Article24 January 2019Reading time 3 minutes

Asia week ahead: Indian budget steals focus

The trade and purchasing manager indexes (PMIs) from across Asia may reveal that 2019 isn’t off to a good start for regional economies, arguing for continued policy stimulus. India’s FY2019-20 budget will be a closely-watched event as the Modi government aims to boost economic growth in its bid for re-election

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Indian government unveils an election budget

India’s interim finance minister Piyush Goyal presents the FY2019-20 budget to the parliament on Friday, 1 February (Arun Jaitley is reportedly on medical leave). Growth will outweigh fiscal discipline as the Modi administration pushes its way for a second term in the general election scheduled for May this year.   

As such, after an overshoot of the deficit in the last financial year and more likely again in the current year, hopes of any fiscal consolidation taking place in the next financial year are largely misplaced. We see the revised budget for current FY2018-19 producing a deficit equivalent to 3.6% of GDP, well above the government's initial projection of 3.3% (consensus 3.5%). Our deficit forecast for the next financial year is 3.4%.

Persistently weak public finances will keep local government bonds and the Indian rupee under weakening pressure.

India: Fiscal deficit - derailed consolidation


Export weakness weighs on manufacturing

The trade and PMI releases from the rest of the region will likely reinforce the export-led slowdown in manufacturing coming into 2019 – not a good start to the year.

China’s PMI will be closely watched. The manufacturing index fell below 50 in December for the first time since mid-2016, indicating contraction in activity, while services continued to grow. We aren’t anticipating any bounce in activity in January, though the front-loading for the Lunar New Year holiday, which falls in the first week February, leaves scope for an upside surprise. Moreover, China’s industrial profits data paints a clearer picture. Profits ended 2018 with negative growth and 2019 has seen a weak start as well.

Korea’s trade for January, the first trade data from the region and probably from the world, is expected to show the deepening of export weakness as the downturn in global electronics and the automobile sector and a slowdown in China dampened export demand.

Asia: Electronics and autom

Bloomberg, CEIC, ING
Bloomberg, CEIC, ING

Asia Economic Calendar

ING, Bloomberg, *GMT
ING, Bloomberg, *GMT