Government to Abolish Bank Guarantee Requirement for MSMEs

Abolishing the bank guarantee requirement would be one of the best forms of support the Government of India could offer to MSMEs. Most of these units operate with limited capital, making it difficult for them to even arrange working capital for day-to-day operations. Financial system unintentionally and indirectly has negative bias against small units!

This proposal would open up new business opportunities for MSMEs. The government should not only increase MSME participation in its operations but also introduce schemes like the PLI (Production Linked Incentive) for them. Implementing such measures would reduce the volume of low-value goods imported from China. This would create business and employment opportunities within India while also helping to bring the trade deficit with China under control helping balance of payments position and Indian rupee. A low trade deficit will result into strong rupee and lower imported inflationary shocks.

Surging Sugar Prices and Ethanol Blending

The government's decision to blend ethanol with petrol will prove economically beneficial for the country in the long run; however, the 40–50% surge in sugar prices over the past month is baffling to the common person.

There was already significant public resentment regarding ethanol blending, though it had not yet manifested as widespread discontent. While ethanol was a topic of discussion in the streets, it had not yet become a subject of conversation within households. Now, however, due to the rising cost of sugar, both ethanol and sugar have become talking points in homes. Women are raising questions. When women begin to express dissatisfaction and repeatedly question society or policies of the government, that discontent tends to become widespread.

Growth in 1st Quarter to remain 7.3%

Despite all headwinds, the Indian economy is expected to grow at 7.3% in the first quarter of the financial year 2026-27 ending on June 30.

Manufacturing, mining, construction & financial services, real estate & professional services would be the major growth pillars in this growth. Agriculture, public administration and trade, hotels, transport, communication & services related to Broadcasting Services will drag the growth momentum.

Among all the problems, rising inflation in the economy is the biggest challenge for the Indian economy. Inflation since March has remained elevated. Not only this, but due to a weak monsoon, crop production is expected to remain weak. Speculation relating to sugar post-ethanol blending in petrol is already a problem.

The economy is expected to grow at 7% this fiscal year. An annual growth of 7% is the new normal for the economy. Its opportune time for India when it can jump its growth rate into double digits.

Rajeev Upadhyay

Uttar Pradesh has to Build an Eonomic Ecosystem to Attract FDI

If you look at FDI received by Indian states, you would be surprised to see the distribution pattern. Uttar Pradesh contributes around 9% to India's GDP. However, it receives less than 2% of the total FDI that India receives! Maharashtra contributes about 14% to India's GDP, but it receives about 35% of total FDI!

Why?

Because, over time, Maharashtra worked on the economic environment. When India was thinking about building one-lane highways-cum-connecting roads, Maharashtra was building 4-lane highways. While states in northern India were busy promoting political fault lines and building narratives around them, Maharashtra was busy establishing manufacturing plants. They built an ecosystem. That's why almost every big politician in Maharashtra has some business interests, and unlike other states, none in Maharashtra has a problem with it. Rather, they appreciate it! They don't like unemployed politicians!

Cities on the Rise: Changing Employment Landscape in India

LinkedIn's new 'Cities on the Rise' list gives very interesting input about how the job market is changing as far as cities are concerned. Big metro cities like Bengaluru and Mumbai were the prime locations but are losing to smaller cities like Visakhapatnam, Prayagraj, Ludhiana, Surat, and Vadodara.

India's metros are choking on their own success, and the job market is finally responding to that reality. Bengaluru's and Mumbai's rents and traffic, Delhi's polluted air aren't quality-of-life footnotes anymore. They're becoming economic costs, and companies are pricing them in.

According to the basic spatial equilibrium theory workers and firms stay in expensive cities only as long as the wage premium covers the extra cost of living there. Once traffic, real estate and pollution such other factors start eating into that premium, the equilibrium breaks and people leave. This is becoming a reality in India. Visakhapatnam, Ludhiana, Surat, Ranchi, Prayagraj, and Vadodara are becoming the center of attraction for both employers as well as the employees. These cities aren't winning because they suddenly became more attractive. They're winning because metro cities like Bengaluru, Mumbai, and Delhi have stopped being worth the trade-off.

Chandra Shekhar and Balance of Payment Crisis of 1991

The season of winter was starting when on an arbitrary day, sweets were brought to our home for no apparent reason. At that age, nothing else was important but sweets. Simply getting as many as possible was the goal. So, I happily focused on the sweets. That very night, overhearing a conversation between my father and my two uncles, I learned that a man named Shri Chandra Shekhar who was from my birthplace, Ballia, had become the Prime Minister of India. I learnt that he was also the Member of Parliament for Ballia. From their talk, I gathered only that the Prime Minister was the highest-ranking official. When I asked, my grandfather explained in simple words that the Prime Minister was the country's king! Those were the days when my mother or grandmother would tell us bedtime stories about kings and queens every night. At the time, I actually imagined that Chandra Shekhar had killed the king and seized the throne! That was my first real political awakening outside the realm of fairy tales! Later, after the Babri Masjid demolition and the dismissal of the Kalyan Singh government, I learned that Chandra Shekhar had become Prime Minister by a margin of vote; not by killing anyone! Back then, I was a student at Saraswati Shishu Mandir in Ratsar and the environment was very tense. I remember going door-to-door with friends, chanting the "Ayodhya Chalo" slogan and scribbling it on walls in exchange for lemon candies.

Government Must Reconsider Fee on UPI Transactions

The NPCI has revolutionised the Indian payment gateway landscape by popularising UPI and the RuPay network. NPCI has effectively ended the duopoly of American giants Visa and Mastercard in the payment gateway business in India. Today, a significant portion of transactions is processed via the Indian RuPay network, and it's a remarkable achievement. About 65% of total 700 million debit cards and 18% of credit cards of total 119 million are issued by Rupay. About 40% of total credit card transactions volume and 8% of value is processed by the Rupay network.

This shift has been financed by the Government of India, as the government has been bearing the costs and facing international pressure to curb this subsidy. This has obviously created a market with distortions which heavily depend on government subsidies. In the long term, such a market cannot sustain itself. So it is logical for the government to make UPI self-sufficient, but timing doesn’t seem to be opportune. India is going through a difficult phase post the volatile situation in the Middle East and tariff risks from the US. Economic activities are expected to cool down in the coming months. In this situation, any fall in domestic consumption and GST collection would be costly for the economy.

Widening Trade Deficit with Russia

For years, India had been maintaining the largest trade deficit with China, followed by the Middle East. But the geopolitical shifts in 2022 changed everything. Russia was not even in the top 10 countries with which India had a trade deficit. But since 2022, India has witnessed a historic and asymmetric expansion of its trade deficit with Russia, making Russia one of its most important trading partners. Before 2022, India’s trade deficit with Russia was under $5 billion, but it has now skyrocketed to a staggering $50.9 billion.

India’s rising trade deficit with Russia is widening despite the rupee-ruble payment mechanisms between the two countries with the purpose of broadening the bilateral trade relationship. But the rupee-ruble payment mechanism is not working. The reasons behind this are India’s massive trade deficit with Russia, volatile exchange rate and inconvertibility of the rupee, as well as fear of sanctions from the US. These make the rupee-ruble payment mechanisms almost ineffective, and often the two countries opt for alternate currencies like UAE Dirham (AED) for bilateral trade.

West Asia Conflict is Slowing Down Indian Economy

Indian economy is showing resilience and is expected to grow at 6.7%, but the ride is expected to be bumpy. It is caught in a problem for which it has no solution on its own. It is completely dependent on other parties.

The conflict in West Asia between the US and Iran has proved a double-edged sword for India. It is hurting India from two sides. India is facing energy challenges in terms of limited access to energy sources as well as high prices on one hand, which is turning the mathematics against the Indian economy as it induces inflation in the economy and increases current account deficit and rupee volatility. This is hurting demand in the economy. On the other hand, India's $50 billion in exports to the Middle East have almost come to a halt. This is pausing economic activities in India. Firms exporting to the Middle East are forced to pile up inventories as these firms are unable to ship their final products to their buyers despite long-term contracts. Their export consignments are caught and hanging in the balance in the firing zone between the US and Iran. This is resulting in slow manufacturing activities and lower labour demand. This has started the vicious circle.

New Tariffs by Trump in the Name of Forced Labour

A person consumed by spiteful rivalry often goes to great lengths to cause trouble for their rival, even if it means suffering a loss themselves. US President Donald Trump’s behaviour mirrors this mindset; in his zeal to 'fix' other nations, he repeatedly deals blows to the American economy.

India will certainly be adversely affected by the new tariff, as will other nations. However, it is ultimately the American citizens who are paying the price for Trump's love for tariffs. By the way, President Trump has populaized tariffs in a such a that now it does feel like an economic term even for a layman!

One wonders: is this merely the US President's spiteful rivalry at play, or is he, knowingly or unknowingly, becoming a Trojan horse for America in general and the American economy in particular?