What we can expect of India’s budget in a year of deal-making #IndiaFinance

The annual deal-making Davos conference kicked off on 20 January, the same day a self-appointed deal-maker was sworn in as the next president of the United States.

India observes an annual deal-making day on 1 February every year when the finance minister presents the budget.

The budget is technically supposed to be a dull accounting statement but, by default, has become India’s annual economic statement; in reality, it has always striven to strike deals between various sections of society through budgetary allocations and tax breaks.

Given the deal blizzard that has welcomed 2025, it will be interesting to see the deal structures finalized by finance minister Nirmala Sitharaman.

A Goldman Sachs report on mergers and acquisitions for 2025 anticipates a stellar year for corporate deal-making as companies try to act on monetary policy normalization, easier regulations under the new US administration, artificial intelligence disrupting normal operations and a widespread corporate desire to rebalance portfolios.

Also Read: Q3 throws focus on deal cycle, tenure for India’s biggest IT service providers

The report expects the M&A engine to accelerate through 2025, knocked occasionally by volatility caused by geopolitical shifts and a new tariff regime.

The biggest deal in recent times was the breakthrough achieved in convincing the Israeli government and Hamas to sign a complicated truce agreement.

Mediated by the Qatar government and pushed along by representatives from both Joe Biden’s lame-duck government and Donald Trump’s incoming administration, a complex and multi-phase ceasefire deal was announced, with hostages and prisoners released by both sides in its first phase as a gesture of deal acceptance.

The truce could well be temporary because any perceived transgression during its prolonged duration by either side could reignite hostilities.

But despite these knife-edge risks, the negotiators soldiered on, modifying some conditions, using available pressure points to get some others accepted or using veiled threats when necessary to get their points across.

Also Read: Mint Quick Edit | Gaza ceasefire: Now for Trump’s art of the peace deal

This is exactly how corporate deals are closed and the presence of Steve Witkoff, a real-estate investor and President Trump’s frequent golf partner, may have speeded up proceedings.

Trump had, of course, promised on the campaign trail that his White House will drive multiple deals.

Soon after his inauguration, he signed a flood of executive orders.

These included withdrawing the US from the Paris climate accord and the World Health Organization, obliterating transgender rights and dismantling federal programmes that promoted diversity, equity and inclusion.

It revealed the president’s desire to unilaterally dictate the governance agenda, independent of the US Congress.

But two specific orders cast a sharp light on his transactional mode of governance, and both involve large corporations.

The first surprisingly reverses the US’s acceptance of a global tax deal facilitated by the Organisation for Economic Co-operation and Development, which sought to limit tax-evasion by large multinational corporations; these companies dodged taxes in countries of operation by booking profits in low-tax jurisdictions.

The order, which invalidates years of G20 negotiations and an agreement signed by 130 nations, is viewed as mostly beneficial to technology companies like Google, Amazon and Meta; the chief executives of all these companies were present in full strength at Trump’s inauguration.

The second order seeks to provide a 75-day reprieve to social media platform TikTok after US federal law banned it (for ostensibly posing a threat to national security), an action that was subsequently upheld by the US Supreme Court.

Trump’s executive order is an attempt to provide TikTok breathing space to finalize a deal—essentially find an American suitor willing to buy a stake—that will help it side-step the ban.

Interestingly, TikTok CEO Shou Zi Chew was found seated next to Tulsi Gabbard, the new director of national intelligence, at Trump’s swearing-in ceremony.

So, what kind of deal is to be expected from India’s budget?

The budget essentially has to strike a deal that optimizes the interests of five sets of stakeholders.

One comprises middle-class salaried employees who feel squeezed between rising inflation, allegedly unfair tax laws and stagnant wages.

Also Read: Mint Quick Edit | Tax cuts are in high demand

The second cohort includes agriculturalists and the broader rural population, which, in the face of stagnating incomes, has been forced to depend on government handouts and loans to finance consumption.

The third is the vast army of unemployed youth which sees no job opportunities and is therefore unable to supply the advertised demographic dividend.

The fourth group includes the creamy layer of the corporate sector, which has used a bouquet of tax breaks and incentives to enrich top management without benefiting the broader workforce or the economy’s investment ratio.

The final silo includes both foreign investors and domestic bean-counters who view the budget through the lens of its fiscal deficit to the exclusion of all else.

Given these five sets and a discernible economic slowdown, the finance minister will have to design a five-cornered New Deal that stimulates consumption, spurs employment generation, incentivizes capital expenditure, maintains tax buoyancy and yet keeps a tight leash on the fiscal deficit.

The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal