Do it yourself

  The India specific actions of President Trump in the past six months have evoked a varied response from various stakeholders. ·           The policymakers have been quite guarded in their response. Prime Minister Modi has rhetorically emphasized on the need to be self-reliant and adopt  Swadeshi  (Made in India products), but so far, we have not heard any specific policy or plan to counter the US aggression. Most of the concerned ministers and bureaucrats have repeatedly expressed hope that India will manage to finalize an “honorable” trade deal before the end of 2025. The only detail they have shared is that India shall not compromise on the interests of its farmers’ and energy security concerns.  Prima facie , the bureaucratic and diplomatic effort is to  “restore status quo ante” , to the extent possible. ·           Industry associations also seem to be preferring a...

The general reaction to the Union Budget for fiscal year 2025-26 is mostly positive. Most people have appreciated the commitment to fiscal discipline. Substantial increase in the allocation for rural and urban development programs has apparently come at the expense of lower or no growth in the allocation for food, fuel & fertilizer subsidies, defense and transportation (road and railways). The most celebrated aspect of the budget is the enhancement of tax rebate under section 87A from Rs25,000 to Rs60,000; and restructuring of tax slabs from the earlier three to six in the new scheme of personal income tax. These changes would result in a potential net tax saving of 2-6% of the post-tax income. The most debated aspect of the budget is the allocation to the capital expenditure. Analysts are calculating the total allocation for capex using different matrices and thus debating in favor or against the budget. The budget numbers assume a nominal GDP growth of 10.1% for FY26, which will ...

If we have to list the reasons for the loss of growth momentum in our economy in the past decade or so, the following three would be amongst the top reasons: 1.   Credit euphoria preceding the global financial crisis and the subsequent meltdown The credit euphoria preceding the global financial crisis and the subsequent meltdown severely damaged India’s financial system. The banking system was crippled with enormous amount of bad assets; many key infrastructure projects were either abandoned or suffered inordinate delays; employment generation capabilities were impaired; private savings began to decline structurally; and overall investments also slowed down. It has taken almost a decade for the Indian banking system to clean its books and return to the path of growth, stability and profitability. Private savings and investments though still have a lot to catch up. 2.   Disruption through policy changes without adequate mitigation strategy At least two major...

 A few month ago, the banking and monetary regulator in India, the reserve Bank of India (RBI), assumed the responsibility of stimulating the economic growth, in addition to its primary responsibility of regulating & supervising the banking & money market institutions, formulating & implementing monetary policy to achieve the objectives of financial stability and price stability. Given the state of economy, no one could find any fault with the RBI assuming this additional responsibility. In fact the RBI was commended for taking this extra load. It is very well accepted that a well-functioning, deep and robust financial market is a must for economic development. On Wednesday, the financial market regulator, the Securities and Exchange Board of India (SEBI) assumed the additional responsibility for reviving the sagging Indian economy. SEBI’s chairman reportedly said “SEBI is considering multiple steps to reboot the economy through financial market reforms”. He said, “It...

  Continuing from last week (See Farm Sector Reforms – 5) To bring any meaningful improvement in the fragile condition of India's farming community, a comprehensive rural development effort is needed. The traditional farmer welfare measures like periodic hikes in support prices for certain crops, farm input subsidies, interest rate subvention have not yielded the desired results. In view of this, the latest legislative effort I important and desirable. However, this may not be sufficient. A sustainable improvement in Indian farmers' conditions is possible only under a comprehensive rural development mission. The mission should address the problem with structural reforms at three levels, viz., 1. Farm Level; 2. Policy Level and 3. Social Level. All reforms must be pursued "urgently, vigorously, simultaneously" and in a fully integrated fashion, for having a meaningfully sustainable impact. Farm level reforms At farm level farmers are struggling with a multitude...

  Continuing from last week (See Farm Sector Reforms – 4 ) While announcing the famous Rs20trn economic stimulus package in May 2020, the finance minister had made the following 10 key promises for the farm sector in India. It was categorically stated that the governments sees farm sector as a key driver of overall economic growth and also a powerful engine to drive the “self-reliance” agenda. 1.     Essential Commodities Act to be amended to enable better price realization for farmers by attracting investments and making agriculture sector competitive. 2.     A central law to be enacted to provide for inter-state trade and framework for e trading of agriculture produce. 3.     The government to facilitate appropriate legal framework for an enforceable standard mechanism for predictable prices of crops at the time of sowing. 4.     Financing facility of Rs.1Lakh Cr to be provided for funding Agriculture Infrastru...

Continuing from last week (See Farm sector economics in India ) The issue of laborers migrating from large cities and industrially developed towns to villages & towns of industrially backward UP, Bihar, Jharkhand, Chhattisgarh, etc has caught everyone's attention in past few weeks. This migration is being widely seen as a fall out of COVID-19 induced lockdown of socio-economic activities. Indubitably, the lockdown has prompted many workers to wind up their household and move back to their home towns. But it would be a grave mistake to assume that lockdown is the only reason for the migration. The rate of unemployment amongst migrant and other workers was rising consistently since past few years. Demonetization and GST dealt a major blow to the jobs in unorganized and MSME sector. Besides, these workers were faced with the double whammy of stagnant to declining wages and rising cost of living. To highlight my point, I would cite my favorite example again. ...

Continuing from yesterday ( see here ) Before planning for any reform in the India's form sector, it is critical to understand the key characteristics of the India's farm sector. To be successful, any strategy, plan, policies and programs must be in congruence with such characteristics. Unfortunately, most of the policy initiatives and programs implemented in past couple of decades have not been congruent with the characteristics of the farm sector. The following are some of the typical characteristics of the India's farm sector which have been hindering the growth and profitability of the sector and large proportion of population associated with the farming and allied activities. Farm sector of India As per the 6th Economic Census (2014) and Agriculture Census of India (2017), and NSSO (2013) data the following are the broad contours of the farm sector of India: Non-farm activities 1.     There are about 3.5cr rural commercial (no...