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India hikes spending, shuns ‘outright populism’ in last pre-election budget

  • Capex to rise 33% to 10 trillion rupees in 2023/24
  • Govt targets gross borrowing of 15.43 trillion rupees
  • Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26

NEW DELHI, Feb 1 (Reuters) – India announced on Wednesday one of its biggest ever increases in capital spending for the next fiscal year to create jobs but targeted a narrower fiscal deficit in its last full budget ahead of a parliamentary election due in 2024.

Prime Minister Narendra Modi’s party has been under pressure to create jobs in the populous country where many have struggled to find employment, although the economy is now one of the world’s fastest-growing.

“After a subdued period of the pandemic, private investments are growing again,” Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

“The budget makes the need once again to ramp up the virtuous cycle of investment and job creation. Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees.”

Reuters Graphics

The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.

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Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1.

Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.

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STEADY ‘MACRO BOAT’

Brokerage Nomura said the budget “prudently pushes for growth, without rocking the macro boat”.

“In the event, the government has presented a good budget. It has pushed for growth via public capex and continued on the path towards fiscal consolidation, without offering much in terms of outright populism.”

Capital Economics said the “absence of a fiscal blowout”, a recent drop in inflation and signs of moderating growth could convince India’s central bank to slow the pace of rate hikes next week.

It said there was still a chance of fiscal slippage as campaigning kicks off for the election, in which Modi is widely projected to win a third straight term.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% next fiscal year, down from 7% projected for the current year, while warning about the impact of cooling global demand on exports.

Sitharaman said India’s economy was “on the right track, and despite a time of challenges, heading towards a bright future”.

India’s real GDP is forecast to grow in the range of 6-6.8% in FY24

Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees – the smallest in more than five years – from 894 billion rupees for this fiscal year.

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The government’s gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.

Reuters Graphics Reuters Graphics

CONSTRAINTS

Moody’s Investors Service said the narrower fiscal deficit projection pointed to the government’s commitment to longer-term fiscal sustainability, but that a “high debt burden and weak debt affordability remain key constraints that offset India’s fundamental strengths”.

Among other moves to stimulate consumption, the surcharge on annual income above 50 million rupees was cut to 25% from 37%.

Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled again as it struggles to repel concerns raised by a U.S. short seller.

Since taking office in 2014, Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labour reforms, and offering subsidies to poor households to clinch their political support.

A lack of jobs for young people, and meagre wages for those who do find work, has been one of the main criticisms of Modi.

Sitharaman also said the government was allocating 350 billion rupees for energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet India’s climate goals.

($1 = 81.7725 Indian rupees)

Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya, Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian bureaux; Writing by Krishna N. Das; Editing by Kim Coghill, Jacqueline Wong and Gareth Jones

Our Standards: The Thomson Reuters Trust Principles.

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China’s July Russian coal imports hit 5-year high as West shuns Moscow

China brought in 7.42 million metric tons of coal from Russia last month, data from the General Administration of Customs showed on Saturday. That was the highest monthly figure since comparable statistics began in 2017, up from 6.12 million metric tons in June and 6.49 million metric tons in July 2021.

Western countries were avoiding cargoes from Russia ahead of a European Union ban on Russian coal that came into force on August 11, aimed at reducing the Kremlin’s energy revenue over its February invasion.

The ban has forced Russia to target buyers such as China and India and sell at a steep discount.

Russian thermal coal with a heating value of 5,500 kilocalories (kcal) traded around $150 per metric ton on a cost-and-freight basis in late July, while coal of the same quality at Australia’s Newcastle port was assessed at more than $210 per metric ton on a free-on-board (FOB) basis.

Some Chinese traders expect more Russian coal to flow into China in the fourth quarter when utilities in northern China build stocks for the winter heating season.

July shipments of Indonesian coal, mostly cheap, low-quality thermal coal with a heating value below 3,800 kcal, were 11.7 million metric tons. That was up 22% from June but down 40% from a year earlier. China has reduced its overall coal imports in recent months amid surging domestic output.

Power plants in southern China have increased tenders to buy Indonesian coal in August as it is cheaper than domestic coal, while demand for coal-fired power generation has been boosted by a record heat wave.

Indonesian thermal coal with a heating value at 3,800 kcal changed hand at about $78 per metric ton on a FOB basis last week, which would still below about 690 yuan (about $100) for local coal when considering shipping costs.

China’s customs data showed zero coal shipment from Australia in July.

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Trump shuns ‘ex-presidents club’ — and the feeling is mutual

WASHINGTON (AP) — It’s a club Donald Trump was never really interested in joining and certainly not so soon: the cadre of former commanders in chief who revere the presidency enough to put aside often bitter political differences and even join together in common cause.

Members of the ex-presidents club pose together for pictures. They smile and pat each other on the back while milling around historic events, or sit somberly side by side at VIP funerals. They take on special projects together. They rarely criticize one another and tend to offer even fewer harsh words about their White House successors.

Like so many other presidential traditions, however, this is one Trump seems likely to flout. Now that he’s left office, it’s hard to see him embracing the stately, exclusive club of living former presidents.

“He kind of laughed at the very notion that he would be accepted in the presidents club,” said Kate Andersen Brower, who interviewed Trump in 2019 for her book “Team of Five: The Presidents’ Club in the Age of Trump.” “He was like, ‘I don’t think I’ll be accepted.’”

It’s equally clear that the club’s other members don’t much want him — at least for now.

Former Presidents Barack Obama, George W. Bush and Bill Clinton recorded a three-minute video from Arlington National Cemetery after President Joe Biden’s inauguration this week, praising peaceful presidential succession as a core of American democracy. The segment included no mention of Trump by name, but stood as a stark rebuke of his behavior since losing November’s election.

“I think the fact that the three of us are standing here, talking about a peaceful transfer of power, speaks to the institutional integrity of our country,” Bush said. Obama called inaugurations “a reminder that we can have fierce disagreements and yet recognize each other’s common humanity, and that, as Americans, we have more in common than what separates us.”

Trump spent months making baseless claims that the election had been stolen from him through fraud and eventually helped incite a deadly insurrection at the U.S. Capitol. He left the White House without attending Biden’s swearing-in, the first president to skip his successor’s inauguration in 152 years.

Obama, Bush and Clinton recorded their video after accompanying Biden to lay a wreath at the Tomb of the Unknown Solider following the inauguration. They also taped a video urging Americans to get vaccinated against the coronavirus. Only 96-year-old Jimmy Carter, who has limited his public events because of the pandemic, and Trump, who had already flown to post-presidential life in Florida, weren’t there.

Jeffrey Engel, founding director of the Center for Presidential History at Southern Methodist University in Dallas, said Trump isn’t a good fit for the ex-presidents club “because he’s temperamentally different.”

“People within the club historically have been respected by ensuing presidents. Even Richard Nixon was respected by Bill Clinton and by Ronald Reagan and so on, for his foreign policy,” Engel said. “I’m not sure I see a whole lot of people calling up Trump for his strategic advice.”

Former presidents are occasionally called upon for big tasks.

George H.W. Bush and Clinton teamed up in 2005 to launch a campaign urging Americans to help the victims of the devastating Southeast Asia tsunami. When Hurricane Katrina blasted the Gulf Coast, Bush, father of the then-current president George W. Bush, called on Clinton to boost Katrina fundraising relief efforts.

When the elder Bush died in 2018, Clinton wrote, “His friendship has been one of the great gifts of my life,” high praise considering this was the man he ousted from the White House after a bruising 1992 campaign — making Bush the only one-term president of the last three decades except for Trump.

Obama tapped Clinton and the younger President Bush to boost fundraising efforts for Haiti after its devastating 2010 earthquake. George W. Bush also became good friends with former first lady Michelle Obama, and cameras caught him slipping a cough drop to her as they sat together at Arizona Sen. John McCain’s funeral.

Usually presidents extend the same respect to their predecessors while still in office, regardless of party. In 1971, three years before he resigned in disgrace, Richard Nixon went to Texas to participate in the dedication of Lyndon Baines Johnson’s presidential library. When Nixon’s library was completed in 1990, then-President George H.W. Bush attended with former Presidents Ronald Reagan and Gerald Ford.

Trump’s break with tradition began even before his presidency did. After his election win in November 2016, Obama hosted Trump at the White House promising to “do everything we can to help you succeed.” Trump responded, “I look forward to being with you many, many more times in the future” — but that never happened.

Instead, Trump falsely accused Obama of having wiretapped him and spent four years savaging his predecessor’s record.

Current and former presidents sometimes loathed each other, and criticizing their successors isn’t unheard of. Carter criticized the policies of the Republican administrations that followed his, Obama chided Trump while campaigning for Biden and also criticized George W. Bush’s policies — though Obama was usually careful not to name his predecessor. Theodore Roosevelt tried to unseat his successor, fellow Republican William Howard Taft, by founding his own “Bull Moose” party and running for president again against him.

Still, presidential reverence for former presidents dates back even further. The nation’s second president, John Adams, was concerned enough about tarnishing the legacy of his predecessor that he retained George Washington’s Cabinet appointments.

Trump may have time to build his relationship with his predecessors. He told Brower that he “could see himself becoming friendly with Bill Clinton again,” noting that the pair used to golf together.

But the odds of becoming the traditional president in retirement that he never was while in office remain long.

“I think Trump has taken it too far,” Brower said. “I don’t think that these former presidents will welcome him at any point.”

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