Why you’re paying more for flying from certain airports; Will Indian IT see a resurgence?
Welcome to Top of the Morning by Mint, your weekday newscast that brings you five major stories from the world of business. It's Thursday, July 25, 2024. My name is Nelson John. Let's get started:
India’s benchmark indices Sensex and Nifty 50 continued their decline for the fourth straight session. Sensex dropped 0.35 per cent while Nifty fell 0.27 per cent.
Finance Minister Nirmala Sitharaman faced new challenges as she prepared for her seventh consecutive budget amidst changing political dynamics. The recent electoral results have shifted the political landscape, impacting the government's approach and introducing the pressures of coalition politics. Despite these pressures, the budget focused on maintaining fiscal discipline and promoting capital expenditure-led growth, writes N Madhavan. This was evident in the government's commitment to reducing fiscal deficits and boosting public investment to stimulate economic activity, hoping to catalyze private sector investment. Employment remained a central theme, with the government introducing schemes to enhance education, skills, and job creation, reflecting a proactive approach to harness India's demographic potential. Capital expenditure was maintained at robust levels to ensure continued infrastructure development and encourage state-level spending, which is typically more immediate in its economic impact. Overall, the budget balanced prudent fiscal management with necessary spending on critical areas, aiming to sustain growth without compromising financial stability. This explainer by Mint’s senior editor N Madhavan is the only one you will need to understand the Union Budget of 2024. Click on the link in the show notes to read.
The $250 billion IT services sector had a rough start in Q1 FY25, with mixed performances from big names like TCS, HCLTech, Infosys, Wipro, and LTIMindtree. Companies are still holding back on spending, and the much-anticipated boom from AI projects hasn’t quite hit yet. For instance, TCS saw a dip in its operating margins and overall contract values, while Infosys actually did better than expected, prompting it to boost its revenue outlook for FY25. Looking forward, there's a cautious optimism in the air. Global IT spending is expected to rise by 7.5% this year, but sectors like banking and financial services are keeping their wallets tight, which affects overall growth. The industry is hopeful for a stronger second half of the fiscal year as companies start loosening the purse strings and AI projects scale up. Mint’s Shelley Singh explains whether the IT sector will see a resurgence in the ongoing fiscal year or not in today’s Mint Primer.
In its first budget after a modest election victory, the BJP-led government is putting job creation at the forefront with new financial incentives to boost formal-sector employment. Details are pending, but the gist is clear: financial perks for hiring and for new employees signing up. However, given the deep-seated issues in India's job market and employers' typical aversion to formalizing roles, it's uncertain how much these incentives will actually move the needle. With three new schemes, the government aims to formalize more jobs, but past patterns suggest a tough road ahead. Real change might need more than just incentives if the underlying issues of job security and employer reluctance aren't addressed. Our partners at howindialives.com take a comprehensive look at the job-creation schemes through charts and numbers and whether these schemes can deliver what they promise.
Travelling from airports like Bengaluru, Kochi, or Ahmedabad? It might cost you more, even if your airline hasn't hiked its fares. This is due to increased airport charges, specifically the user development fees, which are passed from the airline to the airport operator and, ultimately, to travellers. Since the start of FY25, 16 major airports across India, including those in cities like Hyderabad, Mangalore, and Chennai, have increased the fee by 2 to 200 per cent, Mint’s aviation correspondent Anu Sharma reports. This rise in airport fees adds another layer to the already higher airfares this year, driven by a shortage of available aircraft and a spike in demand.
The Centre is committed to maintaining its fiscal deficit below 4.5% of GDP for FY26, continuing its track record of exceeding fiscal projections. Speaking to Mint’s Rhik Kundu and Subhash Narayan, finance secretary T.V. Somanathan said this goal, announced during the budget on Tuesday, aligns with the fiscal consolidation path set by Finance Minister Nirmala Sitharaman. The government aims to cut down the deficit from the 9.1% peak during the pandemic. The capex plan of the Central government will remain at about 3.4% of GDP, consistent with levels from the interim budget, and it may see an absolute increase in FY26. Somanathan indicated that while the percentage of GDP allocated to capex will hold steady, the actual amounts could rise, reflecting the government's commitment to maintaining robust investment levels in the coming years.
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Show notes:
Budget 2024-25: The ultimate explainer
Mint Primer | IT services: When will the tide turn?
Will the budget sops for hiring bear fruit?
Why you’re paying more for flying from these airports
Centre aims to better fiscal deficit target in FY26: Finance secretary