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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Category: Economic outlook
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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Compensation cess should go
In its meeting held early this month, the Goods and Services Tax Council decided to set up a Group of Ministers (GoM) to suggest “how to go about” the GST compensation cess, which is levied on luxury, sin and demerit goods after the loans taken to meet the revenue shortfall of states during Covid-affected years are repaid. Reports that the Group of Ministers will be “reworking its nomenclature” suggest policymakers intend to continue the levy even after the March 31, 2026 deadline, when it is supposed to be withdrawn as per the subsisting arrangement. Why should the levy be continued? Following the Constitution Amendment Act, 2016, which introduced the GST, the Union Government also introduced the GST Compensation Act, 2017. It...
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Why RBI should not look at food inflation
Concerns over persistent food price volatility and the need for economic growth support have prompted the Reserve Bank of India to keep its options open On October 9, 2024, 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 has kept the policy rate (the interest rate at which the RBI lends to banks) unchanged at 6.5 per cent. However, it has altered its policy stance from “withdrawal of accommodation” to a neutral stance. In 2016, the Union Government put in place an institutionalised framework to enable the MPC to formulate monetary policy and determine the key interest...
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Can India become a manufacturing hub?
Growth is driven by strong domestic demand, export potential, government infrastructure efforts, private sector investment, and initiatives like ‘Make in India’ According to a Study Report by IDBI Capital, India is set to add US$ 1 trillion to its gross domestic product (GDP) every 18 months over the next six years. It goes on to say that “with this momentum, the country is on track to become a US$ 10 trillion economy positioning itself as the world’s third-largest economy by 2030”. Currently, India has a GDP of US$ 4 trillion. The report has also highlighted that “India’s accelerated growth will be driven primarily by the manufacturing sector, which is projected to contribute 32 per cent to the incremental Gross Value...
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GST cess extension: Is it Justified Beyond 2026?
With loans likely to be repaid by January 2026, the question arises—can the continued levy of the cess be logically justified in light of buoyant tax collections In its meeting held early this month, the GST Council had decided to set up a Group of Ministers (GoM) to suggest ‘how to go about the GST compensation cess, which is levied on luxury, sin and demerit goods such as automobiles, aerated drinks and tobacco, after the loans taken to meet the shortfall in revenue of states during Covid-affected years are repaid. The GoM will be headed by Union Minister of State for Finance Pankaj Chaudhary and include members from states. The statement ‘how to go ……’ together with reports suggesting that...
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Making IBC work better
According to a report by CRISIL, resolutions of non-performing assets (NPAs) of banks under India’s Insolvency and Bankruptcy Code (IBC) was the highest in FY 2023-24, with 269 cases receiving approval of the National Company Law Tribunal (NCLT) which were 42 percent higher compared to FY 2022-23 when 189 cases were resolved. NPA is a fancy nomenclature for a loan that has gone bad. A loan account becomes an NPA when interest and/or installment of principal remain overdue for a period of more than 90 days. Resolution is the process of recovering value from the NPAs. To enable banks to pursue resolution of NPAs on the fast track, in 2016, Modi – government had enacted the IBC superseding multiple subsisting laws....
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Privatisation off the table for banks
With stalled reforms and limitations of coalition politics, PSBs remain shackled by govt control In her Budget speech for the financial year 2021-2022, Union Finance Minister Nirmala Sitharaman announced the Modi government’s policy on disinvestment of central public sector undertakings (CPSUs). She mentioned plans to privatise two public sector banks (PSBs) and one insurance company. A PSB is a bank where the central government holds a majority share of over 50%. Disinvestment refers to the sale of these shares to private investors. When such a sale reduces the government’s shareholding in a PSB below 50% and ownership and management control are transferred to a private entity, it is termed privatisation. Has there been any follow-up action to the finance minister’s...
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