The Times of India | Happiness from subsidy: It’s complicated by factors such as neighbour’s envy

I am a relatively poor man. Govt does a lot for me. Or at least in my name. In Bengaluru, for example, govt has kept the price of water low, so that I can afford it. Though it costs them roughly Rs 100 a kilolitre to provide, they charge everybody only about Rs 10 and give a subsidy to cover the rest. Honourable intentions, no doubt, for which I am sincerely grateful. What hurts me a little bit is that my supremely rich neighbours also use this subsidy in large amounts. To wash their grand cars and water their sprawling lawns. Read the full article here.

Moneycontrol | Supreme Court’s push to fix medical rates is unjustified and counterproductive

In the Indian blockbuster series of judicial interventions in policymaking, the latest episode on fixing the rates of medical services charged by hospitals in the country dropped last week. The Supreme Court of India, overcome by the pressing concerns of rising healthcare costs and disparities in costs of treatments availed at public and private hospitals, heard a public interest litigation (PIL) filed by the NGO ‘Veterans Forum for Transparency in Public Life’. In the characteristic style of PILs, the Court directed the Union Government to find a way to fix the price bands for all medical procedures and treatments offered by hospitals in the country and report back in 6 weeks. Or else, the Court threatened to impose the medical rates charged under the Central Government Health Scheme (CGHS) on all hospitals as an interim measure. Hospital stocks responded promptly by shedding more than a few points. Read the full article here.

Moneycontrol | Bangalore Water Crisis: Marginal pricing of water, subsidies to poor may curb water woes

Barely a few days into summer and there are already reports of Bangalore facing a severe water crisis. Groundwater is depleting and borewells are running dry. The price charged by private tankers have doubled. Some apartment complexes and RWAs are already rationing water and cutting off water supply to households for a few hours in the daytime. Meanwhile, the state government has decided to nationalise all private water tankers in the city. This is a complex problem with multiple causal factors – geography (Bangalore is situated far away from any naturally occurring water body), weather (weak southwest monsoons), and mismanagement. Mismanagement takes the shape of encroachment and building property on lake beds, failure to enforce rainwater harvesting systems, not providing piped water supply to peripheral areas, and unabated exploitation of ground water. Read the full article here.

Times of India | Un-fare policy

Why it may take a Bangalorean 37 tries to book a cab

Traffic rules are seen as mere suggestions for drivers and riders in Bangalore. In the same vein, principles of economics are considered as an optional extra while formulating policies. Both are more honoured in the breach than observance.

A recent doozy is the Karnataka govt decision to fix the prices for taxis in Bangalore based on the cost of the vehicle. What is idiotic about this? For one thing, we have centuries of literature on govts trying to meddle with prices and fix them. And for centuries, govts have failed in doing so. Read the full article here.

Moneycontrol | Karnataka’s plan to fix prices for Uber-Ola cabs is going to boomerang badly

There’s ridiculous and then, there’s this! In a long list of antagonist policy decisions taken against cab-aggregators by Indian state governments, the latest one by the Karnataka government takes the cake. In a policy that plans to emulate the pricing structure of the city’s autos, the Karnataka government plans to fix prices for all taxis in the state. In the new fare structure, all taxis will be categorised into three segments based on the purchase value of the vehicle and the prices will be fixed for each segment. Read the full article here.

Moneycontrol | Why Budget 2024 will rank as a good budget

Ceteris paribus, a boring budget is a good budget and this one definitely fits the bill. The impressive part was the resistance on part of the government to introduce any big, populist measures aimed at strengthening their position before the upcoming elections. As the name suggests, this is an interim plan until the real deal in July 2024, which the Finance Minister seemed very confident of being the one to present. The interim budget speech by the Finance Minister for 2024-25 sounded largely like a report card of past achievements rather than a plan proposal for the upcoming year. Read the full article here.

Times of India | Republic Day reminder: Let’s reclaim the right to economic freedom

Let’s get the basics out of the way — we celebrate the Republic because it prohibits any majority from running roughshod based on its numerical strength. The Constitution limits the power of governments and groups to protect the minority of One, i.e. every individual. The Republic grants fundamental rights to individuals to live, trade, work and protest peacefully. Yet, among these freedoms, the one that governments most readily and frequently trample upon — with little or no opposition—is the right to economic freedom. We can endlessly debate the current state of political or religious freedom and the decline of the freedom of expression, and that is partly the point — there is at least a debate. Read the full article here.

Moneycontrol | Global Economy 2024: Positives in macro outlook outweighing uncertainties, India in a position to dream big

Macroeconomists were created to make weather forecasters gain credibility” goes one joke. “Economists have successfully predicted 9 out of the last 5 recessions” is another dig at the predictive ability of the macroeconomics discipline. Beyond the humour, it points to the obvious complexity of interaction between hundreds of related variables in a complicated geopolitical scenario. Despite the obvious risks involved in speculating about the future in the economic domain, many brave economists undertake foolhardy tasks of making year-end projections and this is one such attempt. Read the full article here.

Moneycontrol | Reservation For Locals: Whither jobs, economic freedoms, and economic unity?

It is both easy and tempting to dismiss the entire saga of the reservation of jobs for the locals in Haryana as one of misplaced policy action duly corrected by the judiciary. It could even be tempting to celebrate the strength of the checks and balances present in the Indian Republic. Briefly, to set the context, the Haryana government, acting on the election promise of the current Deputy Chief Minister Dushyant Chautala, passed the Haryana State Employment of Local Candidates Act, which came into effect in January 2022. The law mandates that all private employers in the state must reserve three-fourth of jobs paying less than Rs 30,000 a month for local residents. Read the full article here.

Moneycontrol | G20 Summit: India takes its Digital Public Infrastructure success to the world

Digital Public Infrastructure (DPI) has created quite a storm in the recent G20 meetings. For years, India’s soft power was confined to cricket, Bollywood, Yoga and Ayurveda. It now seems that there has been a powerful addition to this list. The Finance Minister, Nirmala Sitharaman even mentioned that the inclusion of DPI into the G20 Financial Inclusion Action Plan was the defining legacy of India’s presidency of the G20. Read the full article here.

Moneycontrol | The many messages from NCAER’s report on food delivery gig workers

Food delivery companies will use almost any excuse to prompt you to order more from them and right now it’s peak cricket season. Push notifications on your phone and take-away containers in your kitchen are piling up at a rapid rate. Unfortunately, the rate of wage growth for the delivery personnel is anything but rapid. Read the full article here.

Hindustan Times | An echo of licence raj in laptop import curbs

India’s abrupt decision to restrict the import of laptops and personal computers, though with a three-month lag, is a throwback to the 1970s, when such policies were commonplace. Presumably, the aim is to give a fillip to domestic manufacturing and is probably targeted at China, which accounts for 75% of the total $5.33 billion worth of laptops and personal computers imported by India in 2022-23. However, the government maintains that it carried out the move for the digital security of its citizens. The reason is obvious — national security is the one accepted condition in multilateral trade treaties for imposing import restrictions, whereas protectionism is frowned upon. Read the full article here.

Moneycontrol | Don’t rush to mimic Rajasthan gig workers law

The devil, as they often say, is in the details. And so it is with the The Rajasthan Platform Based Gig Workers (Registration and Welfare) Act 2023, passed in the Rajasthan Assembly on July 24 to nearly universal fanfare. The need for some form of social security measures for gig workers was so acutely felt that this Act is currently lauded with messianic zeal just for the good intentions behind the law. There is a good chance that other states will follow suit and therefore, a closer scrutiny can instruct areas for improvement. Read the full article here.

Moneycontrol | India mustn’t miss this chance to supercharge its electronic goods industry

India is caught up in a quarrel over tariffs on information and communication technology (ICT) goods. The EU filed a WTO dispute that India has applied tariffs up to 20 percent on certain ICT goods, such as mobile phones and accessories, which is against the Information Technology Agreement-1 (ITA-1), to which India is a signatory. Signatories to ITA-1 are obliged to levy a maximum tariff of zero percent on a set of pre-agreed ICT goods. India claims that the goods on which it levies a tariff are not covered under ITA-1. Besides the EU, Japan and Taiwan also filed similar cases against India. The WTO has ruled against India in all three disputes. Read the full article here.

MoneyControl | Government overreach in digital economy could end up with no commensurate benefit and serious distortions

History, it seems, tends to move in full circles. “Be Indian, Buy Indian”, a popular slogan from the bygone era has changed to “Vocal for Local”. Deliberate incursions by the government into the market, especially into the digital economy, are reminiscent of old Nehruvian socialist objectives despite all the blame Nehru gets for India’s economic problems. The government’s intervention into payment via the Unified Payments Interface (or UPI) was justified on the grounds that it is a public good (it isn’t) and that lowering transaction costs can benefit everybody (it can). But the justifications grow thinner when we consider other government run or backed enterprises in the digital economy, such as the Government e-Marketplace (GeM) (facilitate government procurement), mSeva app store (indigenous mobile app store), and the Open Network for Digital Commerce (ONDC) among others. Read the full article here.

Why crisis-hit Pakistan won’t go the Lanka way

There are a few factors that might prevent an all-out collapse like we saw in Sri Lanka. First, Pakistan has been here before. Many times, in fact.  Pakistan has sought financial aid from the UAE, China, and the IMF in 2013, 2016 and 2018.  Second, the international community is wary about a Sri Lanka styled economic and political collapse in a nuclear armed country. The threat of rogue players gaining access to nukes often makes lenders a lot more lenient in issuance of fresh loans and repayment terms. Third, Pakistan has more generous friends. Pakistan received a loan from Saudi Arabia and recently, the UAE government has offered to acquire 10 to 12 per cent equity shares in Pakistan government-owned companies through its sovereign wealth funds.

Untangling the GST mess

Now, in the 5th year of GST, it is the opportune time to look at reforming and refining the system to achieve the original outcomes of a good and simple tax. The first important reform is to broaden the base by minimising the number of exemptions and including petroleum products and electricity in the GST bracket. It can help in reducing petrol prices for end-consumers. Second, there is a need to reduce the number of tax slabs to one or two and gradually eliminate compensation cesses. This will help in reducing problems related to classification of products, disputes, and lobbying. A single rate at 15% with an aim to reduce it to 12% in 10 years should be the aim. Third, ease GST compliance costs for businesses by rationalizing the compliance requirements and having a single identification number.

The US Must Provide Concrete Benefits to IPEF Signatories

At the recently concluded Quad summit in Tokyo, India joined the United States (US)-led Indo-Pacific Economic Framework (IPEF), created to provide an alternative trading arrangement and counter Chinese dominance in the region. While the scope is broad enough to provide an inclusive platform, the ambiguity, vagueness, and the lack of specific agreements can render it toothless.

Divide Forex Reserve Into Two Components

The United States (US), European Union (EU) and several countries have imposed a raft of punitive measures on Russia for invading Ukraine. One of the more serious forms of sanctions has been the freezing of the Russian central bank’s assets held in foreign-denominated currencies. When a country earns more foreign exchange (forex) than it spends, it moves the surplus into its reserve account for future contingencies. These reserves are not held in physical currency, but in different forms of financial assets such as gold and debt instruments (bonds and bills) of foreign governments. Countries prefer to invest in currencies that are liquid (easily convertible), widely accepted and trustworthy. The US dollar fits all these criteria.

India can work around Russia’s SWIFT expulsion. But there may be geopolitical costs

One of the most severe Western sanctions on Russia is freezing the Russian central bank’s assets held abroad. Russia has $630 billion in foreign exchange reserves. However, more than $300 billion worth of assets are held abroad in the Federal Reserve (US central bank) and the European Central Bank (ECB). Cutting off access to these funds to Russia can be a mighty blow.

The other big action underway is excluding Russian banks from the SWIFT network, which facilitates international payments. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging system that allows banks to communicate with each other in a secure manner, enabling safe transfer of funds. Based in Belgium and jointly owned by 2,000 banks and financial institutions, it is the underlying technology that enables global payments and has 11,000 international banks as members.