Interest rates throughout much of the global economy are headed lower in 2024 but the timing, extent, and pace of the prospective decline in rates is uncertain. Indian economic growth likely remained strong in Q3 but slowing government CAPEX, weaker agriculture sector growth and external sector vulnerabilities pose risks in the near term. The government is scheduled to present a vote-on-account budget on 1st February. We expect the government to meet the fiscal deficit target of 5.9% in FY24 while taking forward the themes of CAPEX-led infrastructure development and manufacturing push through expansion of PLI schemes in FY25. The target for FY25 is estimated at 5.2%-5.3%. Despite the resurgence of headline inflation in November-December, the RBI is likely to remain unperturbed given that the disinflationary trend in core inflation remains intact. We expect the central bank to remain on hold in the next meeting.
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