China has announced an economic growth target of approximately 5% for 2025, a figure consistent with its objectives over the past two years. However, meeting this goal may prove more challenging due to increasing global uncertainties, particularly higher tariffs imposed by the United States.

The target, revealed during the opening session of China’s annual legislative meeting, signals the government’s commitment to stabilising growth amid ongoing economic pressures. The inclusion of the term “around” in the target allows for flexibility should actual growth figures fall slightly short of the stated goal.

Challenges Posed by Global and Domestic Economic Factors

While China remains committed to economic expansion, external and internal challenges persist. The government’s official report highlighted concerns over an increasingly complex international landscape affecting trade, science, and technology.

Domestically, the report acknowledged that China’s economic recovery remains fragile. Weak demand, sluggish consumer spending, and subdued investment activity continue to pose risks to sustained growth. The International Monetary Fund (IMF) has projected China’s GDP growth at 4.6% for 2025, slightly below the government’s target and lower than the 5% recorded in 2024.

Focus on Boosting Domestic Demand

A key highlight of this year’s economic strategy is an enhanced focus on domestic demand. The government’s report outlined plans to position internal consumption as the primary driver of economic growth. This marks a strategic shift, aligning with the ruling Communist Party’s December meetings, which underscored the need to bolster household spending and domestic economic activities.

President Xi Jinping’s administration is expected to introduce more robust stimulus measures to support economic momentum. While the details of these measures remain undisclosed, economists suggest that increased public spending and targeted financial incentives could be part of the strategy to revive consumer demand.

Increase in Defence Budget Amidst Economic Priorities

In addition to economic policy, China’s draft budget revealed a 7.2% increase in defence spending for 2025, bringing the total military expenditure to 1.78 trillion yuan (approximately $245 billion). This solidifies China’s position as the world’s second-largest defence spender after the United States.

While this budget allocation reflects strategic priorities, it also raises questions about balancing economic stimulus with increased military spending, particularly in the face of constrained fiscal resources.

Conclusion

China’s decision to maintain a GDP growth target of approximately 5% in 2025 underscores its ambition to navigate economic headwinds while ensuring stability. The government’s renewed emphasis on domestic demand signals a shift in policy priorities, aiming to counterbalance external pressures such as US tariffs and global trade uncertainties. How effectively these strategies are implemented will determine whether China can achieve its ambitious economic goals in the coming year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

In his first address to Congress after commencing his second term, United States President Donald Trump reiterated his strong stance on tariffs. He criticised what he described as “unfair” trade practices by several countries, particularly highlighting India and China for imposing high duties on American goods.

Trump underscored that the U.S. has long been subjected to disproportionate tariffs and vowed to take decisive action to level the playing field. He pointed out that certain nations impose significantly higher import duties on American products compared to what the U.S. levies on their exports.

India and China Targeted for High Tariffs

During his speech, Trump specifically mentioned India’s tariff on automobile imports, which he stated exceeds 100 per cent. He also drew attention to China’s average tariffs, which, according to him, are twice as high as those imposed by the U.S. Additionally, he claimed that South Korea’s tariffs on American products are four times higher than what the U.S. charges in return.

The President argued that these tariff imbalances put American businesses at a disadvantage, making it necessary for the U.S. to take reciprocal action.

Reciprocal Tariffs to Take Effect from April 2 – The Reason Behind the Date

Trump announced that the United States will introduce reciprocal tariffs on several nations starting April 2. Notably, he specified that the date was chosen deliberately to avoid coinciding with April Fools’ Day.

He explained that the tariffs would mirror the charges imposed by other countries on American goods. If a country places non-monetary restrictions on U.S. exports, the U.S. will implement similar trade barriers to limit their access to the American market.

Trump Highlights Economic Benefits of the Tariff Strategy

Trump asserted that these tariffs would generate “trillions of dollars” in revenue and create employment opportunities within the U.S. He cited his previous tariff policies on China and other nations as evidence of their effectiveness, claiming that the Biden administration could not reverse them due to their financial impact.

Expressing frustration over longstanding trade imbalances, Trump stated, “We have been taken advantage of for decades by nearly every country on Earth, and we will not let that happen any longer.”

Conclusion: Implications of the Reciprocal Tariffs

The imposition of reciprocal tariffs marks a significant shift in U.S. trade policy, potentially affecting global trade dynamics. The decision could impact businesses and industries reliant on international trade, particularly in sectors such as automotive, technology, and manufacturing.

As the policy comes into effect, stakeholders in both the U.S. and affected countries will be closely monitoring its economic consequences. The move is expected to trigger responses from trading partners, which may lead to further trade negotiations or retaliatory measures.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

The Bombay High Court has temporarily halted the registration of a First Information Report (FIR) against former Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and 5 others. This stay, which will remain in effect for at least 4 weeks, follows concerns over procedural lapses in the special court’s decision.

Special Court’s Order Under Scrutiny

On March 1, a special court designated under the Prevention of Money Laundering Act directed Maharashtra’s Anti-Corruption Bureau (ACB) to register an FIR based on a complaint filed by journalist Sapan Shrivastava. The complaint alleged that SEBI permitted the listing of New Delhi-based oil refinery, Cals Refineries, on the Bombay Stock Exchange (BSE) in 1994, despite regulatory non-compliance.

Justice SG Dige of the Bombay High Court found flaws in the special court’s ruling, stating that it appeared to have been “passed mechanically” without due consideration of the applicants’ roles. The complainant has been granted 4 weeks to file a reply.

Allegations of Fraud and Corruption

The complaint accused SEBI officials of enabling market manipulation and corporate fraud. It was alleged that certain SEBI officials accepted bribes ranging from ₹2-10 lakh to overlook regulatory breaches, causing substantial financial losses to investors. The FIR was directed against SEBI’s Buch, along with whole-time members Ashwani Bhatia, Ananth Narayan G, and Kamlesh Chandra Varshney. BSE Chairperson Pramod Agarwal and CEO Sundararaman Ramamurthy were also named in the complaint.

SEBI’s Defence and Legal Counterarguments

SEBI, in a statement following the special court’s order, highlighted that trading in Cals Refineries shares had been suspended in August 2017 and that Buch and the 3 whole-time members were not part of SEBI during the company’s listing.

Representing Buch, advocate Sudeep Pasbola reiterated this in the high court, while Solicitor General Tushar Mehta questioned the validity of the special court’s order. Mehta argued that Shrivastava has a history of filing frivolous complaints and had been previously fined ₹5 lakh for such cases. He also pointed out that Shrivastava had been attempting to fundraise via a website for his legal battles, alleging extortionary motives behind the complaint.

BSE’s Response to the Allegations

Senior advocate Amit Desai, representing the BSE officials, dismissed the claims as unfounded and harmful to the country’s economy. He stated that the special court’s decision to take action against the SEBI and BSE officials was unjustified and had serious repercussions.

Implications and Next Steps

With the high court’s stay in place, the complainant now has 4 weeks to respond. The case has brought renewed attention to the oversight and regulatory functions of SEBI and the broader implications of legal scrutiny in corporate governance. The outcome of this legal battle will determine the next course of action regarding the allegations of fraudulent listing and regulatory lapses.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

The International Monetary Fund (IMF) has expressed concerns about financial stability risks in India arising from the substantial exposure of Non-Banking Financial Companies (NBFCs) to the power and infrastructure sectors. In its latest report, the IMF warns that vulnerabilities in these sectors could trigger systemic financial distress due to the interconnected nature of NBFCs, banks, corporate bond markets, and mutual funds.

NBFCs’ High Lending to Power Sector Poses Stability Risks

NBFCs play a crucial role in financing infrastructure projects, particularly in the power sector, which continues to face structural challenges. Large-scale lending to these projects increases the risk of financial instability, as any distress in the sector could ripple across banks and other financial institutions.

One key area of concern is the co-lending model, where banks and NBFCs jointly provide credit to priority sectors. While this model enhances credit access, it also deepens financial interconnectedness, making systemic risks more pronounced if vulnerabilities emerge in infrastructure financing.

Liquidity Constraints and Regulatory Challenges

Unlike traditional banks, NBFCs do not have access to Reserve Bank of India (RBI) liquidity facilities or the ability to accept demand deposits, making them more vulnerable to market fluctuations. The IMF report emphasises the need for enhanced monitoring of NBFC lending patterns and stricter liquidity regulations, particularly for those financing infrastructure projects.

Additionally, India’s corporate bond market remains underdeveloped, forcing NBFCs to rely on banks and mutual funds for funding. This dependency has led to past liquidity crises, highlighting the need for a stronger regulatory framework to manage risks effectively.

State-Owned NBFCs and Regulatory Disparities

Another concern highlighted in the IMF report is the disparity between public and private NBFCs in regulatory oversight. State-owned NBFCs hold a significant share of total NBFC assets but are exempt from certain regulatory limits. The IMF recommends aligning regulations for both public and private NBFCs to ensure a level playing field and mitigate financial risks.

Financial Inclusion and Market Development

Despite these challenges, India has made notable progress in financial inclusion, with nearly 80% of adults now having financial accounts. The country has also emerged as a leading market for equity options trading, reflecting broader financial market advancements. However, these positives do not negate the risks posed by NBFC exposure to infrastructure and power sector lending.

Potential Market Shock from NBFC Distress

If major NBFCs were to face financial distress, the impact could extend beyond their own balance sheets, affecting banks, corporate bond markets, and mutual funds that provide funding to NBFCs. This interconnectedness amplifies the risk of financial instability, making it crucial for regulators to implement risk-mitigating measures and improve financial sector resilience.

Conclusion

The IMF’s warning underscores the need for stricter oversight of NBFCs’ exposure to infrastructure projects. While NBFCs have contributed significantly to economic growth and financial inclusion, their reliance on external funding sources and exposure to volatile sectors present notable risks. Addressing these concerns through enhanced regulation and liquidity management could help safeguard India’s financial stability in the long run.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.