The Comptroller and Auditor-General (CAG) of India’s report on Tamil Nadu’s finances for 2023-24 reveals mixed results. While the state successfully lowered its debt-to-GSDP ratio to 28%, meeting one of its three fiscal targets, other indicators showed decline. The revenue deficit increased by 0.15% of GSDP compared to the previous year, reaching ₹45,121 crore. Additionally, the Fiscal Deficit-to-GSDP ratio stood at 3.32%, which is higher than the 3% target set under the Tamil Nadu State Fiscal Responsibility and Budget Management (FRBM) Act. The debt figure includes Off-Budget Borrowings (OBB).
- Tamil Nadu met the target of bringing the debt-GSDP ratio below 29.1%, achieving 28%.
- The revenue deficit rose to ₹45,121 crore, which is 71.5% higher than Medium Term Fiscal Plan projections.
- The state failed to meet the fiscal deficit target of 3% of GSDP by March 2025.
The U.S. Chamber of Commerce has filed a lawsuit against the Trump administration’s decision to impose a $100,000 fee on new H-1B visa applications. The lawsuit argues that this hike overrides existing laws and makes the program cost-prohibitive for employers, especially startups. The H-1B program is vital for high-skilled jobs where local talent is scarce. Data shows that nearly 60% of Indian H-1B workers earn $100,000 or less, meaning the fee could exceed their annual pay. Major Indian firms like TCS, Infosys, and Wipro are significant beneficiaries of this program and would be heavily impacted by the increased costs.
- The fee hike aims to discourage US employers from replacing American workers with cheaper foreign labor.
- The US Chamber of Commerce argues the fee is unlawful as it exceeds the actual processing costs incurred by the government.
- Approximately 70% of the 7.3 lakh H-1B visa holders in the US are Indian nationals.
The transition to GST and the end of the compensation period have significantly squeezed the fiscal space of Indian States. While GST was intended as a shared tax, States feel a loss of autonomy as the Centre dominates the GST Council. The article notes that actual tax devolution has consistently fallen short of Finance Commission recommendations due to the Centre's increasing reliance on cesses and surcharges, which are not shared with States. To restore fiscal balance, suggestions include restructuring GST slabs, merging the compensation cess with the regular tax, and empowering States to collect a share of personal income tax to reduce dependency.
- The 15th Finance Commission recommended 41% tax devolution, but actual transfers are lower due to non-divisible cesses.
- The end of the GST compensation period in June 2022 has created a major revenue gap for many Indian States.
- Vertical fiscal imbalance persists as the Centre collects the majority of taxes while States handle most developmental spending.
As India develops its Carbon Credit Trading Scheme (CCTS), it must learn from global failures where carbon projects exploited local communities. Carbon markets reward emission reductions but risk becoming 'modern plantations' that bypass land rights and customary usage. The article highlights the Northern Kenya Rangelands project as a cautionary tale of top-down governance. For India, especially in agriculture and forestry, it is vital to ensure Free, Prior, and Informed Consent (FPIC), equitable benefit-sharing, and transparent legal frameworks. This prevents the marginalization of smallholders and tribal communities while ensuring that climate action does not come at the cost of social justice.
- India is establishing its own Carbon Credit Trading Scheme (CCTS) to set emission benchmarks for energy-intensive sectors.
- Carbon projects in afforestation and agriculture often extend into areas with customary land use, risking local displacement.
- The principle of Free, Prior, and Informed Consent (FPIC) is essential to ensure community-led resource management.
India and the United States continue to differ publicly over Russian oil imports. U.S. President Donald Trump claimed Prime Minister Narendra Modi assured him India would stop buying oil from Russia 'soon.' However, India's Ministry of External Affairs (MEA) denied such a conversation took place on the specified date. The MEA clarified that India is 'broad-basing' and 'diversifying' its energy sources to protect national interests rather than committing to an immediate halt. This disagreement highlights ongoing U.S. pressure on India's energy ties with Russia, while India maintains its stance against unilateral sanctions and double standards in global energy trade.
- Donald Trump claims PM Modi committed to ending Russian oil imports; the MEA officially denies this claim.
- India is pursuing a strategy of diversifying energy sources to meet market needs rather than an abrupt cessation.
- The U.S. has imposed parity tariffs on India, partly linked to the ongoing friction over Russian oil trade.
Indian cities generate nearly two-thirds of the national GDP but control less than 1% of the country's tax revenue. The introduction of GST led to the loss of local taxes like octroi, making municipalities dependent on intergovernmental transfers. The article argues for 'fiscal democracy,' where cities have the right to levy taxes directly, similar to Scandinavian models. It suggests that municipal bonds and a share of GST compensation could restore cooperative federalism and ensure cities are seen as foundations of national prosperity rather than just cost centers.
- Municipalities lack fiscal autonomy and predictable revenue streams, leading to a 'peculiar inversion of democracy.'
- Over-centralization of taxation has weakened local governance and service delivery.
- Reforms should include empowering cities to earmark a portion of GST compensation for municipal borrowing.
The India-Middle East-Europe Economic Corridor (IMEC) aims to enhance maritime and rail connectivity between India, the Arabian Peninsula, and Europe. Despite initial optimism following the Abraham Accords, the security situation in West Asia (Israel-Hamas conflict) has raised questions about its feasibility. However, the corridor remains strategically important for India to access European markets and bypass volatile routes like the Red Sea. The article emphasizes that IMEC is a multi-member initiative that offers space for innovative geopolitical adaptations and remains a vital alternative to other trade routes.
- IMEC includes maritime links, high-speed rail, clean hydrogen pipelines, and digital cables.
- Europe is India's largest trade partner, making the corridor economically vital for resilient supply chains.
- Geopolitical instability in West Asia, particularly the Israel-Hamas conflict, is the primary hurdle for implementation.
India's biotech industry has grown from 500 startups in 2018 to over 10,000 in 2025, supported by the BioE3 Policy. India aims for a $300-billion bioeconomy by 2030. While India is a global leader in generics and vaccines, the sector faces challenges like regulatory complexities, high capital requirements for Phase II clinical trials, and a 'brain drain' of talent. The article suggests a dedicated biotechnology fund, blended-finance structures, and streamlined regulations to help startups scale and compete globally in high-impact areas like precision medicine.
- The BioE3 Policy aims to transform India into a $300-billion bioeconomy powerhouse by 2030.
- India provides over 60% of global doses for essential immunizations like DPT and BCG.
- Scaling challenges include fragmented infrastructure and the high cost of clinical validation for startups.
China has filed a complaint against India at the World Trade Organization (WTO) over New Delhi's subsidies for electric vehicles (EVs) and batteries. This marks the first step in the dispute settlement process. China has also filed similar applications against Turkiye, Canada, and the EU. The move comes amid a widening trade deficit between the two nations, which reached $99.2 billion in 2024-25. While India's exports to China contracted by 14.5%, imports from China rose by over 11%, highlighting significant trade imbalances.
- China is challenging India's domestic subsidy regime for the green energy sector under WTO rules.
- The complaint follows similar Chinese actions against other major trading partners like the EU and Canada.
- India's trade deficit with China has reached nearly $100 billion, driven by rising imports.
India's goal of 500 GW renewable energy by 2030 and net-zero by 2070 depends on securing critical minerals like lithium, cobalt, and Rare Earth Elements (REEs). Currently, India relies heavily on imports, particularly from China. To achieve 'Atmanirbhar Bharat,' India must enhance domestic mining, improve recycling infrastructure (circular economy), and forge global partnerships. The government has launched the National Critical Mineral Mission and amended mining laws to attract private investment and streamline licensing, aiming to build a self-reliant supply chain for national security.
- Critical minerals are essential for EV batteries, solar panels, and wind turbines.
- India currently relies on imports for nearly 100% of its lithium, cobalt, and nickel requirements.
- The circular economy is vital, as India formally recycles only 10% of its four million metric tonnes of annual e-waste.
The 2024 Nobel Prize in Economic Sciences was awarded to Philippe Aghion, Peter Howitt, and Joel Mokyr for their research on how institutions and innovation drive economic progress. Their 'creative destruction' model suggests that long-term growth is generated by internal forces like innovation and research rather than external factors. The article notes that while this model thrives in liberal markets, it faces challenges from modern protectionism and the success of state-led economies like China. It serves as a warning that for democracies to thrive, they must protect institutional freedoms.
- The prize recognizes the 'creative destruction' model and endogenous growth theory.
- The research emphasizes that competition and private incentives are the primary engines of technological progress.
- The model highlights that long-term growth is generated by innovation, education, and research within an economy.
The global economic order is shifting from a normative consensus to great-power conflict, primarily between the US and China. This transformation involves 'digital colonialism' and the weaponization of supply chains. The article suggests that India and the Global South must collaborate to construct a new economic deal that ensures fair representation in international financial institutions. India needs to recalibrate its domestic policies, adopting a commanding role in critical sectors like energy, infrastructure, and digital ecosystems, while maintaining a non-aligned 'India way' that prioritizes national interests over partisan politics.
- Global markets are shifting from laissez-faire capitalism to state-mediated markets serving oligopolies.
- Digital colonialism is emerging through the control of value chains and the weaponization of data and supply lines.
- India must lead the Global South in pushing for a new debt-relief framework and fair-trade policies.
The 2025 Nobel Prize in Economic Sciences was awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt. Mokyr was recognized for identifying the prerequisites for sustained growth through technological progress, emphasizing the role of 'useful knowledge.' Aghion and Howitt were honored for their 'theory of sustained growth through creative destruction,' which explains how new innovations replace older technologies, leading to economic gains but also the destruction of incumbents. Their research provides a mathematical model to determine optimal R&D investment and suggests that governments should subsidize R&D to ensure long-term societal benefits and overcome resistance from established interest groups.
- Joel Mokyr distinguished between propositional knowledge (natural world) and prescriptive knowledge (instructions/recipes).
- The theory of 'creative destruction' posits that innovation leads to growth but also displaces existing technologies and interests.
- The research suggests that R&D should be subsidized because private firms may not invest enough if they cannot capture all the value.
India's retail inflation dropped to a 99-month low of 1.54% in September 2025, falling below the RBI's comfort band of 2%-6%. This trend suggests that supply is outstripping demand, a situation similar to China's oversupply problem. The article argues that the RBI needs to improve its forecasting accuracy, as its predictions have seen drastic revisions within short periods. To stimulate the economy, there is a call for the Monetary Policy Committee (MPC) to consider significant interest rate cuts in December to boost private investment and consumption, as current household savings are being used to reduce debt rather than increase spending.
- Retail inflation reached a 99-month low of 1.54% in September 2025.
- The RBI's target inflation rate is 4%, with a tolerance band of 2%-6%.
- Low inflation indicates weak domestic demand, prompting calls for interest rate cuts by the MPC.
The 2025 Nobel Prize in Economic Sciences was awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their research on innovation-driven economic growth. Mokyr's work focuses on historical factors and technological progress, while Aghion and Howitt developed the mathematical model of "creative destruction." This concept describes an endless process where new, better products and technologies replace old ones, driving long-term prosperity. The prize, worth $1.2 million, highlights that sustained growth is not guaranteed and requires specific institutional and technological prerequisites to counteract economic stagnation.
- The laureates explained how innovation and technological progress are the primary drivers of long-term economic growth.
- The 'creative destruction' model posits that growth arises from the continuous replacement of old technologies with new ones.
- Joel Mokyr’s research emphasizes the historical role of the 'culture of growth' and institutional frameworks in fostering innovation.
India and Canada have agreed to relaunch their trade dialogue and restore diplomatic ties following a meeting between External Affairs Minister S. Jaishankar and Canadian Foreign Minister Anita Anand. The discussions focused on restarting talks for a Comprehensive Economic Partnership Agreement (CEPA) and exploring cooperation in AI, energy, and food security. Both nations also began preliminary discussions on Small Modular Reactor (SMR) nuclear-powered reactors. This move signals a "repair mode" in bilateral relations, which had been strained since 2023 due to security issues and allegations regarding the killing of a Khalistani activist.
- India and Canada are re-establishing the India-Canada Ministerial Dialogue on Trade and Investment.
- Discussions included an invitation for Canadian PM to visit India for the AI Impact Summit in February 2026.
- Cooperation on Small Modular Reactor (SMR) technology marks a new area of civil nuclear energy partnership.
Indian Railways is undergoing a massive transformation to become a net-zero carbon emitter by 2030, four decades ahead of India's national target. Key initiatives include 100% electrification of broad-gauge tracks, the introduction of hydrogen-powered trains under the "Hydrogen for Heritage" initiative, and the use of solar and wind energy. The shift also involves moving freight from road to rail to increase the rail share to 45% by 2030. Financial mechanisms like sovereign green bonds and loans from the World Bank and IRFC are supporting this multi-billion dollar decarbonization plan.
- Indian Railways aims for net-zero emissions by 2030 through electrification and renewable energy integration.
- Over 98% of the broad-gauge network is already electrified, significantly reducing diesel dependence.
- The "Hydrogen for Heritage" initiative plans to deploy 35 hydrogen-powered train sets.
Economists C. Rangarajan and D.K. Srivastava analyze India's potential growth rate, suggesting it currently stays around 6.5%. While some argue for a 7.8% growth based on recent quarterly data, the authors emphasize the relationship between the Real Gross Fixed Capital Formation (GFCF) and the Incremental Capital-Output Ratio (ICOR). To achieve growth above 6.5%, India needs to increase the GFCF rate to approximately 34% of GDP and reduce the ICOR. The analysis highlights the importance of private sector investment and the impact of technological changes like AI on long-term growth prospects.
- India's potential growth rate is estimated at 6.5% based on historical GFCF and ICOR trends.
- The GFCF has remained stable at around 33.6% of GDP, but private investment needs to rise to push growth further.
- Public sector investment has been a major driver recently, but its momentum appears to be slowing down.
India's retail inflation, measured by the Consumer Price Index (CPI), dropped to 1.54% in September 2025, the lowest since June 2017. This decline is primarily attributed to falling food and fuel prices. The figure is currently below the Reserve Bank of India’s (RBI) lower comfort bound of 2%. While food inflation is expected to remain benign due to a good monsoon, risks persist from late monsoon withdrawals. Categories like clothing and footwear also saw a slowdown, whereas housing and intoxicants experienced a slight uptick in inflation rates.
- Retail inflation fell to 1.54% in September, driven by a contraction in food and beverage prices.
- The current inflation rate is below the RBI's mandated lower comfort limit of 2%.
- Food and beverages saw a contraction of 1.4% in September compared to 8.4% inflation a year ago.
India has seen a surge in women-focused cash transfer programs like Bihar’s Mukhyamantri Mahila Rojgar Yojana and Karnataka’s Gruha Lakshmi. While 89% of Indian women now own bank accounts—higher than the global average of 77%—true economic agency remains limited. Data shows that many women use their accounts primarily to withdraw cash for household needs rather than for savings, borrowing, or business operations. Barriers include a 19% gender gap in mobile phone ownership, lack of digital literacy, and social norms. For cash transfers to build agency, women need control over assets and access to credit beyond simple deposits.
- 89% of Indian women own bank accounts, significantly higher than the global average of 77%.
- The 'JAM trinity' (Jan Dhan, Aadhaar, Mobile) is the backbone of India's Direct Benefit Transfer (DBT) architecture.
- A significant gender gap exists in mobile phone ownership and digital financial literacy, hindering full financial inclusion.
Amidst global geopolitical volatility, the India-UK economic relationship is showing steady progress. UK Prime Minister Keir Starmer’s recent visit to India reinforced bilateral ties, focusing on defense, investment, and cultural exchange. Unlike the fraught negotiations with the US or EU, India and the UK have quietly advanced their trade deal signed in July. India is currently the world's fourth-largest economy, yet it accounts for less than 2% of the UK's total merchandise exports, indicating significant growth potential. Key developments include a £350 million missile supply deal and commitments by 64 Indian companies to invest £1.3 billion in the UK.
- India is the fourth-largest economy globally but has a low share in the UK's total merchandise exports.
- The UK accounts for approximately 3% of India's total exports, suggesting ample scope for trade expansion.
- A strategic £350 million missile deal highlights deepening defense cooperation between the two nations.
The Uttar Pradesh government has introduced the Export Promotion Policy 2025-30 to support exporters affected by the 50% U.S. tariffs on Indian goods. The policy focuses on key sectors like leather, textiles, and gems, which face significant competition from countries like Vietnam. It offers financial assistance, marketing development support, and logistics subsidies to help small businesses reach international markets. By strengthening the 'One District One Product' (ODOP) scheme and improving global connectivity through new airports, the state aims to build a resilient export base and achieve a $1 trillion economy.
- The policy provides a 30% reimbursement of inland freight costs to help landlocked exporters.
- Financial assistance is provided to MSMEs to meet international standards and participate in global trade fairs.
- The ODOP scheme has been a major driver, promoting unique products from all 75 districts of Uttar Pradesh.
India and the European Union (EU) are optimistic about concluding a Free Trade Agreement (FTA) by the end of 2024 following the 14th round of negotiations in Brussels. While bilateral trade reached €120 billion in 2024, challenges remain regarding tariffs, sustainability, and carbon regulations. India has specifically objected to the EU's Carbon Border Adjustment Mechanism (CBAM), a tax on carbon-intensive imports scheduled for full implementation in January 2026. Additionally, discussions touched upon the India-Middle East-Europe Economic Corridor (IMEC) and the Global Gateway Forum to enhance connectivity and investment.
- Negotiators are working to resolve sensitive issues in agriculture, dairy, pharma, and automobiles.
- India opposes the EU's CBAM, viewing it as a trade barrier that links climate action with trade.
- The India-Middle East-Europe Economic Corridor (IMEC) remains a strategic priority for both regions.
Despite political promises, unemployment remains a critical issue in Bihar. Analysis of the Periodic Labour Force Survey (PLFS) for 2023-2024 shows that Bihar ranks lowest among large states in Worker Population Ratio (WPR) and Labour Force Participation Ratio (LFPR). The state's unemployment rate stands at 5.2% (quarterly) and 3% (annual). A significant concern is the 'Discouraged Worker Effect,' where individuals stop looking for work due to poor job prospects, leading to deceptively low unemployment figures. Bihar also has a high proportion of casual laborers (23.8%) and very low female workforce participation (30.1%).
- Bihar has the lowest WPR and LFPR among nine large, low-income states in India.
- The state's female WPR is significantly lower than the national average and neighboring states like Jharkhand.
- A high percentage of the workforce (23.8%) is engaged as casual laborers, indicating a lack of formal job opportunities.