Indian Economy Review

All Posts (32)

A major reform in the government’s policy on retail marketing of petroleum products was announced on October 23 by allowing non-oil companies to operate fuel outlets in the country, without any investment commitments in the petroleum sector. In 2002, the government had allowed only companies, including those with foreign ownership, to set up fuel outlets provided they invested a minimum of Rs 2,000 crore in the petroleum sector. Now, the government has relaxed that policy by allowing…

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Macroeconomic Estimates Going Wrong

It is not just the Reserve Bank of India that has been getting its India growth forecasts wrong. The original culprit is the government of India. Its interim Budget for 2019-20, presented in February before the elections, projected a nominal growth rate of over 12 per cent for the current year. This is on the assumption of a 4 per cent inflation rate. In other words, the real GDP growth was projected at 8 per cent for 2019-20.

The July Budget, presented after the general elections,…

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Improved Ease of Doing Business

India’s latest ranking in the Ease of Doing Business index, produced by the World Bank, may not have pleased the government. This is understandable. India has improved 14 notches to claim the 63rd position in the global index out of 190 countries, but the goal was to rank itself within the top 50 countries. The progress in the last few years under the Modi regime has been huge – India’s rank had improved from 142 in 2014 to 77 in 2018 and now to 63. This is an impressive…

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Merger Economics in Vogue

There is, however, no let-up in the government’s decision making drive. If it was the announcement of merging 10 public-sector banks into 4 big banks on August 30 and a sharp cut in corporation tax rates, announced just three weeks later on September 20, the government has made yet another big pre-Diwali announcement. On October 23, the Union Cabinet met and approved a proposal for merging two of its giant but ailing telecommunication companies – Bharat Sanchar Nigam Limited and Mahanagar…

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Government Finances in Deeper Peril

One of the casualties of growth estimates going awry is the government’s Budget. The tax revenue numbers in the Budget were premised on a nominal growth rate of 12 per cent. Even on that assumption, a tax revenue increase of about 18 per cent was an ambitious task. Add to that the slowing economy, which meant that the task of meeting the revenue growth target would become even more formidable. According to an internal assessment made in the finance ministry, gross tax collections may fall…

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State of the Economy – A Dilemma

The month of October began with what looked like a reality check on the Indian economy. And that process was kicked off by none else than India’s central bank, the Reserve Bank of India (RBI).  In its bi-monthly monetary policy review on October 4, the RBI cut the repo rate (the rate at which the central bank lends to commercial banks and, therefore, signals the overall interest rate direction) yet another time by 25 basis points, taking the overall reduction during this year to 135 basis…

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Packages For Sugar And Ethanol

The Modi government’s focus on the farm economy continues to remain as sharp as before. The sugar economy is not only politically sensitive but can also cause economic distress to lakhs of farmers in states like Uttar Pradesh, Maharashtra and even Haryana, which constitute important and significant vote banks for the ruling party. Thus, in the last week of August, the Cabinet Committee on Economic Affairs approved an export subsidy amount of Rs 10 per kilogram to sugar mills for 2019-20.…

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Hopes Revive On India Joining RCEP

A positive development was an indication from the Indian government suggesting that it was at last preparing to enter the Regional Comprehensive Economic Partnership, a grouping of 16 countries including 10 ASEAN member countries and six other countries having a free trade agreement with the ASEAN, namely China, India, Japan, South Korea, Australia and New Zealand.  For many months, India had dilly-dallied and expressed deep reservations over how India could be at a disadvantage because of…

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FDI Policy Gets A Boost

Prompted to a great extent by the realisation that domestic investments are not picking up, the government has further liberalised its policy on foreign direct investment. A Cabinet meeting, chaired by Prime Minister Narendra Modi, has cleared a host of new proposals on FDI, most of which were aimed at attracting more foreign investment into the country. Thus, 100 per cent FDI in coal mining was allowed to encourage competition and opening up of the domestic coal market, FDI was allowed in…

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Demand-side Boost To Auto

Sitharaman announced a few more steps to revive demand in the economy and address the concerns of those who believed that the economic slowdown could be addressed more quickly if the demand constraints in the economy were addressed first. Thus, she announced a package for the automobile sector that included a deferment of one-time registration fees for vehicles till June 2020, an additional 15 per cent depreciation, over and above the existing 15 per cent depreciation, on all vehicles…

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Sops For Real Estate And Exports

Earlier in September, the government had announced a Rs 70,000-crore package for the exports and real estate sectors, two segments of the Indian economy that had been hit hard by the slowdown and their revival could help both jobs creation and growth. A Rs 20,000-crore fund, with the government providing half of the amount, was decided to be set up to arrange for last-mile funding for housing projects, which are not subjected to bankruptcy proceedings or have not been classified as bad debt.…

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Bold Moves, But Not Yet Out Of The Woods

The last few weeks have seen the Union government in firefighting mode.  As the signs of an economic slowdown became increasingly more evident, the Union finance ministry came out with a slew of measures – as many as four packages in as many weeks – in a bid to revive the Indian economy. A rough estimate puts the total impact of these measures at a little over Rs 1.6 lakh crore by way of revenues foregone and additional expenditure by the government.
  
Three distinctive features…

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The GST Balm

The government continues to deal with the challenges of implementing the goods and services tax (GST) even after rolling it out more than two years ago. The 37th meeting of the GST Council continued to rationalise rates for different items and provide waivers from compliance norms to small tax payers. Thus, the cess for mini-vans with a capacity of carrying 10-13 persons were reduced and the GST rates for low-cost hotels, outdoor catering, job-work for diamond jewellery and marine fuels were…

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Uninspiring Economic Data

The Indian economy is yet to emerge out of the economic slowdown, if the latest data released in the last few weeks are any indication. Economic growth, measured by GDP in real terms, was estimated at 5 per cent for April-June 2019 compared to 5.8 per cent in the previous quarter. Industrial production for July 2019 improved a bit at 4.3 per cent, but the capital goods sector continued to remain in contraction mode. And retail inflation for August 2019 decelerated further to 3.21, compared…

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Three Steps For The Financial Sector

Three major developments took place in India’s financial sector in the last few weeks. One, the government on August 23 announced that the Rs 70,000-crore recapitalisation plan announced in the Budget for public sector banks would be completed immediately, which would enhance the banks’ lending capability by Rs 5 lakh crore.  For many public sector banks, this meant they could get back into the business of lending after providing for their capital adequacy. 

But in less than a…

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Relief For FPIs & Start-ups

In her first intervention to revive the economy, Sitharaman announced a package of policy changes on August 23. Thus, she withdrew the enhanced surcharge her Budget had levied on income of foreign portfolio investors on their short- and long-term gains on equity transactions. This meant a revenue loss of Rs 1,400 crore, but it also assuaged the hurt sentiments of the stock markets. There was some relief for start-ups as well. Start-ups registered with the government were to be spared from…

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A New Economic Team

A new team is in place at the Prime Minister’s Office (PMO). With the resignation of Nripendra Misra as the principal secretary, P.K. Mishra, who was earlier the additional principal secretary at the PMO, has taken charge as his successor. Former Cabinet Secretary P.K. Sinha has joined the PMO as Principal Advisor. Brajendra Navneet, the joint secretary in charge of economic policy in the PMO, has gone back to his parent cadre i.e. Tamil Nadu. Simultaneously, the top team that oversees the…

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Softening Interest Rates

Anticipating correctly the softening of the headline retail inflation rate, the Reserve Bank of India had almost a week earlier cut the repo rate by 35 basis points from 5.74 per cent to 5.4 per cent. The repo rate is the policy rate at which the RBI lends money to the commercial banks to meet the latter’s liquidity shortfall. The 35-basis point reduction was announced on August 7 at the end of the RBI’s Monetary Policy Committee’s third bi-monthly monetary policy review of 2019-20. It also…

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No recent development has had such a deep impact on the government’s responsiveness to industry as the death of Cafe Coffee Day owner, V.G. Siddhartha. The sequence of developments drew attention to the strained relations between the government and industry and underlined how the government’s approach to big business could do with a lot of overhaul. The media focus was on the mysterious disappearance of Siddhartha on July 29 and then on the discovery of his body in a river near Mangalore two…

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About the Author

A K Bhattacharya
Distinguished Fellow, Ananta Centre
Editorial Director, Business Standard

After a 10-year long stint with Financial Express from 1978-1988, in different capacities in the areas of news gathering and news management, A.K. Bhattacharya joined The Economic Times in 1988 and functioned as its Chief of Bureau from 1990 to 1993. In 1994, he became its Associate Editor. He joined The Pioneer as Executive Editor in September 1994, stabilised the newspaper before becoming its Editor in 1995. He joined Business Standard in 1996 as Editor, News Services. Was its Resident Editor in Mumbai from July 1996 to September 1997 and helped the newspaper launch its Mumbai edition. From October 1997 to May 1998, he functioned as National Editor leading the paper's news operations. As Managing Editor of Business Standard between June 1998 and April 2000 and as its Group Managing Editor between May 2000 and October 2011, he oversaw the newspaper's news operations and editorial administration. From November 2011 to July 2016, he was the Editor of Business Standard. Since August 2016, he has been the Editorial Director of Business Standard on a part-time basis. He has been writing a regular column - New Delhi Diary - commenting on government affairs, since 1990 - that appeared in The Economic Times, Pioneer and now in Business Standard. Since 1997, he has been writing another column - Raisina Hill - commenting on developments/issues concerning bureaucracy.