2025-02-11 12:02
Key takeaways In recent weeks, the introduction and threats of US tariffs… …have caused shocks across markets… …and threatens what had been a steadily improving growthinflation mix. Uncertainty is back with a vengeance in the global economy, with the first few weeks of President Trump’s second term leading to tariff announcements and delays, triggering market volatility across currencies, rates, equities, and cryptocurrencies. Tariff impacts Should US tariffs and retaliatory action take effect, the impact could be significant, particularly for Canada and Mexico, given more than 75% of their exports go to the US (Chart 1). For now, US inflation has remained broadly under control (Chart 2), but tariffs risk upsetting that trend, potentially adding to goods inflation, even if US imports of goods are less than 10% of GDP. At the same time, tariffs threaten both global trade and broader growth. The increased level of uncertainty in the global trading system is likely to weigh on investment plans, whilst supply chains are ripe for rejigging around any potential tariff targets. Source: Macrobond, IMF DOTS Source: Macrobond. Note: Estimates are baselines. Activity data have been strong in the US… That said, the US is starting the year from a position of strength after a barnstorming Q4 for consumers that saw consumption rise by 4.2% q-o-q annualised on the back of strong real income growth. Survey data suggest there could be further growth momentum into 2025, even if labour market indicators are a little more mixed. …but generally softer across the globe The rest of the world is vulnerable to this uncertainty – particularly mainland China – where an additional 10% tariff was imposed on 4 February. Growth revived in some areas in Q4 (Chart 3), but uncertainty over the future for exports and still subdued confidence look likely to hold back any significant growth recovery, absent a further substantial fiscal stimulus package. Source: Macrobond Source: Macrobond In Europe, tariff threats further cloud a gloomy outlook, where continued struggles on the industrial front are not being offset by consumers opening their wallets. Despite tight labour markets in most economies and improving real incomes, confidence remains weak and GDP growth has ground to a halt in both the eurozone and the UK. Across the emerging world, the previous growth star of India has shown some wobbles of its own, leading the Reserve Bank of India (RBI) into cutting rates, while in Brazil stronger growth data and a deteriorating inflation outlook have played a role in driving even more tightening from the central bank. Heightened uncertainty It’s a challenging world for central banks weighing up the inflationary and growth consequences of a tariff-related supply shock – at a time when food and gas prices are rising. The job isn’t made any easier as 2025 has started with the level of uncertainty pushed into a new gear. Source: Bloomberg, HSBC ⬆Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus Source: LSEG Datastream, HSBC https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/tariff-threats/
2025-02-11 07:04
Key takeaways RBI’s Monetary Policy Committee (MPC) unanimously decided to cut the benchmark repo rate by 0.25% to 6.25%. All six MPC members chose to retain the liquidity stance at “neutral”. Overall, we expect the current rate cut cycle to be a shallow one and expect one more 0.25% rate cut from the RBI in the April MPC meeting. However, we assign a high likelihood of further liquidity support to the financial system between now and the April MPC meeting. The RBI meeting was a positive for the domestic equity markets as the rate cut should lead to marginally lower borrowing cost for companies. The announcement to push back the implementation of more stringent Liquidity Coverage Ratio (LCR) measures to March 2026 is a clear positive for Financials. Hence, we retain our overweight stance on Indian equities, with a preference for the financials, industrials and healthcare sectors. As we expect 10-year yields to edge lower, we remain bullish on INR local currency bonds. What happened? On 7th February, the RBI’s Monetary Policy Committee (MPC) unanimously decided to cut the benchmark repo rate by 0.25% to 6.25%. At the same time, all six MPC members chose to retain the liquidity stance at “neutral”, allowing them the flexibility to move in either direction on rates or liquidity. This was the first meeting under the new RBI Governor Malhotra, with markets looking at RBI guidance on rates, liquidity and regulations. Heading into the meeting, we expected the RBI to cut rates by 0.25%, as we expected the central bank to increasingly focus on balancing both growth and inflation dynamics. Latest projections by RBI MPC Source: RBI, HSBC Global Private Banking and Wealth as of 7 February 2025 On the regulatory front, the central bank pushed back the implementation of more stringent LCR requirements to March 2026, and signalled a gradual implementation. We view this as a near-term positive for the financials sector. In its updated projections, the RBI expects the economy to grow at 6.7% in FY 26 (Apr 2025 – Mar 2026) and expects inflation to average around 4.2% over the same timeframe. The RBI Governor also spoke about using the flexibility embedded in the inflation targeting framework to improve outcomes and highlighted the central bank’s commitment to provide sufficient liquidity to the system. It is worth noting that the RBI has injected INR 2tn of liquidity over the past few weeks, through the use of a variety of instruments, such as OMOs, FX swaps and long-dated VRRs. Overall, we expect the current rate cut cycle to be a shallow one and expect one more 0.25% rate cut from the RBI in the April MPC meeting. However, we assign a high likelihood of further liquidity support to the financial system between now and the April MPC meeting. Investment implications RBI’s FY26 growth and inflation projections indicate that the policymakers remain comfortable with India’s growth trajectory and expect further easing in inflation, broadly in line with our expectations. While the monetary policy stance is still “neutral”, we believe that the RBI is likely to provide further liquidity over the coming months and deliver further rate cuts, which are positive for both equities and bonds. In our assessment, the RBI meeting was a positive for the domestic equity markets from two aspects. First, the 0.25% rate cut and robust growth projections lead to marginally lower borrowing cost for companies - improving their margins - also encouraging them to resume capex. Secondly, the announcement to push back the implementation of more stringent Liquidity Coverage Ratio (LCR) measures is a clear positive for Financials. INR has been amongst the worst-performing Asian currencies in 2025 Source: Bloomberg, HSBC Global Private Banking and Wealth as of 7 February 2025. Past performance is not a reliable indicator of future performance. Hence, we retain our overweight stance on Indian equities, with a preference for the financials, industrials and healthcare sectors. Counter-intuitively, the 10-year Indian government bond yields rose by c.0.05% following the rate cut announcement. It was likely due to a combination of the fact that markets had largely priced in the rate cut prior to the meeting and potentially the disappointment that the RBI kept monetary policy stance unchanged at “neutral”. Nonetheless, we believe that further rate cut in April, along with the lower net supply indicated in FY26 budget and robust demand means that 10-year yields are likely to edge lower. We therefore remain bullish on INR local currency bonds. With real interest rate differentials between the US and India close to flat, our expectation of a 0.25% RBI rate cut in April and Fed pause over the same period may lead to unfavorable dynamics for the INR in the near term. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/rbi-commences-the-rate-cut-cycle/
2025-02-10 12:02
Key takeaways The Fed held rates unchanged, while both the ECB and the BoE lowered their key rates by 25bp, as widely expected. The divergence in both monetary policy and growth between the US and other economies should play to the USD’s advantage. Unlike the USD, both the EUR and GBP are facing stagflationary challenges, alongside the tariff risks. The Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) did not surprise markets at their first policy meetings in 2025. The Fed kept the federal funds rate steady at 4.25-4.50% after its 28-29 January meeting. Fed Chair Jerome Powell was basically able to paint a goldilocks picture of a resilient economy and inflation that is well off its highs, even if the last steps towards target are taking longer than anticipated. Our economists still expect 75bp of Fed cuts in 2025, but no longer expect the first cut this year to come in March. Instead, our macro team look for three rate cuts to be delivered in 25bp steps at 17-18 June, 16-17 September, and 9-10 December policy meetings, bringing the federal funds target range to 3.50-3.75% by end-2025. The USD was little changed after the announcement. In the end, uncertainty is likely to remain the key theme, not least with the US tariff news dominating over the near term. Amid the noise of the news flow, we expect the USD to remain strong. A day after the Fed’s announcement, the ECB cut its key policy rates by 25bp, bringing the key deposit rate down to 2.75% and the main refinancing rate down to 2.90%. The ECB remains confident that disinflation is well on track, and our economists think that another 25bp cut is likely at its next meeting on 6 March after which the debate might heat up. Markets expect the ECB rate to finish the year around 1.80% (Bloomberg, 6 February 2025). If the tariff threat materialises in earnest, those expectations may need to drop further. As the Eurozone still faces a challenging growth/inflation mix alongside the tariff risks, the EUR is likely to weaken further this year, in our view. Like the ECB, the BoE also delivered a 25bp rate cut, sending the Bank Rate to 4.50%. But the monetary policy committee’s (MPC) vote was dovish, at 7-2 with two members (Catherine Mann and Swati Dhingra) preferring a larger 50bp move. That being said, the BoE signalled a “gradual and careful approach” to future rate cuts. At the same time, the central bank’s latest forecasts depicted a more stagflationary picture in 2025, cutting its growth forecast to 0.75% (from its November forecast of 1.50%) but raising its inflation forecast to 3.50% (from 2.75%). GBP-USD dropped below 1.24 before recovering some of its earlier losses. We expect the GBP to weaken against the USD, but should the dovish voices grow within the MPC, the risk is that GBP-USD could drop faster and more than expected. Our economists expect the BoE to accelerate its pace of easing, cutting at every meeting from September 2025 to February 2026, taking the Bank Rate down to 3.0% in 1Q26. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/the-fed-pauses-as-both-the-ecb-and-boe-cut-rates/
2025-02-10 07:04
Key takeaways The yield curve has flattened by around 20bp since the US 10-year yield peaked in mid-January. However, some analysts continue to think the trend is towards a “structural steepening”. US earnings season approached half-way last week, with some of the S&P 500’s big technology names reporting figures for Q4 2024. After the recent ‘AI trade’ wobble, the outlook for tech profits has been under the microscope – particularly given the sector’s high valuations. India’s recent FY2025-2026 Union Budget endeavoured to strike a balance between boosting growth, maintaining capex spending, and sticking to a path of fiscal restraint. Chart of the week – Policy uncertainty and stock market valuations Quantitative measures of global policy uncertainty are increasing. Last week, like in the last few weeks, investors had to deal with another burst of episodic volatility in markets. Global stocks weakened, reflecting how policy uncertainty can be a challenge to profits and how it prompts more risk aversion. While, in government bonds, there was a “flattening” of the yield curve (see further details on page 2), as markets reflected the possibility of bumpier disinflation. Meanwhile, the US dollar remained a safe harbour, strengthening as policy uncertainty increased. But after being a serial winner in FX markets, investors are beginning to question whether “King dollar” can keep the crown? After all, the dollar is expensive, the Fed is still cutting rates in 2025, and US fiscal deficits are very wide. Investors need to consider the possibility that further dollar strength may be temporary. Another telling sign of risk aversion in markets was the rally in the gold price. Gold has been on a tear over the past 12 months. The recent rise in policy uncertainty has seen that trend continue. Overall, the latest bout of volatility – the third this year after the surge in bond yields and the AI trade wobble during January – reinforces that markets will face a volatile ride at times in 2025, albeit against a broadly constructive backdrop of no recession, further rate cuts and resilient profits. This is called “volatile Goldilocks”. Market Spotlight Hedging volatility With bouts of volatility proving to be a feature of markets this year, diversification strategies are front of mind for asset allocators. After a strong performance in 2024, one asset class that could be ideally placed to keep delivering in these conditions is hedge funds. Hedge funds have a track record of outperforming global balanced portfolios during spells of particularly high volatility. Moreover, when you combine them into well-diversified portfolios of different strategies, their own volatility profile compares well against traditional assets. In fact, with recent volatility notably affecting cryptocurrencies, hedge funds also offer potentially more resilience than non-traditional, crypto diversifiers. Crucially, hedge fund strategies can profit from volatility in a range of ways, including long and short positioning, and arbitrage opportunities. Against a backdrop of higher levels of uncertainty, they have new opportunities to feed off the associated volatility. For 2025, rising uncertainty and market volatility are likely to play to the strengths of hedge funds, providing a potential boost to returns, as well as a degree of downside protection. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 7.30am UK time 07 February 2025. Lens on… Curve appeal The yield curve has flattened by around 20bp since the US 10-year yield peaked in mid-January. However, some analysts continue to think the trend is towards a “structural steepening”. The prospect of further gradual Fed easing should put downward pressure on the two-year yield while further declines in the 10-year yield are likely to be limited by two key factors. First, US government debt is high and rising, and the situation is unlikely to change anytime soon. Second, a more fragmented geopolitical and international trade backdrop implies greater inflation volatility. The term premium on US Treasuries could, therefore, trend higher as investors require greater compensation for holding longer dated debt, leading to a gradual steepening of the curve. Moreover, should growth disappoint, and the Fed eases policy aggressively, the curve would steepen rapidly. Where this view could go wrong is if the Fed were forced to hike the funds rate. However, the bar for this to happen is quite high given Chair Powell views policy as “meaningfully restrictive” and the FOMC does not want labour markets to “cool off anymore”. Earnings broadening? US earnings season approached half-way last week, with some of the S&P 500’s big technology names reporting figures for Q4 2024. After the recent ‘AI trade’ wobble, the outlook for tech profits has been under the microscope – particularly given the sector’s high valuations. Some ‘Magnificent Seven’ stock prices have been punished on marginal profit misses, high capex spending, and disappointing forward guidance. In terms of year-on-year Q4 profit growth, Financials are leading the index, with Communications Services and Technology also beating expectations. Among the growth laggards have been Industrials, Energy, and Materials. While the profits growth outlook is solid for the US, there have been downward revisions to 2025 consensus expectations recently. By contrast, Europe and China, which both saw a deterioration in the profit growth outlook last year, have seen revisions pick-up for 2025. This is evidence of profit growth potentially broadening beyond the US to markets that are significantly cheaper. In Europe, weak sentiment has set a low bar for positive surprises. While in China, further policy stimulus this year could herald a performance pick-up. India’s growth plan India’s recent FY2025-2026 Union Budget endeavoured to strike a balance between boosting growth, maintaining capex spending, and sticking to a path of fiscal restraint. India experienced a cyclical slowdown last year, so a key budget pivot was an income tax cut to encourage consumer spending. Meanwhile, capex spending on road and rail is set to remain flat, with marginal growth in other sectors. And as for the fiscal deficit, the reduction target for FY25-26 is 4.4% versus 4.8% in FY24-25. In response, consumer stocks rallied, while some railway, industrial and capex-sensitive plays corrected. Indian stocks have weakened since their peak last September, and CY24 earnings expectations have fallen by 3%. With an easing in frothy valuations, the large-cap Nifty 50 index now trades at a forward price-to-earnings ratio of 19.3x, which is around its five-year average. However, major sectors (excluding financials) are still trading at a premium and could be vulnerable to any macro or profit disappointments amid elevated short-term expectations. Active stock selection remains crucial. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. Source: HSBC Asset Management. Macrobond, Bloomberg, Datastream. Data as at 7.30am UK time 07 February 2025. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 7.30am UK time 07 February 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Market review Rising global policy uncertainty cast a pall over risk markets last week. While the US dollar index consolidated, core government bonds rallied in response to some weaker-than-expected US macro prints, with eurozone bonds and UK Gilts slightly outperforming US Treasuries. The BoE lowered rates by 0.25%, with two members calling for a 0.50% reduction. In the stock markets, US equities reversed early losses last week, benefitting from lower US bond yields. The Euro Stoxx 50 index recorded stronger gains following a wave of upbeat earnings, while Japan’s Nikkei 225 ended lower amid investor caution over external uncertainties and a firmer yen against the US dollar. Other Asian stocks mostly performed well, with Hong Kong’s Hang Seng and mainland China’s Shanghai Composite posting catch-up rallies after the Lunar New Year holiday. In commodities, oil fell, whereas gold and copper both rose. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/policy-uncertainty-and-stock-market-valuations/
2025-02-05 21:05
Key takeaways Table of tactical views where a currency pair is referenced (e.g. USD/JPY):An up (⬆) / down (⬇) / sideways (➡) arrow indicates that the first currency quotedin the pair is expected by HSBC Global Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks. The arrows under the “current” represent our current views, while those under “previous” represent our views in the last month’s report. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-trends/fx-eyes-on-us-trade-policy-developments/
2025-02-05 21:04
Key takeaways India announced tax cuts to support consumption, held on to its capex thrust, and yet stuck to a fiscal consolidation path. On the budget math, expenditure assumptions can be met with the pruning of schemes... ... but tax revenues could disappoint mildly; overall fiscal impulse will likely be negative. The government walked the tightrope in their 1 February budget, balancing several conflicting objectives. It provided near-equal stimulus to both consumption (personal income tax cuts amount to INR1trn) and capex (budget outlays rise by INR1trn), while lowering the fiscal deficit (as promised, from 4.8% in FY25 to 4.4% of GDP for FY26). It also announced its intention to lower the centre’s debt to c50% of GDP by FY31. On the budget math, the personal tax revenue growth assumption (of 14.4% y-o-y) looks overoptimistic given those earning up to INR1.2m per year (INR0.7m earlier) will not be liable to pay income tax under the new regime. However, non-tax revenue assumptions look realistic. Central government capex is expected to grow in line with nominal GDP (at 10% y-o-y). But when scheme transfers to states and public sector enterprise (PSE) capex are added, overall capex is likely to grow faster at 16% y-o-y. Central to meeting the fiscal deficit target is cutting current expenditure. Here, a lower fertiliser subsidy bill and pruning other outlays is key. With fiscal consolidation, net market borrowing in FY26 is lower than a year ago. But because of a higher redemption bill, gross market borrowing is higher. However, we are not worried. The growth in borrowing is well under nominal GDP growth, and with the RBI having turned buyer, should be comfortably funded. Aside from the consumption stimulus and the capex thrust, import tariffs were lowered for key inputs, and several tariff rates eliminated, in a bid to help India plug into global supply chains as they get rejigged. The FDI limit in insurance was raised, and promises to lower the regulatory burden on industry were made. With consolidation, the fiscal impulse is likely to be negative. But inflation is falling, and we expect the RBI to cut rates and infuse domestic liquidity, picking up the growth baton. Adhering to fiscal consolidation The government announced the following fiscal deficit path - A fiscal deficit of 4.8% of GDP for FY25, lower than the budget estimate of 4.9% of GDP. A fiscal deficit target of 4.4% of GDP for FY26 (HSBC: 4.4% of GDP), marking 0.4% of GDP fiscal consolidation. Despite nominal GDP growth coming in lower than budgeted (9.7% y-o-y vs. 10.5%), the government expects to end FY25 with a lower-than-budgeted fiscal deficit. This has been made possible by lower than budgeted capital expenditure on account of election-led delays (INR10.2trn vs INR11.1trn budgeted). Despite pressures to support growth, the government stuck to its promise of lowering the fiscal deficit further in FY26, to below 4.5% of GDP. This, we believe, is a big positive for macro stability. Following the numbers released on 1 February, the general government fiscal deficit stands at 7.3% of GDP, lower than 7.6% a year ago, but higher than 5.9% in the pre-pandemic period (see exhibit 2). As such, some sense of a future consolidation path post-FY26 becomes important. Here, the government also announced its medium term fiscal consolidation path. In the years ahead, it plans to “keep the fiscal deficit each year such that Central Government debt remains on a declining path as a percentage of GDP”. It has set a new target of central government debt at 50% +/-1% of GDP by FY31, from 57.1% in FY25. Fiscal math: Spending numbers reasonable; revenues a tad high To meet the fiscal target of FY25, tax revenue growth in 4Q must be around 12% y-o-y, and expenditure growth around 7%, Both targets look achievable to us (though we may have some minor quibbles that direct tax collection looks too high, and indirect too low). Next, we look into the FY26 math carefully. Nominal GDP growth has been pegged at 10.1%, broadly in line with expectations. We believe personal tax growth of 14.4% is a tad high at a time when nominal GDP is growing 10.1%, the capital gains tax component is slowing (led partly by the recent fall in equity markets), and most importantly, the government has cut personal tax rates for FY26, and thereby foregone revenue of INR1trn (more on this later). Overall gross tax buoyancy is assumed to be 1.1, and our calculations suggest that there could be disappointment here as the year progresses. Non-tax revenues look reasonable. Dividends from the RBI and other financial institutions remain elevated at INR2.6trn (versus 2.3trn in FY25), led partly by the central bank’s FX intervention though the year. Spectrum sales numbers are a bit muted, but could be offset by slightly higher ‘other non-tax revenue receipts’. Expectations from disinvestment receipts are surprisingly muted, perhaps signalling lukewarm appetite for disinvestment. On the current expenditure front, the government expects a cut in the fertiliser subsidy bill, though a lot will depend on the FX and global commodity prices though the year. It also expects a cut in non-subsidy current expenditure, especially outlays to the telecom sector and transfers to some reserve funds (like the Guarantee Redemption Fund). Capex is expected to grow in line with nominal GDP growth, coming in at INR11.2trn in FY26 (vs INR10.2trn in FY25), and suggesting that the government intends to hold on to the capex thrust it has carefully nurtured. In fact, as we note below, the overall capex thrust is higher than it looks at first glance. In fact, we find that the quality of expenditure continues to improve, though more gradually now (see exhibit 4). All told, we think that with careful pruning, expenditure numbers can be met, while tax revenues could disappoint mildly. Gross versus net market borrowing In line with the fiscal consolidation, the government announced net market borrowing of INR11.5trn in FY26, lower than INR11.6trn in FY25. But because the redemption bill for FY26 is rather high (at INR3.3trn), gross market borrowing came in higher than a year ago, at INR14.8trn (versus INR 14trn in FY25). As the year progresses, the government may use more short term borrowing or get a higher collection from the small saving scheme than has been budgeted, resulting in lower market borrowing (see exhibit 5). But we will have to wait for several months to getclarity there. Despite higher gross market borrowing compared to a year ago in INR terms, it remains below nominal GDP in growth terms (5.8% y-o-y gross borrowing growth vs.10.1% y-o-y nominal GDP growth). And after a long wait, the RBI has also started buying government bonds. As such, the borrowings are likely to be comfortably funded. Focus areas in FY26 Consumption boost: The hallmark of the budget was the cut in personal income tax. Individuals earning up to INR1.2m per year (INR0.7m earlier) will not be liable to pay income tax under the new regime. 10m individualsare likely to benefit from this. Tax slabs and rates were changed across the board. All of this will likely cost the government INR1trn of revenue foregone. Capex diversification: The capex thrust was maintained at 3.1% of GDP (INR11.2trn, 10% y-o-y growth) despite the consumption stimulus. But there is more than meets the eye: Once we include scheme specific capex revenues transferred to states, it adds up to INR15.5trn (17% y-o-y growth). And when we add PSE capex, the number goes up to INR19.8trn (16% y-o-y growth), see Exhibit 6.The power sector is a case in point where PSE outlays have been quite high (growing 21% y-o-y). There has been some diversification in central government capex, moving away, on the margin, from just roads (1.5% y-o-y) and railways (0% y-o-y), towards urban infrastructure (20% y-o-y), housing (62% y-o-y), interest-free loans to states (budgeted at INR 1.7tr for FY26), and funds earmarked for any ministry that mayneed extra capex funds as the year progresses, see Exhibit 7. Rural spending is budgeted to be higher than a year ago, led largely by the clean water mission. Import tariffs were slashed across a variety intermediary inputs and equipment. This is expected to help India plug into Asian supply chains. Furthermore, changes are being made for easier access to export credit and support to MSMEs. FDI limit in insurance was raised from 74% to 100%. In terms of reforms, a high level committee will be tasked to lower the regulatory burden businesses face. Impact on growth The 0.4% of GDP fiscal consolidation in FY26 is likely to impart an overall negative fiscal impulse on the economy (see exhibit 8). The task of lifting growth is likely to pass on to the RBI. With inflation falling, room for rate cuts and easier liquidity has opened up. We expect a 25bp rate cut in the Feb 7 meeting, followed by another one in April, taking the repo rate to 6%. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/consumption-capex-consolidation/
