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Reforms in agri-marketing – Uttar Pradesh shows the way

In Uttar Pradesh (UP) the biggest producer of wheat with a share of about one-third in India’s total wheat production, the farmers have sold to the State agencies a meager 1 million ton out of total market surplus of 16 million tons from their produce during Rabi 2024-25 (out of total production of 41 million tons, 60 percent or 24 million tons is used by them for their own consumption leaving a surplus of 16 million tons). They have sold the rest to private trade reportedly at a price even higher than minimum support price (MSP) fixed by the Centre. Clearly, they find sales in private channels to be more attractive. Look at the situation from another angle. According to...
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GST Compensation cess should go post – March 2026

In its meeting held in October, 2024, the Goods and Services Tax (GST) Council had 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 revenue shortfall of states during Covid-affected years are repaid. Reports that the GoM will be “reworking its nomenclature” suggested it intend to continue the levy even after the March 31, 2026 deadline, when it was to be withdrawn as per the subsisting arrangement. Now, it is reported that after March 31, 2026, Compensation Cess may either be absorbed into the basic GST rate or levied as...
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Global wars expose vulnerability of Indian fertilizer industry

The Russia-Ukraine war that started in early 2022 followed by war in Middle-East has exposed the inherent ‘weaknesses’ of the Indian fertilizer industry. Nitrogen (N), phosphate (P) and Potash (K) are the three major plant nutrients needed for increasing the production of various crops. These are supplied from (i) urea that contains 46 percent ‘N’; (ii) non-urea fertilizers which supply ‘P’ and ‘K’. In this category, while, di-ammonium phosphate (DAP) contains 18 percent ‘N’ and 46 percent ‘P’, muriate of potash (MOP) supplies 60 percent ‘K’. There are around two dozen grades of complex fertilizers containing N, P, and K in different proportions. India depends heavily on import of fertilizers either in finished form or as raw materials (RMs) such...
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Balance price stability with growth

On June 6, 2025, the Reserve Bank of India (RBI) Governor Sanjay Malhotra announced the decisions taken by the six-member Monetary Policy Committee (MPC) in its second 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 0.5 percent to 5.5 percent. Coming on top of 0.25 percent cut announced in February 2025 and another 0.25 percent cut in April 2025, the RBI has thus reduced the rate by a full percentage point. The downward trajectory in the repo rate is seen after a gap of five years (the last time, the central bank affected the cut was in May 2020)....
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Financing fertilizer subsidy – don’t encroach on reserve oil funds

For the first time, in the nearly five decade history of implementing the Fertilizer Subsidy Scheme, the Union Government has decided to dip into the Oil Industry Development Fund (OIDF) to finance a portion of the subsidy requirement under the Scheme. The amount to be drawn from the OIDF is Rs 13,000 crore in the revised estimates (RE) for  financial year (FY) 2024-25 and Rs 24,600 crore in Budget estimate (BE) for FY 2025-26. In the backdrop of successive and steep increases in the international prices of crude oil and petroleum products since early 1973, and urgent  need for achieving progressive self-reliance in petroleum based industrial raw materials, in 1974, the then government set up the OIDF by enacting the...
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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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FM bows down to real estate lobby

In the Union Budget for 2024-25 presented on July 23, 2024, Finance Minister Nirmala Sitharaman reduced the tax on long-term capital gains (LTCG) from sale of Real Estate (Physical) and Physical Gold from 20 percent with the benefit of indexation to 12.5 per cent but without the indexation benefit. However, owners of old houses acquired before 2001 (ancestral property) will continue to get indexation benefit. For the purpose of deciding that the capital gain is long-term, the holding period for both the asset classes is 24 months. Whereas, for Physical Gold, it is down from 36 months earlier, in case of Real Estate (Physical), it remains unchanged. The benefit of indexation allowed a person to adjust the cost of her...
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Redistribution of wealth – a dangerous idea

Addressing a rally in Rajasthan’s Banswara on April 21, 2024 Prime Minister Narendra Modi referred to plans of the Congress party (if it were to come to power) to conduct a survey of the wealth held by individuals and redistribute it. The trigger for what Modi said was Rahul Gandhi’s speech  on April 6, 2024 in Hyderabad, wherein the latter promised what he termed as “financial and institutional survey” for re-distribution of the country’s wealth. The re-distribution would be taken up after a nation-wide Socio-Economic and Caste Census promised by the Congress party in its manifesto. The manifesto dwells on income and wealth inequalities, though not redistribution. There is an inherent connection between economic growth and income inequalities. Economic growth happens when...
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Electoral bonds out, black money in

On February 15, 2024, a five-judge Constitution bench of the Supreme Court (SC), headed by the CJI declared the Modi government’s 2018 Electoral Bond Scheme (EBS) as unconstitutional. The four major considerations behind this order are:- The scheme legitimizes the use of black money in political funding; it lacks transparency and keeps identity of the donor anonymous thereby violating the constitutional right to freedom of speech and right to information (Article 19(1)(a)); it gives rise to ‘quid pro quo’ – a legal jargon for a person in the position of power granting favor in exchange for bribe; it denies equality of opportunity to the voters to exercise their freedom to vote in an effective manner (Article 14). The EBS was...
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RBI changes gear, finally

Normally, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) conducts a review once in every two months based on which the RBI makes policy announcements at the beginning of each of the following months viz. February, April, June, August, October, December. Deviating from this practice, in early May, 2022, Governor Shaktikanta Das announced changes in the important monetary policy instruments. Das increased the policy repo rate (interest rate at which the RBI lends to banks) or RR from 4 percent to 4.4 percent. He also increased the cash reserve ratio (percentage of a bank’s total deposits that it needs to maintain with the RBI as liquid cash; the bank does not earn interest on this liquid...
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