The challenge now is not just about delivering on electoral promises but also about balancing an already precarious fiscal equation that could see deficits skyrocket Having swept the polls in the National Capital Territory (NCT) of Delhi with a clinching 2/3rd majority, Rekha Gupta-led BJP – government faces the daunting challenge of having to find money to fulfil its poll promises. Amongst others, the BJP had promised Rs 2,500 a month to women under Mahila Samridhi Yojana (MSY); Rs 21,000 to pregnant women; LPG cylinders for Rs 500 and free cylinder on Holi and Diwali; a stipend of Rs 1000 a month to SC students pursuing technical and vocational courses; free education for needy students from KG to PG; free travel...
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Category: Economic outlook
RBI should go for an ‘accommodative’ stance
While inflation has been steadily declining, the RBI opted to retain its ‘neutral’ stance, signaling a measured approach rather than give push to boost liquidity and demand On February 7, 2025, the Reserve Bank of India (RBI) Governor Sanjay Malhotra announced the decisions taken by the six-member Monetary Policy Committee (MPC) in its sixth bi-monthly meeting of the current financial year (FY). It has reduced the policy rate or the repo rate (the interest rate at which the RBI lends to banks) by 25 basis points to 6.25 per cent. This marks the first repo rate cut in nearly five years. Moreover, it has continued with a neutral stance which it shifted in its fourth bi-monthly review/announcement on October 10,...
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Balancing growth with fiscal discipline
Key measures, including tax reliefs and incentives for private sector, reflect a balanced approach to making India a developed economy by 2047 A theme that reverberates in the Union Budget for FY 2025-26 presented by Finance Minister Nirmala Sitharaman on February 1, 2025, is ‘sustaining the momentum of high economic growth alongside sticking to fiscal consolidation’. During FY 2024-25, the GDP growth (gross domestic product) is estimated at 6.4 per cent which is more or less close to the 6.5 per cent – 7 per cent projected in the Economic Survey (ES) for 2023-24 presented by Sitharaman in the Parliament on February 1, 2024. For FY 2025-26, according to the Economic Survey presented by her on February 1, 2025, the...
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Freebies could push Delhi to fiscal disaster
Despite repeated warnings from the Supreme Court about the detrimental impact of freebies on free and fair elections, political parties continue to offer them In the din of blistering campaign in Delhi with the central theme of major political parties being on “freebies” – an acronym for ‘something given free of charge’ – it may be worthwhile to remind them about two observations made by the Supreme Court (SC). In an order in S Subramaniam Balaji vs the Government of Tamil Nadu & Ors given in July 2013, the SC had observed that the distribution of freebies of any kind influences all people. “It shakes the root of free and fair elections to a large degree.” A decade later, hearing a...
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State budgets on the brink: RBI sounds alarm
With outstanding debts exceeding the prudential threshold, the RBI urges states to adopt “next-generation” fiscal rules to ensure sustainable financial management According to a report on ‘State Finances: A Study of Budgets of 2024-25’ released by the Reserve Bank of India (RBI) on December 19, 2024, the consolidated gross fiscal deficit (GFD) of all State governments was contained within 3 per cent of their gross domestic product (GDP) during the financial years (FY) 2022-23 and 2023-24. For 2024-25, their GFD has been budgeted at 3.2 per cent of GDP. They have complied with the stipulation under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which requires them to keep it within the 3 per cent cap. But, the good...
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Slowdown in growth: Is it a temporary blip?
This temporary slowdown, attributed to reduced government spending, raises broader concerns about the structural challenges underpinning India’s growth story The GDP (gross domestic product) growth during the second quarter of the current financial year (FY) ending September 30, 2024, decelerated to 5.4 per cent down from 8.1 per cent achieved during the corresponding period of FY 2023-24. It was the lowest in seven quarters and well below the Reserve Bank of India’s (RBI) forecast of 7 per cent. It was even lower than the 6.7 per cent recorded during the first quarter of the current FY ending June 30, 2024. Union Finance Minister Nirmala Sitharaman observed that deceleration was not a “systemic slowdown”; that it was a temporary blip caused...
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Freebies: A winning strategy or economic pitfall?
The growing trend of offering freebies in elections raises significant concerns about financial sustainability, governance and its impact on voters’ mindset A major factor contributing to the success of the respective political party in the just concluded elections in Maharashtra and Jharkhand was freebies – an acronym for “something given free of charge” – particularly those targeted at women. In Maharashtra, the BJP-led Mahayuti alliance launched the Ladki Bahin cash benefit scheme that offered Rs 1,500 a month to every woman with a family income of less than Rs 2,50,000 annually, in the age bracket of 21 to 65 years. The amount was subsequently increased to Rs 2,500 per month. In Jharkhand, under Mukhyamantri Maiyan Samman Yojna (MMSY) Hemant Soren’s...
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Are e-commerce giants violating FDI norms?
As policymakers consider future regulatory steps, the ongoing ED investigation may serve as a pivotal moment in clarifying the regulatory framework for e-commerce operations in India Reportedly, on October 7, 2024, the Enforcement Directorate (ED) raided the offices of half a dozen sellers operating on the e-commerce platforms of Amazon and Walmart-owned Flipkart for alleged violations of Foreign Investment norms and Prevention of Money Laundering Act (PMLA). The intent behind the searches was to gather evidence on complaints that these sellers have been importing products from China but routing them through other locations to avoid paying higher import duties and longer time in getting the consignment cleared at the ports (that would be the case if the products were imported...
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Overstating food inflation
The CPI uptick is traced to food inflation which has a 40% weightage in the index On October 9, the Reserve Bank of India (RBI) Governor Shaktikanta Das announced the decisions taken by the six-member Monetary Policy Committee (MPC) in its fourth bi-monthly meeting of the current financial year (FY). It kept the policy rate (the interest rate at which the RBI lends to banks) unchanged at 6.5%. However, it altered its policy stance from “withdrawal of accommodation” to a neutral stance. The RBI fixes the policy rate in such a manner as to maintain the Consumer Price Index or CPI (it corresponds to a basket including food, fuel, manufactured goods and select services) within the target range of 4% (+/-...
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Unlocking the full potential of GatiShakti
The PM GatiShakti initiative is revolutionising India’s infrastructure by integrating digital planning tools to expedite project completion and improve multimodal connectivity According to the Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), Amardeep Singh Bhatia, as many as 208 big-ticket infrastructure projects including roads (101), railways (73), urban development (12) and oil and gas (4) worth Rs 1539,000 crore have been recommended for approval under the PM GatiShakti initiative so far. These projects have been recommended by an inter-ministerial group known as the Network Planning Group (NPG) constituted under the PM GatiShakti National Master Plan (NMP). Launched in October 2021, the PM Gati Shakti NMP is a transformative Rs 100 lakh crore initiative aimed at revolutionising the...
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