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Moneycontrol Pro Weekender: A Budget for a Brave New World 

India is on the frontline of the geopolitical conflict -- We need a budget to reflect that fact

January 28, 2023 / 10:48 AM IST

Dear Reader,

I do hope the Union Budget 2023 will not be a business-as-usual one. Nor should it be, God forbid, a populist one. The finance minister’s speech needs to go beyond the mere numbers, the accounting pieties of balancing the books, a sop here, a nudge there and catchphrases everywhere.

Instead, it should outline to us how the government plans to deal with the brave new world that is in the making. We would like to know the strategy and the tactics that will be employed and the vision the government has of India’s role in the new world. After all, we are now on the frontline of an ongoing geopolitical conflict, and the old ways will not do. We need to talk geo-economics, where economics must be used to advance geopolitical and national security objectives.

Consider what a group of RBI economists wrote in their ‘State of the Economy Report’. They said, “Powerful forces are being unleashed that can potentially reshape the global order. The upsurge of international hostilities in 2022 is rearranging geopolitical configurations, with profound implications for economic activity, commerce and finance.”

What are these implications? Zoltan Pozsar, not just a Credit Suisse analyst but a prophet of the new age, has outlined his vision in his missive ‘War and Industrial Policy’. He writes, “The West will have to pour trillions into four types of projects starting ‘yesterday’: 1) re-arm (to defend the world order); 2) re-shore (to get around blockades); 3) re-stock and invest (commodities); and 4) re-wire the grid (energy transition). He said these four themes will be the defining aims of industrial policy over the next five years.

Nations have already started to implement these policies. To take a few examples, Japan has increased its defence spending by 23 percent for 2023, the CHIPS Act in the US is spending $52 billion on re-shoring semiconductor manufacturing, the EU has enacted legislation to mobilise €43 billion in public and private funds with the goal of doubling its share of the global semiconductor manufacturing market by 2030.

Pozsar adds that the to-do list will have to be done whatever the cost, because security is at stake. He writes, “Hell or high water, executing on the to-do list is imperative. Industrial sovereignty depends on it.” As for China, recall that Xi Jinping said the word ‘security’ 50 times in his speech at the Party Congress last October. Surely, the list is equally applicable to India as well.

The governor of Finland’s central bank, Olli Rehn, gave a speech recently with the rather ominous title, ‘Preparing the economy and financial system for hybrid war—Finland’s experience’. Rehn said Finland’s preparedness includes the following: mandatory conscription for men, defence forces fully interoperable with NATO, a diversified energy supply, including various forms of renewable energy and nuclear power, a National Emergency Supply Agency that maintains sufficient stockpiles of critical materials in cooperation with the private sector, and making sure that backups for financial systems take care of all emergencies. For instance, Finland’s central bank has created a backup plan for two severe scenarios: The first scenario is a severe disruption of customer services in an account-holding bank, for instance due to a serious cyberattack, while the second scenario is a severe disruption of critical resources outside the country or the undersea cables on which Finland's digital economy relies.

It’s not just a matter of increasing defence spending --geopolitical power is not solely based on military force, but also derives from factors such as the control of resources, logistics, access to technology, R&D, ability to withstand sanctions and arm-twisting, trade control, investment policy, energy security, security of data and digital infrastructure and, of course, economic and political alliances.

Thankfully, the Indian government too has taken some measures to embrace the new paradigm. The PLI scheme, for instance, will add to our security. The government’s Aatmanirbharta policy is in accordance with the spirit of the times. The attempt to use the rupee for bilateral trade is another example. The holding of strategic talks with NATO is a positive step.

But Singapore diplomat Bilahari Kausikan sounded a note of caution at the recent Atal Bihari Vajpayee Memorial Lecture in New Delhi when he said, “Without the US, there can be no balance to China anywhere; without engagement with China, the US may well take us for granted. The latter possibility may be less in the case of a big country like India, but it is not non-existent.”  

Olli Rehn justified the measures Finland was taking by pointing to its 1,340-km long border with Russia. The length of India’s border with China is 3,488 kms, so we should be three times more prepared.

It may be asking for too much to expect this year’s budget to boldly go where no budget has gone before. But we can at least hope to get some clues about the government’s thinking on how it proposes to allocate resources taking the new challenges into consideration.

And just in case all this is too depressing, here’s a view of how World War 1 started that might lift the gloom.

Manas Chakravarty

Here are some of the stories and insights we published this week, apart from our technical picks in the equity, commodity and forex markets.


Yes Bank, Prudent Corporate Advisory Services, Dr Reddy’s, VIP Industries, Tata Motors, Bajaj Auto, Weekly tactical pick, Pidilite, Thangamayil Jewellery, Heritage Foods, Home First Finance, Cipla, Karur Vysya Bank, Colgate Palmolive, Saregama, Dodla Dairy, Syngene, Tamilnad Mercantile Bank, Axis Bank, UltraTech, Atul Industries, ICICI Bank, Kotak Mahindra Bank, Mphasis, JSW Steel, Polycab India, India Energy Exchange

Budget 2023 

Time to reinvent the budget exercise altogether

Keep the focus on capex growth

Why the budget should become a non-event

Balancing growth and fiscal prudence

Indian economy needs a time out for meditation

The key to increasing the capex multiplier

Fiscal math from the market’s lens

Marketing Musings: How the Indian media created the mega budget event

Focus on sustainable allocations to power growth

Renewable energy likely to get deeper thrust

What to expect on energy storage, T&D in RE sector


Can we bank on banks to pull Nifty up?

Global economy

Good news on the global economy

Why Eurozone avoiding a recession is no reason to celebrate

Why the ECB will continue to increase rates

Budget snapshots

Subsidies, Housing market, Infrastructure, Interest Payments


Technology lifted India’s productivity, but did it also depress employment?

Economic Recovery Tracker

Tackling unemployment—a job we haven’t met

Financial Times 

Why passive investing makes less sense in the current environment

China’s record $2.6 trillion rise in savings fuels ‘revenge spending’ hopes

The end of Chinese lockdowns and the re-opening of trade

Luxury boom shows staying power of ultra-rich

Companies and industry 

Yes Bank’s AT-1 bonds, BPCL and its BeCafes, Colgate, Gland Pharma, Warehousing the next wave in real estate, Start-up Funding


How to effectively regulate Big Tech—Australia as a role model

SEBI cannot ignore SAT decisions


The Eastern Window, On quiet quitting, BharOS, ASER Report, Personal Finance, GuruSpeak

Manas Chakravarty
Manas Chakravarty
first published: Jan 28, 2023 10:48 am