Business
Budget predictability, fiscal discipline positive, but liquidity remains key challenge: Neelkanth Mishra
Responding to concerns around the fiscal deficit and borrowing targets, Mishra said the Budget was largely in line with expectations and that this predictability itself is a positive signal for investors.
“So, the budget in many ways was absolutely predictable. There was not much of a surprise and I mean it in a very good way. The government increasing the visibility and reducing policy uncertainty for businesses and investors is a very positive step. The hard miles on fiscal consolidation are behind us,” Mishra said.
He added that with the pace of fiscal consolidation slowing, the economy has room to move closer to its trend growth rate.
“As you know, reduction in fiscal deficit is a drag on growth. So, clearly now with the deficit barely falling, the economy can start getting closer to its trend growth rates. But in order to close the output gap, clearly we are maybe one-and-a-half years behind where we were supposed to be if Covid had not happened,” he said.
However, Mishra flagged that despite strong fiscal discipline, the benefits are not yet translating into lower borrowing costs — largely due to liquidity conditions and government cash management.
“This remarkable fiscal discipline needs to show up in lower bond yields, lower cost of borrowing and unfortunately, as you also mentioned, the borrowing targets and perhaps excessively conservative plan to finance it… See, what has happened over the past two years is that government cash balances have actually shot up,” he explained.He noted that elevated government cash balances are draining liquidity from the banking system.
“What used to be ₹0.5–1 trillion overnight has now risen to maybe ₹3–3.5 trillion, sometimes even ₹4 trillion. And as the government cash balances go up, they actually go out of the deposits, so out of the banking system. This uncertainty itself has pushed up the cost of liquidity,” Mishra said.
He pointed out that banks are facing higher funding costs, which is distorting bond market behavior.
“If the banks today are borrowing 12-month money at 7%, it is not surprising that they are actually selling their holdings of Government of India bonds to generate that liquidity because those are yielding 6.6–6.7. And not surprisingly, the surprise on the gross borrowing target has meant that the yields today are 6.76,” he said.
According to Mishra, the failure of fiscal discipline to translate into lower rates is now a central policy challenge.
“So, despite fiscal discipline which is politically challenging and very hard to do, despite sticking to the debt consolidation path, the transmission to lower rates is not happening and that is the biggest challenge that confronts RBI and the government because unless you do that, how do you close the output gap,” he said.
He stressed the need for more proactive liquidity management and signalling. “Significant injections of liquidity, lot of signalling, the government’s efforts to manage its cash balance more proactively, all of these are important measures to address this challenge,” Mishra added.
On whether India is nearing a fiscal ceiling without large disinvestment proceeds, Mishra said the country has largely returned to pre-Covid fiscal norms — a notable achievement. “Look, the fiscal deficits at the central level are almost back to pre-Covid levels. This is a remarkable achievement,” he said.
He highlighted that the current deficit includes support to states for capital expenditure.
“So, the 4.3% deficit includes about 0.55% of GDP of the interest-free loans to states for capex. So, if you remove that and you compare it to where we were pre-Covid, they are almost there,” he said. Mishra also noted improvements in fiscal transparency.
“Pre-Covid we actually used to have many of these off-balance sheet issues which I think have been now mostly addressed. So, it is a much cleaner number and on an adjusted basis I think is far superior to the fiscal deficits that we used to work with earlier,” he said.
Looking ahead, he said fiscal consolidation has largely done its heavy lifting, allowing policy to increasingly rely on monetary easing.
“The hard miles on fiscal consolidation have been crossed. The fiscal deficit does not need to fall meaningfully from here. But remember that, if your debt to GDP and if the government is reducing crowding out, it enables the private sector to grow faster,” Mishra said. He pointed to narrowing yield differentials between India and the US.
“So, what used to be 8% in India and 2% in the US is now 6.5% in India and 4.25% in the US. And frankly, if the liquidity situation is managed well, my expectation is that we will be closer to 6% in the next 12 months and therefore, the yield gap narrows even further,” he said.
On capital expenditure, Mishra acknowledged steady growth but emphasized that the quality of spending has improved.
“What we are seeing now is capex starting to happen on railways. There was a challenge with the national highways. The strategic plan was a bit of an issue. It looks like we are done with that and now expenditure can start happening. Tendering for national highways can start to pick up,” he said.
He also highlighted a shift away from wasteful spending.
“The expenditure improvement, quality improvement I was talking about, is that if the government spending on the whole is rising at 7% but capex is rising at 11–12%, it shows that the government is refraining from wasteful expenditure and focusing on what it must do instead of using taxpayer money as its own,” Mishra said.
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The U.S. housing market accelerated in March despite elevated mortgage rates reducing some of the affordability improvement the market had recently seen, according to a new report.
Zillow released its market report for March which found that newly pending home listings increased 4.6% from a year ago in March.
That increased the number of listings to the second-largest monthly total since the end of the pandemic boom in August 2022, which Zillow said was a positive sign for the market as the home shopping season begins in earnest.
The housing market’s uptick occurred despite mortgage rates increasing from 5.98% at the end of February to 6.38% in late March, according to data from Freddie Mac. Excluding taxes and insurance, the typical mortgage payment increased 1.5% from February, which undercut some of the affordability improvements the market had seen.
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The housing market is showing signs it’s picking up despite mortgage rates rising higher again. (Daniel Acker/Bloomberg via Getty Images)
Zillow found that the monthly mortgage payment on a typical U.S. home was $1,789 in March, given a 20% down payment, after excluding taxes and insurance. While that figure rose on a monthly basis, it was 4.4% lower than last year, according to the report.
There were 1.23 million homes listed for sale in March. Inventory rose 9.5% from February and active inventory was 4.2% higher than it was a year earlier.
The number of new for sale listings totaled 384,854 in March, an increase of 0.1% from a year ago and 35.6% in February.
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Mortgage rates have risen lately, curbing some of the affordability improvements seen earlier this year. (Getty Images)
Newly pending listings – a figure that measures listings which changed from for sale to pending status rather than closed sales – shows 4.6% growth from a year earlier, and a 29.8% increase over February.
A total of 300,398 homes were sold in March, according to a preliminary reading from the Zillow sales count nowcast. That’s up 3.7% from a year ago and 25.2% from February, though those figures will be revised mid-month.
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The number of homes sold in March was up on both an annual and monthly basis. (David Paul Morris/Bloomberg via Getty Images)
“Buyers and sellers have been navigating uncertainty and market volatility in some form since the onset of the pandemic, and this month’s concern over energy prices is no different,” said Mischa Fisher, chief economist at Zillow. “However, we have persistent signals that the market has turned a corner.”
“Pent-up demand from three years of low sales volume and winter storms in January and February, along with the tailwind from lower mortgage rates earlier in the year, seem to have buoyed the market as home shopping season kicked off. In particular, the rapid acceleration of daily page views per listing we saw in March was a noteworthy improvement over the dormant market of recent years,” Fischer added.
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Oracle on Monday announced it hired a new chief financial officer after the software giant moved forward with layoffs last week.
The company announced that Hilary Maxson will serve as the new CFO, joining Oracle from French industrial conglomerate Schneider Electric where she served in the same role. Oracle said her appointment to the rule is effective immediately.
Maxson, 48, will receive an annual base salary of $950,000 and will be eligible for a performance-based bonus with a target of $2.5 million, Oracle said in a regulatory filing.
The move comes on the heels of Oracle reportedly moving forward with a round of layoffs last week, with CNBC reporting the layoffs will affected thousands of workers at the tech company, according to two people familiar with the matter.
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Oracle has hired a new CFO as the company grapples with a costly AI buildout and restructures its workforce amid reported layoffs. (David Paul Morris/Bloomberg via Getty Images)
Oracle’s most recent 10-K filing noted the company had about 162,000 full-time employees in May 2025.
The company said in a March filing that it expects the total costs associated with its restructuring plan in fiscal year 2026 to be as high as $2.1 billion, most of which would go to employee severance and related expenses.
Oracle has recently ramped up capital spending to build artificial intelligence (AI) data centers as the company looks to incorporate those tools into its business software services. The company has projected $50 billion in capital expenditures for its fiscal year that ends in May, more than double its spending in the previous fiscal year.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ORCL | ORACLE CORP. | 145.54 | -0.86 | -0.59% |
The cloud computing company said in February it planned to raise as much as $50 billion this year through a combination of debt and equity sales.
The company’s stock has been volatile over the last year amid the AI buildout, with shares up about 14% in the last year despite declines of 50% in the last six months and 25% year to date amid concerns that AI presents a competitive threat to software providers.
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Oracle’s stock has been volatile amid its AI buildout. (Getty Images)
Oracle’s move to hire Maxson as CFO will reinstate a position that was eliminated after Safra Catz became the company’s co-CEO and principal financial officer in 2014.
Maxson will report to Oracle co-CEO Clay Magouyrk in her new role and said in a press release announcing her hiring that she is “excited to join at this pivotal moment.”
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She added that she looks forward to partnering with the company’s leaders to “continue to invest with discipline and to translate this momentum into durable, long-term value for customers and shareholders.”
Reuters contributed to this report.
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