Indian Economy

India’s Institutions and Its Bottlenecks: National Clean Air Programme

Leave a Comment / Indian Economy, State Economies, Urban Development /

India’s Institutions and Its Bottlenecks India’s Institutions and Its Bottlenecks Prayaga Venkata Rama Vinayak March 19, 2026 Indian Economy, State Economies, Urban Development This article discusses about one of the most pressing environmental challenges faced by Indian cities – Air Pollution. Also, this piece talk about the sources of the air pollution analysing the latest available data along with the policy assessment of National Clean air program (NCAP) which aim to improve the air quality of selected 131 Indian cities. According to the 2021 Air Quality Guidelines of WHO, PM 2.5, PM 10, Nitrogen dioxide (NO2), Sulphur dioxide (SO2) and Carbon dioxide (CO2) are the major pollutant which influences the air quality in a particular city. Of these, PM 10 & PM 2.5 are the most dangerous pollutants. PM 10 is nothing but particulate matter with diameter near to 10 micro meters. A normal human hair usually has a width of 70 micrometers. These PM 10 particles are 7 times smaller than human hair. These PM 10 particles deposit in lungs and create many respiratory problems like breathing problems, lung irritation, chronic bronchitis etc. According to the WHO’s 2021 Air quality guidelines Road dust, construction dust, cement dust, smoke particles and Industrial dust are the significant sources for these PM 10 particles in the air. WHO air quality guidelines document also highlighted that PM 2.5 is even more dangerous than PM 10. PM 2.5 particles are Particulate matter in the air with diameter less than 2.5 micro meters which means 30 times smaller than the average human hair. Diesel vehicle’s exhaust, Coal power plants, Industrial combustion, Biomass burning (kind of stubble burning), household cooking fuels etc. are the sources of PM 2.5 particles in air. This leads to Lung diseases, Heart attacks, lung cancer and other deadly diseases. For thoroughly monitoring the pollutant levels the Central Pollution Control Board (CPCB) launched NAAQS (National ambient air quality standards) in 1982 and we are following the latest revisions of 2009 in which PM 2.5 was also included as one of the major pollutants. In 2014, the present NDA Government had launched NAQI (National Air Quality Index) which will give consolidated score of 8 pollutants which includes PM 10 and PM 2.5 along with other 6 pollutants responsible for air pollution. National Clean Air Programme (NCAP) has been launched by the Union Ministry of Environment, Forest and Climate Change as a comprehensive initiative in partnership with various Ministries and States to improve air quality at city, regional and national level. It is a focused and time bound scheme to implement various sectoral policies, strengthen monitoring and enhance public participation in 130 cities for effective air quality management. As part of this NCAP all 130 cities should come up with Graded Response Action Plan (GRAP) which is an emergency pollution control framework required implementing in all cities that activates progressively stricter measures when the Air Quality Index crosses specified pollution thresholds. This GRAP will be supervised by the Commission of Air quality management. Along with this, the States and cities are also required to come up with their City Air Action Plans which are city specific long term sstrategies designed to identify major pollution sources and implement targeted measures to reduce air pollution and improve urban air quality. Also, all these cities are required to create Public Grievance Redressal systems which will address the citizen grievances related to the air pollution. As per the Indian Government’s PRANA (Portal for Regulation of Air-Pollution in Non-Attainment cities) website, all 130 cities comply 100% with GRAP, City Air Action Plans (CAAP) and Public Grievance Redressal systems. As per PIB Report on 25th July 2024, 95 cities out of 131 cities have shown improvement in air quality in terms of annual PM10 concentrations in FY 2023-24 with respect to the baseline of FY 2017-18. 18 cities have met National Ambient Air Quality Standards (NAAQS) for PM10 (60 µg/m3) in FY 2023-24. Under NCAP, Rs.2408.19 Crores have been cumulatively released to non-attainment cities from FY 2019-20 till date. In addition, since the financial year 2020–21, the government has provided Rs.11,457.34 crores in grants to 42 large urban cities with populations over one million under the 15th Finance Commission. Further, the City Action Plan (CAPs) of 130 cities is implemented by coordinated action of state government and its agencies at state and city level. The funding for implementation of CAPs is also being mobilized through convergence of resources from various schemes of Central Government such as SBM (Urban), AMRUT (Atal Mission for Rejuvenation and Urban Transformation), Smart City Mission, SATAT (Sustainable Alternative Towards Affordable Transportation), PM E-Drive (Prime Minister Electric Drive Revolution in Innovative Vehicle Enhancement), etc. and resources from State/UT Governments and its agencies such as Municipal Corporation, Urban Development authorities and Industrial development authorities etc. The funding from NCAP/XV-FC is a performance based supplemental grant for funding the unfunded critical gap of CAP. So, can we conclude that NCAP served the purpose? The answer is partially yes. But there is still a room for improvement. NCAP was launched in 2019 aimed to reduce PM 10 levels by 20-30% when compared to 2017 levels by 2024. Many cities could not achieve that as air pollution is a very complex program and most of the cities were not even considered air pollution as serious problem to be tackled before NCAP. So, the governments felt it is not pragmatic to get the desired results by that time and extended the deadline with revised targets to 2026. Target has been set to achieve reduction in PM10 level up to 40% by 2025-26 from the levels of 2019-20. These interim targets are in line with global experiences which highlight those city specific actions led to 35%–40% PM2.5 reduction in five years for cities, such as Beijing and Seoul, whereas cities, such as Santiago and Mexico City have shown 73% and 61% reduction in 22 to 25 years with regard to PM2.5 and PM10 concentrations, respectively. But, the first phase of NCAP has at least brought

India’s Institutions and Its Bottlenecks: National Clean Air Programme Read More »

Fiscal Constrains and Structural Transitions

Leave a Comment / Indian Economy, Tamilnadu Economy /

Fiscal Constrains and Structural Transitions Fiscal Constrains and Structural Transitions Baskar R February 19, 2026 Indian Economy, Tamilnadu Economy State Finances: A Study of Budgets RBI has recently released its annual publication on State Finances: A Study of Budgets of 2025-26 analysing the latest fiscal position of State Governments across India. The report has a separate chapter on India’s demographic transition and its implication for State finances. Key Takeaways for Tamil Nadu Tamil Nadu has been identified as an ageing state – where the demographic share of working age population (15-59 years) begins to decline. This leads to shrinking tax bases and rising committed expenditure in pensions and healthcare.  Compared to peer states, Tamil Nadu operates with the highest committed expenditure burden at 36% of revenue expenditure and high revenue deficit of 1.2%, highlighting structural imbalance between revenue spends and earnings. Read More …

Fiscal Constrains and Structural Transitions Read More »

Highlights of Economic Survey 2025-26 on Tamil Nadu Economy

Leave a Comment / Indian Economy, Tamilnadu Economy /

Highlights of Economic Survey 2025-26 on Tamil Nadu Economy Highlights of Economic Survey 2025-26 on Tamil Nadu Economy Chandrasekaran Balakrishnan February 6, 2026 Indian Economy, Tamilnadu Economy The national economic survey report has been presented before the announcement of the Union Government Budget for the next financial year since 1957-58. The report outlines the key driving forces of the Indian economy during the past year. The Survey also dives deeply the candors of the key challenges faced in the domestic as well as the international economy. The survey provides a major sector-wise analysis with trends of growth and development, policy gaps, if any, and innovative ways to address sectoral issues at both national and regional levels for achieving national and regional aspirations. With this background, this analysis shows the key best practices highlighted with references to the regional economy like Tamil Nadu state, which is the second largest in size at the regional level. This analysis also looks into some of the grave concerns highlighted in the National Economic Survey on the state’s specific issues. At the national level, it is important to note what the Economic Survey emphasised: “India received credit rating upgrades from three credit rating agencies in 2025, starting with Morningstar DBRS in May, followed by S&P in August and R&I in September. S&P’s upgrade of India from BBB- to BBB was India’s first credit rating upgrade from a major agency in nearly two decades.” This is possible because of India’s macroeconomic performances, which are not only now fundamentally strong now but also the growth accelerated due to a slew of structural reforms and policy measures. Employment, Factories and Higher Productivity The Survey Noted that “in terms of geographic distribution, seven states contributed to around 60 per cent of the total employment in the manufacturing sector with Tamil Nadu (15 per cent) on top followed by Gujarat (13 per cent), Maharashtra (13 per cent), Uttar Pradesh (8 per cent), Karnataka (6 per cent), Haryana (6 per cent) and Telangana (5 per cent). States like Maharashtra, Madhya Pradesh, Tamil Nadu, Himachal Pradesh, Haryana, Uttarakhand, Karnataka and Uttar Pradesh displayed a higher share of larger factories. These states also registered a high productivity in terms of NVA per person engaged. Further, eight industry groups in the organised manufacturing sector contributed to around 60 per cent of the total employment (Chart XII.12).” Growth and Development of Industries It is interesting to note the observations of the Economic Survey on major regional economies, which are essentially “the entrepreneurial state complements this institutional integration by coordinating expectations and bearing risk in sectors where fragmented private actors would otherwise hesitate to act. In automotive components in Tamil Nadu, pharmaceuticals in Gujarat and Hyderabad, and more recently electronics manufacturing clusters in Noida and Sriperumbudur, public policy has not only regulated but convened and aggregated: facilitating cluster formation, underwriting early investment, shaping procurement and export pathways, and making global standards attainable for small and mid-sized firms. In renewables, space, defence manufacturing, and select digital infrastructure, public institutions have signalled technological direction in advance of market consensus.” Further, the Survey noted that “in the area of building and development norms, Haryana, Madhya Pradesh, Odisha, Tamil Nadu, Uttar Pradesh, and Uttarakhand have liberalised building bye-laws, and simplified development norms relating to setbacks, Floor Area Ratio (FAR), parking restrictions, and minimum plot area. These measures have reduced land loss, enabled higher utilisation of urban land, and facilitated project execution, particularly for industrial and commercial developments.” Also, importantly, “for environmental clearances, Andaman & Nicobar Islands, Andhra Pradesh, Goa, Tamil Nadu, and Uttarakhand have enabled self-certification and third-party certification for Consent to Operate, reducing dependence on routine departmental inspections.” Moreover, the Survey observed that for achieving balancing Growth and Green Initiatives…Some evidence shows that states like “Tamil Nadu, Kerala, and Andhra Pradesh have not only enhanced their business environments by integrating sustainability measures but have also, through the Business Reform Action Plan (BRAP), reduced the time taken for environmental clearances.”. Also, the “Tamil Nadu has enhanced the ease of doing business through single-window clearances, digitised approvals, and land reforms, while promoting solar parks, district-level decarbonisation plans, and energy efficiency programs.” The construction sector is an important aspect of industrial growth and development keeping in view that the country is aiming to accomplish viksit Bharat@2047. The Survey mentions that “about 85 per cent of the cement industry is concentrated in the states of Rajasthan, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh, Chhattisgarh and West Bengal. The industry has adequate installed capacity to meet the domestic demand for cement. Domestic cement consumption in India is approximately 290 kg per capita, compared to a global average of 540 kg per capita.” Few States have taken significant policy initiatives in the pharmaceutical sector, with “Scheme for Promotion of Medical Devices Parks: Final approval for financial assistance of Rs.100 crore each has been given to the states of Uttar Pradesh, Tamil Nadu and Madhya Pradesh. Under the scheme, the land has already been allotted to 184 manufacturers.” Under the National Green Hydrogen Mission, “three Green Hydrogen Hubs designated: Deendayal Port Authority, Gujarat; V.O. ChidambaranarPort Authority, Tamil Nadu; and Paradip Port Authority in Odisha.” Moreover, for enhancing Private Participation in the Space Sector,“establishment of a dedicated launch pad and integration facility at Kulasekarapattinam, Tamil Nadu, is underway, which will strengthen India’s launch infrastructure”. Despite the huge potentials in the coastal area developments in the state of Tamil Nadu, the state has not given due importance for a long time, but it has now realised to bridge the gaps and explores with mission mode approach. As per the Economic Survey, “Tamil Nadu’s Coastal Restoration Mission: Tamil Nadu has a 1,069 km coastline, home to 14 coastal districts that are vulnerable to impacts such as shoreline erosion, storm surges, and sea level rise. The Tamil Nadu Sustainably Harnessing Ocean Resources and Blue Economy Project employs a multi-pronged approach to enhance coastal biodiversity, improve coastal protection, enhance livelihoods, mitigate pollution, and enhance project

Highlights of Economic Survey 2025-26 on Tamil Nadu Economy Read More »

Quality of GDP Measurement in India: An Assessment of the Supply-Use Table (SUT) Framework

Leave a Comment / Indian Economy /

Quality of GDP Measurement in India: An Assessment of the Supply-Use Table (SUT) Framework Quality of GDP Measurement in India: An Assessment of the Supply-Use Table (SUT) Framework Prayaga Venkata Rama Vinayak January 30, 2026 Indian Economy The International Monetary Fund (IMF)’s 2025 Annual staff report for India has once again given the country’s national accounts, including Gross domestic product (GDP) data, a C-grade, indicating that the statistics have “some shortcomings” that hinder effective economic surveillance. IMF has recommended revising the base year which is a long pending due. We are currently using 2011-12 as our base year from 2015. It’s been almost 10 years since we revised the base year. The Ministry of Statistics and Program implementation (MoSPI) is taking steps to revise the base year to 2022-23. By end of February 2026, the new estimates will be released based on the new base year and within one year the back dated GDP data will also be released. Measuring GDP correctly is important because it affects government policy, budgeting and economic planning. In India, GDP measurement has become more challenging as the economy has changed significantly over the years with the rapid growth in services, digital activities and a large informal sector. These changes have sometimes led to differences between GDP estimates calculated using the Production (GVA) method and the expenditure method. To improve the consistency and reliability of GDP numbers, India has started moving towards the use of Supply-Use Tables (SUT) which helps link production and spending more clearly within the economy. GDP is nothing, but the total value of the final goods and services produced within the country. It can be calculated in 3 methods: 1) Production Method; 2) Expenditure method; 3) Income method. 1. Production (GVA) Method: India primarily uses Production method to calculate GDP. For this, first we need to calculate the Gross Value added (GVA). This is nothing but how much value has been created by the respective stakeholders in the economic process. Let us say, A farmer cultivated 1 KG of wheat grains sold to a miller for 40 rupees. The value added by the farmer is calculated as 40 rupees. Now, the miller using his machinery manufactures wheat flour from those grains. It will be sold to the baker for 80 rupees. The value added by the miller is 40 rupees (Output – Input cost = 80 – 40). The baker prepares bread using wheat flour and sells them for 100 rupees. The value added by the baker is 20 rupees (100-80 = 20). The total GVA can be calculated as 40+40+20 = 100 rupees. Once the GVA was calculated we need to add the net tax levied on the products and services as well. Expenditure Method: This method measures GDP by adding up all the spending on final goods and services produced within a country during a given period. Where,  C – Consumption: Spending by households on goods and services, examples like Food, clothing, rent, healthcare, entertainment, etc. I – Investment: Spending by businesses on capital goodsExample: machinery, buildings, inventories, etc. Also includes residential construction. G – Government Expenditure: Government spending on public servicesExample: salaries of government employees, defense, infrastructure, etc. Does NOT include transfer payments (like pensions, subsidies). (X – M) – Net Exports X = Exports (what the country sells abroad) M = Imports (what the country buys from abroad) Though India uses production method to publish the official GDP figures, the MoSPI also calculated GDP in expenditure method as the GDP calculated through this method depicts the demand from the economy. Theoretically, the GDP Calculated from both methods should be equal. But in reality, GDP through production method greater than the GDP calculated through expenditure method. In India, it is very difficult to capture the minute expenditure data with the existing systems of 1.4 billion populations. But we get the reliable production data through robust systems like MCA-21 filings, GST returns which companies need to file for compliance purposes. Also, due to the large share of informal economy, it is very difficult to capture every transaction. Till now, we have reported the variance of GDP calculated from both the methods as discrepancy. Eventually, this discrepancy made our national accounting look feeble on global stage. Now, to tackle this discrepancy issue, MoSPI integrated Supply use tables while calculating the GDP. SUTs are a core framework in national accounting that ensures internal consistency in the measurement of GDP by systematically linking what is produced in an economy with how that production is used. Simply, if an economy produces a certain value of goods and services, where exactly does the output go? Let us consider a simple analogy of economy as a water distribution network. Supply is the total amount of water pumped into the system and use as how that water is consumed by households, industries as inputs, governments or exports outside the system. If the system pumps 100 litres of water, then exactly 100 litres must be accounted for in use, if only 92 litres are observed as being used, the system is said to have a leak. Earlier GDP compilation methods allowed such leaks to exist as statistical discrepancy. SUTs, however, do not allow water to disappear. They require every unit supplied must be matched with a corresponding use. For an economy as large and diverse as India where many activities happen outside the formal system and data comes from multiple sources, it is very difficult to ensure that production and spending numbers always match. SUTs offer a structured way to bring these different data points together. Their use marks an important step towards making India’s GDP estimates more consistent and comparable with international standards. But there are few shortcomings with the SUTs. The increasing use of administrative data such as GST filings and company returns introduces additional sources of error. These datasets are often affected by under-reporting, misclassification of activities and compliance gaps. For example, A firm producing metal components may report its activity under a

Quality of GDP Measurement in India: An Assessment of the Supply-Use Table (SUT) Framework Read More »

Bitcoin’s Achilles’ Heel

Leave a Comment / Indian Economy, Public Finance, World Economy /

Bitcoin’s Achilles’ Heel Bitcoin’s Achilles’ Heel by Shanmuganathan N December 3, 2025 Indian Economy, Public Finance, World Economy While almost all market participants have an opinion on the value of Bitcoin, or the lack thereof, the most vocal proponents for both sides of the argument have come from the same ideological community of Laissez-faire Economists/Libertarians. To that extent, I will be drawing on the work of Rothbard, Menger, and Greenspan in this article. The objective is not to convert the Comrades or the Keynesians. Perhaps ironically, and to paraphrase Greenspan, “They (comrades/keynesians) seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that Bitcoin does not have the required monetary characteristics. And a restraining force on the reckless spending habits of government, it cannot be”. Trump, with his “Big, Beautiful Bill,” would not be embracing Bitcoin if it would. Let me start with the conclusions, and the rest of the article is a praxeological explanation of why it is indeed the case. Bitcoin’s Achilles’ Heel, as I have captioned it, is not the lack of widespread adoption as a monetary medium, as one might expect.  It is the lack of any non-monetary utility whatsoever that disqualifies its usage as a monetary medium. Even if Bitcoin is adopted by a few countries as a medium of exchange, either through legal tender laws or by the willing use of market participants, it would ultimately fail the test of “desirability.” The Origins of Money The society transitioned from a direct exchange (barter) to an indirect one (using a medium of exchange), as it was more efficient from a transactional standpoint. It permitted greater, easier, and granular exchanges as compared to the prevailing barter system. Consequently, the division of labour could be greater when the medium of exchange was more “marketable” as compared to direct exchanges. The entire process did not originate through an overnight discovery, but a gradual transition of members accepting and using the medium of exchange for conducting their transactions. This medium of exchange had to be a highly valued good under the barter system before it became accepted for its monetary value in indirect exchanges. Or, in other words, the monetary property of a commodity was a consequence of widespread non-monetary utility within a community. It couldn’t have been otherwise. Many textbooks would define money as a “medium of exchange” and a “store of value” (i.e., retains purchasing power). However, as readers would realize, a good medium of exchange would also be a store of value. Greenspan summarizes it best in terms of the advantages of moving from a barter system to using money as a mechanism for conducting transactions. Reproducing his quote from Gold and Economic Freedom, “The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.” While all commodities possess varying degrees of acceptability as a monetary medium, it was the non-monetary utility that determined their widespread market acceptance for monetary purposes. Literally hundreds of commodities have been experimented with as a medium of exchange in the free markets, and only three have met the market test across countries and for extended periods of time. This is depicted in the table below. So, why did society start using wheat as a medium of exchange and subsequently transition to iron/copper, and eventually gold/silver? Once again, we turn to Greenspan for a pithy summarization “…the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe, where they were considered a luxury. The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.” So not only should the object used as a medium of exchange have widespread non-monetary utility, but it should be a very highly desired commodity as well. The transitions over thousands of years reflect this, as increasing productivity, induced by the specialization of labour, turned what were once luxury items (e.g., wheat, iron, and copper) into basic, everyday goods. Why only Gold / Silver? While societies have experimented with hundreds of commodities, we eventually settled on gold/silver, as they best met the requirements desired of money. The authors mentioned in the beginning (Rothbard, Menger, and Greenspan) have extensively documented the rationale, and a summary table is included below. While desirability (i.e., a luxury good on account of its non-monetary utility) has been expanded earlier, a brief overview of the other four properties is provided below: Durable: An ability to retain its essential property over prolonged periods of time. Gold and Silver, even under the most corrosive conditions (e.g., the ocean floor), retain their essential properties over thousands of years. While proponents have argued that bitcoin is durable (as it is nothing more than an algorithmic token), durability refers to not merely the extended physical/virtual existence but the continued desirability of the object over that time period. Even assuming some non-monetary utility (i.e., desirability) is found for bitcoin in the years ahead, how can we remotely suppose that a better algorithm will not come along that will serve the same purpose better than bitcoin? Divisible: An ability to subdivide into tiny units, with the divided unit retaining its fractional value of the whole. While gold can be divided into units of 0.001 gram with the unit retaining its value by

Bitcoin’s Achilles’ Heel Read More »

Interest Rate Cuts – A Sinker to a Plunging Dollar

Leave a Comment / Indian Economy, Public Policy, World Economy /

Interest Rate Cuts – A Sinker to a Plunging Dollar Interest Rate Cuts – A Sinker to a Plunging Dollar Chandrasekaran Balakrishnan September 26, 2025 Indian Economy, Public Policy, World Economy The US Dollar has been in a rapid decline since 2022, and the series of hikes initiated by Powell has merely stemmed the rate of decline rather than reversing the trend. This pattern has accelerated since Trump assumed office at the start of the year. It is in this context that we should view the 25bps cut effected by Powell with a promise of two more similar cuts to be made in the remainder of this year. Gold prices have more than doubled since January 2022 (from $1,800/oz to $3,700/oz) while DXY has declined by nearly 15% (112 to 97) in the same period. This indicates that the US Dollar is not only losing purchasing power against the market standard of gold, but also against the currencies of its trading partners. In this environment, what a rate cut(s) would do is to accelerate the decline of the Dollar – most certainly against gold but even vis-à-vis other currencies. What the cut signifies to the markets is the greater preference of the US Fed for its employment mandate over price stability (which was, incidentally, the only mandate of the US Fed when it was formed in 1913). As an aside, I should point out that in the book “RIP USD: 1971-202X …and the Way Forward”, it was explained why gold prices will touch $24,000/oz by the end of this decade. So, though the rate cuts pave the way for higher gold prices, these are merely proximate reasons within the larger context of the world reverting to some form of a gold monetary system over the next few years. Do Rate Cuts Always Lead to a Lower Dollar? On the contrary, the converse is true more often than not. Apart from the 4-year period between 2007 and 2011, interest rate movements and gold price changes are positively correlated; that is, when interest rates rise, gold prices tend to increase and vice versa. The reasons are manifold. At the outset, explaining gold prices with a single factor such as interest rates is academically a flawed proposition. We will have to consider at least 3 factors – interest rates, price inflation and Cantillon effects to explain the movements in gold prices. Without delving into a detailed discussion of the factors mentioned above, the prevailing high price inflation rates today lead to a situation where a reduction in interest rates results in increasing gold prices. So, while we are in an environment where gold prices are structurally positioned to go multiples higher from the current levels, the Fed action of cutting interest rates would be the equivalent of throwing gasoline on an inferno. What should the Fed do? Whether Bernanke acknowledges it or not, the US is in a stagflationary economic situation. The growth and employment numbers are below par, while the price inflation numbers are admittedly much higher than their targets. This is despite accepting the government numbers at face value, and we have repeatedly seen the systemic reporting bias in painting a rosier picture than is actually the case. What did the Fed do when it was previously in such a situation, i.e., a stagflation? We will have to go back to the 1970s, and as one can observe in the table above, the Fed hiked rates substantially to 20%. That begs the question – What is different in the environment back then that warranted hiking rates, while under a similar environment today, the Fed is embarking on a path of lower rates? Between the two issues – the stability of the dollar (price inflation or stable prices) and employment, the former must take precedence. There is no historical record of any country achieving prosperity by devaluing its currency. This was precisely the hard choice in the 1970s as well, and the US Fed under Paul Volcker raised interest rates high enough to quell the monetary as well as price inflationary forces and bring stability to the US Dollar. For context, the US annual price inflation has been above 2% since 2020. So why is the exact opposite monetary path being attempted today? The elephant in the room is obviously the $37 trillion National debt that is bankrupting the US Federal Government. Despite previous claims that the US Fed managed the impossible (i.e., raised interest rates without affecting employment), recent trends have exposed the flawed data basis on which the Fed had made the claims. It is only a matter of time before the GDP is also revised downwards in line with the employment data. The Economic Forecast – What does all this indicate? The only question now is “how long and how deep will the stagflation be?” Given the massive imbalances in the US Economy (multi-trillion-dollar budget deficits, trillion-dollar trade deficits, and debt-to-GDP above 125%), we should not be surprised by an economic playbook that is much worse than the 1970s. That is the best-case scenario, and in my opinion, it is not a very high-probability event. The most probable forecast would have to be a high-inflationary depression, with a possibility of hyperinflation depending on how the Fed / Trump choose to respond to the emerging situation. If they continue to prioritize temporary economic stimulus over price stability, then hyperinflation would become a probable scenario. For 2026, we should not be surprised to see gold prices in the $5,000 – $6,000 range. This is assuming none of the asset bubbles burst (the AI bubble, Housing Bubble 2.0, and the US Bond Bubble). It is pretty unlikely that the Fed can postpone the bursting of these asset bubbles, and in that case, we should witness even higher gold prices depending on the size of the QE in store. About the Author: Shanmuganathan N (aka Shan) is an Austrian/Libertarian Economist based in Chennai, India. He is the author of the recently published

Interest Rate Cuts – A Sinker to a Plunging Dollar Read More »

The Euphoria of Tamil Nadu GSDP Growth Rate!!

Leave a Comment / Indian Economy, Public Policy, Tamilnadu Economy /

The Euphoria of Tamil Nadu GSDP Growth Rate!! The Euphoria of Tamil Nadu GSDP Growth Rate!! Chandrasekaran Balakrishnan September 4, 2025 Indian Economy, Public Policy, Tamilnadu Economy The regional economies in India are still largely evolving and have their own pace of sectoral growth trends. The evolution of the state economy is dependent on the pattern of institutional governance, services, and facilities deliveries, which plays a vital role for achieving the national dream of Viksit Bharath@2047. The degree of economic freedom between and within States varies across India, indicating disparity. The Gross State Domestic Product (GSDP) is an aggregate of all sectors, broadly consisting of agriculture and allied activities considered as the primary sector; manufacturing, including construction, etc., as the secondary sector; and financial services, transports, hotels, etc., as the services sector. Each sub sector has its own significance for achieving a balanced regional growth as well as intra-regional growth within a State and contributing to the national growth rate. When politicians or policymakers become passionate about achieving a year’s GSDP growth rate as the biggest achievement, leaving the growth trends and other inferences, it becomes detrimental for economic development, which accounts for a sustained and overall improvement in welfare. Further, at the regional level, some of the sub-sectors’ growth trends are undermined while focusing only on the overall GSDP growth rates, which leads to not only misinterpretations but wrong conclusions for short term political gains. It is pertinent to note that Ludwig Von Mises, a prominent figure in the Austrian School of Economic Thought, saw statistics as descriptive rather than explanatory, and he cautioned against interpreting statistical regularities for political milage. He argued that statistics deal with past events and historical facts, lacking the ability to predict future outcomes or reveal causal relationships in the realm of human action. In April, 2025 when the Union Ministry of Statistics and Programme Implementation (MoSPI) had released the state-wise GSDP data, there was a huge celebration among a section with the claim that the one-year growth rate of Tamil Nadu state (9.69% for 2024-25) was an extraordinary achievement. The truth is that one year growth rate data cannot give a true picture for a trend analysis- short run, medium run, and long run. The macroeconomic growth rate discourse in the State missed an important point that Tamil Nadu’s agriculture and allied sector witnessed in negative growth of -0.15% in 2024-25 (provisional). As per the provisional data, the average GSDP Growth rate of Tamil Nadu in the last four years (2021-22 to 2024-25) was 8.48%, which was way below the growth rates of States like Odisha (9.80%) and Maharashtra (8.99), and Karnataka (8.73%). Moreover, more than a dozen States’ provisional GSDP data were not even released for the year 2024-25 in April, 2025. Similarly, the MoSPI released the revised State-wise GSDP data on 1st August, 2025, for the financial year 2024-25. One-year GDP data is important, but it is the trend which is more important. There is another dubious claim of a 14-year break of the Tamil Nadu State GSDP! Let’s look at what the actual average trend data reveals. In the current regime of DMK rule in Tamil Nadu, the average growth rate of State GSDP for last four years (2021-22 to 2024-25) is 8.63% which is lower than states like Assam (9.05%), Bihar (9.59%), Karnataka (8.73%), Maharashtra (8.99%), Meghalaya (9.54%), and Uttara Pradesh (9.15%). It is also interesting to look at the data of the first four years’ average state GSDP growth rate of the previous DMK regime. Tamil Nadu’s economy performed far better than comparatively. The average state GDP growth rate for the first four years was 9.41% (2006-7 to 2009-10). Further, even then, States like Bihar (10.41%), Chhattisgarh (9.76%), Haryana (9.89%), etc. outperformed Tamil Nadu. It is pertinent to note that Tamil Nadu’s share of GDP at all India level over the last 7 decades increased only by 0.2% from 8.7 % in 1960-61 to 8.9% 2023-24. Maharashtra’s economic performance has remained relatively steady throughout the period (from 12.5% to 13.3%). According to recent NCAER Analysis (2025), the state of public finance of Tamil Nadu is worrisome. Debt Sustainability Analysis, a method used to assess whether a state (or country) can meet its debt obligations without resorting to excessive borrowing or facing financial instability, expects an upward and increasing trajectory, during the period from 2022-23 to 2026-27. In recent years, what Tamil Nadu missed is the following key drivers of economic growth and creation of employments opportunities, which is at par with States of Karnataka and Maharashtra. Attracting FDI: Analysis of major states’ attractions of Foreign Direct Investments (FDI) Trends of the last decade (2015-16 to 2024–25) shows Gujarat’s share increased from 6% to 11%, while Tamil Nadu’s share declined from 11% to 7%. Tamil Nadu is still lacking what Karnataka and Maharashtra have nurtured for decades, including improved infrastructure policy stability and mature industrial ecosystems across the departments and across the region/districts within the State. The latest FDI data analysis for 2024-25 reveals that among the top ten states, Maharashtra accounts for 39%, followed by Karnataka (13%) and Delhi (12%). Tamil Nadu ranks 5th with FDI inflow of Rs. 31,103 crores. Under-utilised Coastal economy: The strategic geo-economic coastal advantage of Tamil Nadu has not yet been harnessed. Mobility: In the area of mobility as a key driver of the economy, Tamil Nadu has done some concrete efforts in terms of policy for the attraction of new investments for the production of Electric Vehicles, but it has been lacking consistently over the years in terms of adoption of EVs in public transportations across the state. Sub-par urban civic amenities: Urban Population in Tamil Nadu has consistently exceeded the national estimates, and the gap between the two has widened, particularly over the past three decades. Now, Tamil Nadu has 54% of its urban population, but basic urban civic facilities are very poor across the state, without decentralisation Diversification: Tamil Nadu predominantly concentrates on some services sectors, agriculture, forestry, and

The Euphoria of Tamil Nadu GSDP Growth Rate!! Read More »

India Ranks 15th in FDI -UNCTAD Report 2025

Leave a Comment / Economic Reforms, Indian Economy, Public Policy, World Economy /

India Ranks 15th in FDI -UNCTAD Report 2025 India Ranks 15th in FDI -UNCTAD Report 2025 Madhusudhanan S July 30, 2025 Economic Reforms, Indian Economy, Public Policy, World Economy On June 19, 2025, the World Investment Report for 2025 was released by the United Nations Conference on Trade and Development (UNCTAD), highlighting a negative outlook due to trade tensions, geopolitical issues, and economic volatility. This has led to a decline in Foreign Direct Investment (FDI) prospects, impacting GDP growth, capital formation, trade flows, financial stability, and investor confidence. Global Investment Trends The World Investment Report 2025, launched by Secretary-General Rebeca Grynspan, highlights a concerning trend where foreign direct investment (FDI) is decreasing in countries and sectors that need it the most. Productive FDI declined by 11% in 2024, marking the second year of decline. This decline is not just a temporary setback but a consistent pattern, according to Ms. Grynspan. The report revealed a significant drop in productive FDI by 11% in 2024, marking a concerning trend. The US remains a top source and destination for FDI, with Asian economies also prominent in FDI outflows.                                          Foreign Direct Investment  – Top 10 Destination Economies Rank Economies/ Countries Billions in Dollars 1 United States 279 2 Singapore 143 3 Hong Kong SAR, China 126 4 China 116 5 Luxembourg 106 6 Canada 64 7 Brazil 59 8 Australia 53 9 Egypt 47 10 United Arab Emirates 46 Source: UN Trade based  on Information from The Financial Times, fDI markets – Authour converted image to Table Key sectors like renewable energy, water, sanitation, and agrifood systems have seen declines, hindering development efforts. Investment in key sectors like renewable energy has dropped by 31%, water and sanitation by 30%, and agrifood systems by 19%. Health investment has increased by nearly 20%, but the global total is still below $15 billion. These shortfalls are hindering progress in critical areas, highlighting the need for urgent action to ensure sustainable development for all. Developing Asia attracted $605 billion in FDI in 2024 but faces challenges like declining infrastructure investment and policy uncertainty. India’s Possition in Foreign Direct Investment India ranked 15th  globally for FDI inflows in 2024, with $27.6 billion, and 4th in Greenfield project announcements with 1,080 projects unveild in 2024. The country also saw growth in international project finance deals and outward investments. India’s 97 international project finance deals placed it among the top five global economies. With $24 billion in outward foreign investment, the country climbed to 18th place globally in FDI outflows.  There was an improvement in the rankings for both India and Saudi Arabia. The US and India led in greenfield activities in sectors like semiconductors and automobiles, with new battery and electric vehicle projects announced globally. The report ends with recommendations for channeling capital to areas in need by implementing reforms in global financial systems, expanding the use of blended finance, and adopting investment regulations that promote digital and clean transitions. Conclusion The Government of India’s policies have played a key role in making the economy one of the fastest-growing in the world and a top destination for foreign direct investment (FDI). Despite global economic challenges and changing supply chains, India’s stability and investment potential remain robust. India’s consistent implementation of policies and clear vision have attracted significant FDI over the past decade, showcasing confidence in the country’s institutions, skilled workforce, and future prospects. The Author is a Research Fellow at AgaPuram Policy Research Centre.  Views expressed by the author are personal and need not reflect or represent the views of the AgaPuram Policy Research Centre. https://thebangaloremonitor.com/india-ranks-15-in-global-fdi-attraction-unctad-report-2025/

India Ranks 15th in FDI -UNCTAD Report 2025 Read More »

Powell Should Gladly Accept Trump’s Firing

Leave a Comment / Indian Economy, World Economy /

Powell Should Gladly Accept Trump’s Firing Powell Should Gladly Accept Trump’s Firing by Shanmuganathan N July 30, 2025 Indian Economy, World Economy If Powell had any sense for what lies ahead, he would accept Trump’s firing gladly.  Accompanied by the academic protests lamenting the lack of the Fed’s independence, etc, for the record books. If Trump had any sense for what lies ahead, he would allow Powell to remain in the chair and blame him subsequently when the US Housing Bubble 2.0 comes crashing down. Trump can at least have the satisfaction of saying “I told you so”. Why is Trump desperate to get the Fed funds rate down to 1% from the current 4.25 to 4.50% range? Two massive icebergs are on an imminent and direct collision course with the US Economy at this juncture, and these are: Bursting of the US Housing Bubble 2.0 Interest Expense as a % of Federal Income Headed into Uncharted Waters As Trump sees it, the only way to avoid the above issues is to lower the interest rates substantially. Readers should be aware that the current rate, aside from the ZIRP era following the GFC in 2008, is low from a historical perspective. But even these are not sufficient to maintain the bubbles. Trump Challenge 1 – The Housing Bubble 2.0 The peak of the median housing prices in the current cycle occurred in Q4 2022 at $442,600. As of Q1 2025, the median sale price was $416,900. While a 5% drop is not a significant correction, two factors do not bode well for a meaningful recovery: that this drop has occurred over 30 months, and the persistent high mortgage rates are keeping affordability at an all-time low for US consumers.    The previous 30-month period’s drop in housing prices occurred from Q4 2017 to Q2 2020 (a period during which the Fed funds rate increased from 1% to 2.5%), after which the COVID-19 stimulus and a return to ZIRP reversed the declining trend in housing prices. Trump wants to orchestrate a similar move now – reduce interest rates and inject massive fiscal stimulus through the Big Beautiful Bill. The only other period in which we have witnessed an extended drop in housing prices this century was during the 2008 housing bubble. Between Q1 2007 and Q1 2009, housing prices declined by more than 20%. Only a combination of ZIRP and QE – both unprecedented monetary measures – halted this decline. So as far as Trump’s eye can see, the solution to the problem of a housing crisis is a combination of ultra-low interest rates and expansion of the Fed balance sheet. The fact that, on the two occasions this was done – done after 2008 GFC and during Covid-19 – there were no deleterious consequences to talk about – would probably make Trump conclude that this extraordinary monetary stimulus can be done today as well. But why can’t the housing process recover without the above measures? The housing price increases have far outpaced the growth in median incomes. The Atlanta Fed’s Home Ownership Affordability Index (HOAI) – a composite index that takes into account housing prices, principal and interest payments, as well as taxes and insurance – is at an all-time low. This index is even below the levels that led to the bursting of the housing bubble in 2008. A level of 100 indicates that housing prices are affordable to buyers, given the current mortgage rates. The current score as of Apr 2025 is 65 – well below what makes the median house affordable to the median buyer. There are only two acceptable ways to increase affordability – either increase median wages or reduce interest rates. As Trump sees, all roads seem to lead to lower interest rates. There is, of course, a third way (an unacceptable one, though) to increase affordability – a dramatic decline in housing prices. Given that a housing bust will be accompanied by a decrease in employment, wages, and taxes, housing price declines must rival the effects of the above to lead to an increase in the Affordability Index. A drop of at least 30% would be required to bring the index into the affordable category. A 20% decline caused the 2008 crisis, and that too, from much lower levels of housing prices. Once again, it is easy to see why Trump is arguing vehemently in favour of substantially lower rates to stimulate the housing market. Trump Challenge 2 – Interest Expense as a % of Federal Income If the housing bubble bursting is an imminent danger in the months ahead, the Interest expense of the federal government is a current millstone around Trump’s neck. From less than 20% during Q1 2022, the interest expense as a % of Federal revenues has increased to 35% during Q1 2025. Readers might recall that the Fed hiked rates from nearly 0% during March 2022 to nearly 5.5% by July 2023. The US National debt has also increased from $30 trillion in Q1 2022 to more than $37 trillion today. A legitimate question would be whether this is not the first time we have crossed 30%, as there were two earlier periods: the 1980s decade, when this averaged more than 40%, and the years immediately prior to the 2008 GFC. 1980s was a period in which the debt-to-GDP was less than 40% – less than one-third the current debt-to-GDP ratio of 125%. The interest expense was high primarily because the Fed funds rate was in the double digits. As these rates declined, despite the debt growing faster than the GDP throughout the 1980s, the government was quite able to manage the interest obligations without threatening to take over the Fed’s primary role. Today, we are in a situation that the Fed would prefer to call “Fiscal Dominance,” i.e., the rates must necessarily be held low due to excessive government debt. Regarding the years preceding the GFC in 2008, the debt-to-GDP ratio was still less than 60%, allowing

Powell Should Gladly Accept Trump’s Firing Read More »

Missing Markets for Managing Stubble Burning in Punjab and Haryana

Leave a Comment / Indian Economy, Public Policy, State Economies /

Missing Markets for Managing Stubble Burning in Punjab and Haryana Missing Markets for Managing Stubble Burning in Punjab and Haryana Naimitya Sharma June 5, 2025 Indian Economy, Public Policy, State Economies India’s quest for food security led to the development and consolidation of the rice and wheat cropping cycle in states like Punjab and Haryana. The Union government intervened in the agriculture sector to incentivise farmers with the help of Minimum Support Price (MSP) to ensure the adoption of the rice and wheat cropping cycle. Technological advancements in the form of a better variety of seeds ensured India, was able to feed its burgeoning population. Any intervention by the Government comes with associated costs over and above the direct fiscal costs. The specialisation in rice and wheat cropping pattern has led to huge environmental impacts.   In Punjab, there is an acceleration of groundwater depletion due to its greater utilisation for irrigating rice crops sown in the summer months. The government intervened again with a law forcing farmers to delay the sowing of rice. As a result, the gap between rice and wheat crop was reduced significantly. With a short window available and with increased use of combine harvesters for harvesting rice, the amount of stubble or crop residue increased and the time available to manage it reduced. The past few years have witnessed a consistent presence of air pollution in the Punjab and Haryana regions because of this stubble burning. To think about this important problem, we may utilise economic ideas of negative and positive externality. Air pollution created by stubble burning is an example of a negative externality. Economic theory predicts that there will be overproduction of activities leading to negative externality since all the costs involved are not accruing to the producers. Instead, some costs are being borne by society in the form of air pollution. As economic costs do not incorporate all social costs, stubble burning continues unabated. Conversely, Stubble management is an example of a positive externality. Economic theory predicts that there will be underproduction of activities generating positive externalities. The benefits of stopping a farm fire accrue to not just the farmer concerned but also to everyone around the farm. There are external positive benefits enjoyed by society, but these are not part of the demand for the management of stubble, therefore the overall demand is less and in effect, the production of the management of stubble is less than the ideal amount. The challenge for policymakers thus, is to balance the generation of negative externality, i.e., air pollution emerging from stubble burning, and the production of positive externality, i.e., management of crop residue to ensure governance of this market failure. To reduce the production of stubble, the Government is attempting various initiatives ranging from an outright ban on burning, to incentivise farmers to produce other crops or adopt shorter-duration seeds. To promote the management of crop residue, the government is providing subsidies on equipment to manage crop residue along with promoting productive usage of crop residue by creating supply chains and demand for upcycled products. At the end of the day, we can look at the problem of overproduction of stubble and underproduction of the management of stubble as a problem of missing markets. Intervention by the Government needs to focus on finding and nurturing these missing markets through carefully designed policies. How to find the missing markets? To find these missing markets, the first step is to identify key players and processes. These include innovators, scientists, environmentalists, entrepreneurs, concerned citizens, farmers, and communities trying to find productive uses for stubble. To understand how key players are productively using stubble we need to identify, collate, and replicate successful case studies of converting stubble into productive usage. This exercise can lead to capacity building, thereby generating and nurturing the missing markets. To demonstrate this strategy, we may observe one example of productive usage of stubble. Two young people, Arpit Dhupar and Anand Bodha of Dharaksha Eco-solutions have found an interesting use for stubble. They are using bio-fabrication to convert stubble into packaging material with the help of mushrooms. Observing this process of finding productive use of stubble reveals that there are layers of phenomenon, interplaying with each other to generate this productive usage. The social phenomenon of Arpit observing his nephew painting the sky grey, Arpit’s own lived experience of surviving in Delhi, along with traveling across North India and interacting with the farming community plays an important role in this success. The second ingredient of this process is the observation of the ecological or physical phenomenon by Arpit and his team where they identify the bio-fabrication carried out by root-like structures of Mushrooms on Stubble thereby converting stubble into a sturdier product. The interplay between these two phenomena, social need and ecological possibility generates a potentially sustainable solution for the management of stubble. When the founders of Dharaksha Eco-solutions reach a famous startup pitch competition, the repeated questioning by one of the investors leads to a further interplay, this time between economic reality and ecological possibilities. After facing questions about the monetary potential of his idea, Arpit responds by suggesting that it is possible not just to make packaging material but also alternatives of timber with the help of this bio-fabrication. This interplay led to the establishment of a more financially sustainable future pathway for Dharaksha Eco-solutions. The learning from Arpit’s journey suggests that one critical ingredient of finding the missing markets is finding opportunities for upcycling stubble by identifying productive usage. Concerned individuals will become key players if they have had meaningful social exposure to these problems, along with an understanding of ecological processes that might generate solutions. Additionally, scaling and financial sustainability require interplay with economic reality and ideas. We can focus on these observations to generate more key players and processes in the system by empowering individuals with travel and research grants to develop a deep understanding of such problems. Exposing concerned individuals to ecological and environmental education to

Missing Markets for Managing Stubble Burning in Punjab and Haryana Read More »