders.

Inflation is so contagious. No country's effort today is completely successful.

Therefore, the primary cause I would think is the disruption, the war. And, as a result, the world is facing a challenge, which in many ways is reflecting in our economy," Sitharaman said at the CII's Global Economic Policy forum in New Delhi on December 12.

The regime change in the U.S. and the impending tariff war are only expected to add to the uncertainty.

"While current global growth forecasts show stability, possible policy shifts in the U.S. starting January 20 cloud visibility. Uncertainty in global trade and financial markets may remain elevated; we also expect higher global rates and U.S. dollar/rupee volatility," says Axis Bank's 2025 Outlook report.

The likely trade turbulence along with the flight of capital from equities have wilted India's exchange rate, with the rupee touching an all-time-low of 85.12 against the greenback on December 19, on the back of hawkish Fed outlook.