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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Category: Pioneer
Will the three farm laws be revived?
Were the laws a missed opportunity to address the deep-seated issues faced by millions of India’s struggling farmers and consumers? Recently, a BJP Member of Parliament talked of resurrecting the three national Farm Laws. Faced with criticism from the opposition parties, a spokesperson of the BJP clarified that ‘her statement does not represent the party view’. Modi – The government doesn’t intend to bring back these laws. What were those laws? Enacted in September 2020, the most far-reaching of these laws was the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020. It allowed the Centre to regulate inter-State trade and intra-State trade, providing for freedom of choice to the farmer or trader to conduct trade and commerce while...
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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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Unified pension scheme: Balancing the old and new
Modi Government unveils unified pension scheme to bridge old and new, aiming to satisfy Central and State employees On August 24, 2024, the Union government announced the new Unified Pension Scheme (UPS) for central government employees. In fact, what looked like a well-orchestrated action plan, on the following day the BJP-led government in Maharashtra approved the implementation of the Scheme for its employees. Madhya Pradesh government is likely to implement the UPS soon. The above announcements are in response to the earlier decisions of Opposition-ruled States, including Rajasthan, Chhattisgarh (before the November 2023 elections), Jharkhand, Himachal Pradesh (HP) and Punjab to revert to the old pension system (OPS) which it felt tilted the electoral pendulum towards those parties, particularly in...
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E-commerce giants versus mom-and-pop stores
Amazon’s aggressive pricing strategies could lead to a massive e-commerce expansion, capturing half of India’s retail market within the next decade At the launch of the Pahle India Foundation’s report ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India’ on August 21, 2024, Union Commerce and Industry Minister Piyush Goyal took pot shot at the world’s biggest e-tailer Amazon, for selling products directly to consumers and indulging in “predatory pricing” that could lead to massive growth of e-commerce capturing half of Indian retail market ten years from now. This would adversely impact an estimated 100 million small retailers across the country and in turn, lead to “social disruption”. E-commerce, put simply, is the practice of buying and selling...
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Prospects of privatisation of PSUs are bleak
As the Modi government shifts its strategy towards ‘prudent public wealth management’ the prospect of privatising PSBs are increasingly unlikely. Announcing Modi – government’s policy on disinvestment of central public sector undertakings (CPSUs) in her Budget speech for FY 2021-22 the Union Finance Minister, Nirmala Sitharaman had talked of privatizing two public sector banks (PSBs) and one insurance company. A CPSU is an undertaking in which the Central government has majority share holding of more than 50 percent. Disinvestment refers to sale of its shares to private investors. When, such sale results in reduction of the government’s shareholding in the CPSU to below 50 percent and concomitant transfer of ownership and management control to private entity, this is termed as...
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Gas pricing: Reforms turn into a control regime
Government’s decision to grant a 20 per cent premium on natural gas from the state owned new wells has added complexity to the gas pricing regime The decision of the Union Government to grant a 20 per cent premium over the APM price (a jargon for administered or controlled price) for any natural gas (NG) that state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will produce from the ‘new wells or well interventions’ from their nominated fields has made the NG pricing more complicated. It is an outcome of a thought process that focuses on unshackling the oil and gas industry from price controls to start with but ends up exercising more controls. Every year, India...
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Populism will not let food subsidy reforms take off
Leakages can be curbed if the subsidy is given directly to the beneficiaries using ‘direct benefit transfer’ mode. The potential for reducing food subsidies is immense In the full Budget presented by Union Finance Minister Nirmala Sitharaman on July 23, 2024, the government has pegged the budget estimate (BE) food subsidy for FY 2024-25 at Rs 205,250 crore which is no different from the estimate given in the interim Budget. Though slightly lower than the revised estimate (RE) of Rs 211,394 crores for FY 2023-24, this is no consolation as invariably, the RE for any financial year turns out to be higher than the BE. For instance, while presenting the budget for FY 2023-24, Sitharaman kept the BE for food...
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Need for rationalising taxes on fertilisers
The GST Council, responsible for tax rate decisions has yet to resolve the tax discrepancies despite multiple discussions and recommendations For over five years now, the fertilizer industry has been facing an ‘inverted duty structure’. Inverted duty structure refers to a situation in which raw materials (RMs) are taxed at a higher rate than finished products in whose manufacture these are used. But, there was little that the Budget presented by the Union Finance Minister (UFM) Nirmala Sitharaman on July 23, 2024, could do to address it. Fertilizers and RMs used in their making are mostly taxed under the GST (Goods and Services Tax) regime. The GST Council – headed by the UFM that includes finance ministers from all States...
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