Welcome to Samosa Capital’s daily briefing — the best way to stay up-to-date on India’s financial markets. Today, we share concerns from a top Indian economist, and we’re breaking down expectations from the Union Budget 2025, to be announced in February 2025. Finally, we’ll close with Gupshup, a round-up of the most important headlines.

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Market Update

Benchmark indices ended down 0.50 percent today after IT was dragged down post-earnings. Markets are down for the second consecutive week, falling 3 percent in that 2-week timespan.

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Top Economist Worries About India’s 6 Percent Growth Ahead of Union Budget 2025

Raghuram Rajan, renowned economist and India’s former Reserve Bank of India Governor, argued India’s policymakers must focus on structural reforms that revitalize demand among consumers and focus on middle-class growth. With India’s GDP growth projected to close at 6.4 percent in FY25 (fiscal year ending March 2025), the weakest in four years, combined with less-than-exciting corporate earnings, and declining foreign direct investment, the country’s short-term economist prospects need serious shoring up.

Where’s the Population Dividend?

“It's worrying because 6 percent doesn't cut it for us. We need more. We should be getting the result of population dividend," Rajan told The Economic Times earlier today. The population dividend refers to India’s GDP growth being partially driven by its expanding population. While its GDP-per-capita of $2,484.85 has remained lower than Thailand, Indonesia, Vietnam, and other South/Southeast Asian countries, India became the world’s fifth-largest economy largely because its tiny GDP-per-capita scaled across its population — the largest in the world — makes New Delhi a force to be reckoned with.

India’s GDP growth has been slowing, with private final consumption expenditure falling to 6 percent in the July-September quarter from 7.4 percent in the previous period. Rajan noted that while upper-income segments have seen some resilience in spending, the lower middle class is grappling with a lack of jobs, high inflation, and reduced disposable income. Urban demand has declined for five consecutive quarters, with middle and lower-income households cutting back on essentials.  

Consumption patterns, a critical component of India’s economic engine, have shown worrying signs. High food inflation has squeezed household budgets, curbing demand for goods ranging from basic commodities to automobiles.  

Budget 2025 Expectations

Finance Minister Nirmala Sitharaman will present the Union Budget 2025 on February 1, a blockbuster event among India’s investors. Below are expectations, as compiled by HSBC.

1. Housing & Urban Planning

• $128.18 billion (₹10 lakh crore) investment under PM Awas Yojana Urban 2.0 (a government subsidy) for 1 crore urban poor/middle-class families.

• Policies for rental housing markets and women’s property stamp duty reductions.

• Development of 100 weekly street markets and Transit-Oriented Development in 14 cities.

• Water, sewage, and waste management projects for 100 cities.

2. Jobs and Skill Development

• 5 PM Packages to create jobs and enhance skills for 41 million youth:

  • Scheme A: Financial Incentives for first-time employees (30 lakh youth), distributed via the Employee Provident Fund Organization (EPFO), a social security organization under the Ministry of Labor and Employment.

  • Scheme B: Reimbursement of EPFO contributions for new hires (50 lakh jobs).

  • Scheme C: Allowance and Corporate Social Responsibility (CSR) funding for internships in top companies.

  • Skilling Programme: Upgrade 1,000 Industrial Training Institutes and skill 20 lakh youth.

  • Internship Opportunities: 100,000 youth to receive direct e-vouchers and monthly allowances.

• Working women hostels, creches, and higher education loans with interest subvention.

3. MSMEs and Startups

• Enhanced Mudra Loan limit from $115,000 to $230,000 (₹10 lakh to ₹20 lakh).

• Credit Guarantee Scheme for MSMEs in manufacturing.

• Support for MSMEs in food irradiation and quality testing.

4. Socio-Economic Development

• PM Garib Kalyan Anna Yojana (a government food security program) extended for 5 years (benefiting 8 million people).

• Higher MSPs (minimum support prices on crops), a subsidy for farmers to guarantee them a base income, were announced for major crops.

5. Infrastructure

• $133.7 billion (₹11.1 lakh crore) allocation (3.4 percent of GDP) for infrastructure development.

• $17.34 billion (₹1.5 lakh crore) interest-free loans for states.

• Phase IV of PMGSY for all-weather connectivity to 25,000 rural areas.

  • Phase IV of the Pradhan Mantri Gram Sadak Yojana (PMGSY-IV) is a significant rural road connectivity initiative in India, set to be implemented from 2024-25 to 2028-29. Key aspects of PMGSY-IV include:

6. Taxation and Investments

• Review of the Income Tax Act, 1961, and rationalization of capital gains tax:

  • Short-term financial asset gains: 20 percent.

  • Long-term financial and non-financial asset gains: adjusted rates.

• The corporate tax rate will be reduced to 35 percent from 40 percent.

• Reduction of customs duty on gold, silver, shrimp feed, and mobile components, and exemption of customs duties on critical minerals and solar cell manufacturing inputs.

• Overall, Sitharaman has promised to simplify the tax code to reduce regulatory and legal obstacles and minimize corporate loopholes.

Gupshup

Macro

• The RBI expects Indian consumers to have resilient demand, as per the monthly bulletin. The central bank predicts demand to see an uptick supported by brighter agricultural prospects.

Equities

• Suzuki's India arm plans to catch up to other EV manufacturers with exports. Suzuki plans on having 6 distinct EVs by 2030 with India being a manufacturing hub for 100 nations. Suzuki is already India’s largest manufacturer and is investing $242 million (₹21 billion) in Gujarat to develop more EVs.

• Reliance stock jumped after profits in telecom and retail increased. Though there is petrochemical volatility, net income rose to $2.1 billion (₹185.4 billion) off telecom. Profits were up 7.4 percent with revenue up 6.6 percent and costs up 6.3 percent. 

• Infosys shares drop after sales forecasts missed analyst estimates. Infosys projected revenue growth of 4.5 to 5 percent y-o-y compared to the average analyst estimate of 5.6 percent. Overseas clients are spending less on IT due to elevated rates and inflation.   

• Indian tech stocks have rallied $11 billion since the election which will likely stop now. Valuations soared to 34 times one-time forward earnings due to US election results which were believed to spur growth. Recently, slow growth with high valuations has led to a tapering of expectations since Trump’s victory has not led to tech sales increasing.

Alts

• Indian wind energy is key to energy security, especially during non-solar hours. Wind power installations rose to a seven-year high in 2024 with 3.4 gigawatts added. Wind is becoming increasingly important for evenings and nights but a major issue has been transmission lines which are still underdeveloped. 

• Highway developers are looking for a better budget to boost growth. If capital expenditure from the government is the same from 2024, shrinking order books would lower infrastructure valuations.    

• India approved $1.3 billion (₹114.4 billion) to revive state-owned entity steelmaker Rashtriya Ispat Nigam. The government is buying equity after the company’s liabilities became three times its assets. Slumps in the prices of the alloy have caused revenue to fall and the company defaulted on a series of loans in June.

Policy

• Modi is framing policies to bring global investors to an EV event. He predicted an eightfold increase in the use of EVs by the end of the decade. The comments were made at a Bharat Mobility Global Expo.  

• The US Ambassador said that India needs to cut tariffs to remain competitive — even if China is slammed with tariffs. Ambassador Eric Garcetti said that India needs to improve its domestic business environment to bring in foreign investments. He relayed that India’s tariffs present a border for entry that other South American countries do not possess.  

See you Monday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.