Has Budget 24-25 nearly killed stock investing in India? Is the Bull Market going to see a surge after the Budget or are we heading towards the Bear Market?
Model Answer Introduction India has recently emerged as the largest arms importer globally, highlighting the strategic importance of its defence sector. Traditionally reserved for the public sector until 1991, Foreign Direct Investment (FDI) was first permitted in 2001. The recent increase in the FDRead more
Model Answer
Introduction
India has recently emerged as the largest arms importer globally, highlighting the strategic importance of its defence sector. Traditionally reserved for the public sector until 1991, Foreign Direct Investment (FDI) was first permitted in 2001. The recent increase in the FDI limit to 74% under the automatic route and 100% under the government route is expected to have significant implications for both the defence sector and the broader economy.
Short Run Implications
- Boost in FDI Inflows: The liberalization is likely to attract substantial FDI inflows into the defence sector, with a significant portion allocated to establishing manufacturing units. This will accelerate employment opportunities in the sector.
- Technology Transfer: With the ability to own a controlling stake, established foreign companies are more inclined to share advanced technologies, enhancing India’s technological capabilities and fostering innovation.
- Reduction in Imports: Increased domestic production is expected to reduce reliance on imports, leading to greater transparency and a diminished role for middlemen in defence procurement.
Long Term Implications
- Development of a Military-Industrial Complex: The liberalized FDI policy will facilitate collaboration between the military, academia, and industry, promoting industrial growth and reducing import dependence.
- Strengthening Indigenous Manufacturing: Attracting foreign players to set up manufacturing units in India will bolster indigenous production capabilities, creating jobs and fostering self-reliance in defence manufacturing.
- Commercial Linkages: The integration of defence industries with commercial sectors can enhance research linkages, as many innovations in defence have potential civilian applications, driving broader economic growth.
Conclusion
The new FDI policy in the defence sector holds the potential to significantly reduce import dependency while boosting domestic manufacturing capabilities. This strategic shift not only strengthens India’s defence preparedness but also contributes positively to the overall economy.
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Positive impacts: Tax incentives: The budget introduced tax incentives for start-ups, small and medium-sized enterprises (SMEs), and individual taxpayers, which could boost economic growth and job creation. Infrastructure development: The budget allocated significant funds for infrastructure developRead more
Positive impacts:
Negative impacts:
As for the bull market or bear market prospects:
- Short-term volatility: The budget-induced volatility might lead to short-term fluctuations in the market. However, it’s essential to remember that the Indian economy is expected to grow at a moderate pace in the coming years.
- Long-term outlook: The budget’s focus on infrastructure development, digitalization, and job creation could lead to a sustained bull market in the long term.
- Sector-specific performance: Some sectors, such as technology, pharma, and consumer goods, might continue to outperform in the coming months due to their inherent strengths and growth prospects.
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