India's real GDP growth is influenced by both the increase in overall economic output (higher nominal GDP) and the reduction in the rate of price increases (lower inflation)....

India's 7.4% real GDP growth in the Q4 of FY25 is primarily due to higher real GDP growth, not necessarily lower inflation. The 7.4% growth reflects an increase in the quantity and value of goods and services produced, not just a decrease in the cost of those goods and services, according to a Moneycontrol article. While lower inflation can contribute to a higher real GDP growth rate, the data indicates that the growth is driven by increased production, particularly in sectors like manufacturing, construction, and financial services.

Elaboration:

Real GDP Growth:

The 7.4% figure represents a real GDP growth rate, meaning it's adjusted for inflation. It reflects the actual increase in the production of goods and services in the economy.

Sectoral Growth:

The growth is being driven by specific sectors like manufacturing, construction, and financial services, with manufacturing experiencing a three-quarter high and construction a double-digit growth rate, according to the Indian Express.

Lower Inflation's Role:

While lower inflation is positive, it doesn't directly translate into the 7.4% growth. It means that the same amount of goods and services are being produced but at a lower cost, which can be a positive factor in overall economic growth, according to Business Standard.

Nominal vs. Real GDP:

Nominal GDP, which is not adjusted for inflation, showed an even larger increase (9.8%) for FY2024-25, which further supports the idea that the growth is due to increased production rather than just lower inflation, according to the Times of India.

1. Real GDP and its Impact:

Real GDP Growth:

A 7.4% real GDP growth means that the total value of goods and services produced in an economy has increased by 7%, adjusted for inflation. This indicates a healthier economy with greater potential for production and consumption.

Increased Production:

This growth is reflected in increased output across various sectors, including manufacturing, agriculture, and services. For example, in Gorakhpur, Uttar Pradesh, more rice, wheat, or manufactured goods might be produced, leading to greater economic activity.

Example:

Imagine a factory producing 100,000 units of a product last year. A 7% real GDP growth could mean they are now producing 107,000 units, indicating a higher level of production.

2. Lower Inflation and its Impact:

Stable Prices:

Lower inflation means that the prices of goods and services are rising at a slower rate, if at all. This ensures that the value of money (purchasing power) is more stable.

Increased Purchasing Power:

With low inflation, consumers can buy more with their income. For example, if a consumer's income increases by 7% due to real GDP growth, they can purchase 7% more goods and services if inflation remains low.

Example:

A farmer in Gorakhpur can sell more of their produce at a higher price due to real GDP growth. If inflation is low, they can purchase more inputs for their farm (like seeds, fertilizers) with the increased income, leading to further production.

3. Combined Effect:

Increased Disposable Income:

Low inflation allows consumers to spend more of their income on discretionary goods and services. This can lead to increased demand, further stimulating economic growth.

Business Investment:

Businesses are more likely to invest in new equipment and facilities when they see a stable and growing market. This investment further contributes to GDP growth and job creation.

Example:

A small business owner in Gorakhpur can reinvest profits from increased sales into upgrading their store or hiring more employees, leading to higher productivity and output.

4. Real vs. Nominal GDP:

Real GDP:

Measures economic growth in terms of the quantity of goods and services produced, adjusted for changes in prices. This provides a more accurate picture of economic progress than nominal GDP.

Nominal GDP:

Measures the value of goods and services produced using current market prices, without adjusting for inflation. Nominal GDP can be misleading during periods of high inflation.

Example:

If nominal GDP grows by 10% but inflation is 3%, then the real GDP growth is only 7% (10% - 3%).

5. Numerical Example:

Let's say a household's income increases by 7% due to real GDP growth.

If inflation is 2%, the household's real income (purchasing power) increases by 5% (7% - 2%).

This means they can afford more of the same goods and services, or they can buy a higher quality of goods and services with the same budget.

Here's a breakdown:

1. Higher Nominal GDP:

A higher nominal GDP (GDP at current prices) reflects an increase in the total value of goods and services produced in the economy. This includes both an increase in the physical volume of production and an increase in prices. In FY24, India's nominal GDP grew by 9.9% according to the PIB.

2. Lower Inflation:

Lower inflation means that prices are rising at a slower rate, or even falling. This allows consumers and businesses to purchase more goods and services with the same amount of money. The PIB reported that average retail inflation eased to 4.9% in FY24-25.

3. Real GDP Growth:

Real GDP growth is calculated by adjusting nominal GDP for inflation. It provides a more accurate picture of the increase in the volume of goods and services produced, excluding the impact of price changes. In FY24, India's real GDP grew by 6.5%.

In essence, the real GDP growth rate represents the "true" economic expansion, while nominal GDP reflects the total value, and inflation affects how much that value is actually worth.

To answer your specific question:

India's real GDP growth rate owes to both higher GDP and lower inflation.

The exact contribution of each factor is difficult to pinpoint, but the decline in inflation has helped to ensure that the growth in real terms is more substantial than it would have been without it.

The Economic Survey projects a real GDP growth of 6.5-7% in FY25.

The PIB reports that inflation is expected to decline in FY25-26. businesses and consumers.

In summary, a higher real GDP signifies economic growth, primarily driven by increased production. When coupled with low inflation, this growth translates into increased purchasing power for consumers and businesses. A hypothetical scenario illustrates this: if real GDP grows by 7% and inflation remains low, a consumer can buy more goods and services with the same amount of money compared to a scenario with high inflation.  a 7% real GDP growth, coupled with low inflation, creates a virtuous cycle of increased production, stable purchasing power, and higher demand, ultimately benefiting both India's real GDP growth is influenced by both the increase in overall economic output (higher nominal GDP) and the reduction in the rate of price increases (lower inflation). The actual percentage contribution of each factor is difficult to quantify precisely, as they are intertwined. India's real GDP growth rate is the measure of the increase in the value of goods and services produced in the country after adjusting for inflation.

Higher tariffs in both the US and India could lead to reduced real wages and incomes.....

 In economic policymaking, domestic real wages/income typically take precedence over foreign real wages/incomes. Policymakers are primarily focused on the economic well-being of their own country's citizens and businesses, including factors like job creation, purchasing power, and overall economic stability. While global economic conditions and foreign incomes can influence domestic policies, the primary goal is to optimize domestic conditions.

Here's why:

Domestic Focus:

Policymakers are responsible for managing their own country's economy, including its labor market, inflation, and overall economic growth.

Political Considerations:

Domestic economic issues directly impact voters and political stability, making them a primary concern for policymakers.

Policy Tools:

Policymakers have tools like monetary policy, fiscal policy, and regulatory measures that can directly influence domestic wages and incomes.

International Trade and Investment:

While foreign wages and incomes are important in the context of international trade and investment, the focus remains on optimizing domestic competitiveness and ensuring fair labor practices at home.

Higher tariffs on US metals by India would likely lead to a decrease in exports to the US, potentially increasing domestic supply and potentially reducing prices for the domestic economy. Here's how:

Impact on Exports:

Reduced Exports:

A tariff is a tax on imported goods, making them more expensive. This would reduce the competitiveness of Indian steel and aluminum exports to the US, as US buyers would find other suppliers (or might decide not to buy at all).

Increased Costs for Indian Exporters:

The increased tariff would raise the cost of exporting to the US, potentially leading to lower profitability for Indian companies.

Impact on Domestic Supply and Prices:

Increased Domestic Supply:

As exports to the US decline, some of the steel and aluminum that would have been exported might be redirected to the domestic market. This could increase the supply of metals in India, potentially leading to lower prices, according to a report from ClearTax.

Potential for Lower Prices:

With more steel and aluminum available domestically, businesses and consumers might experience lower prices for these materials.

Important Considerations:

Other Markets:

Indian steel and aluminum producers might seek to diversify their markets and find alternative outlets for their exports, such as Europe or the Middle East, according to India Briefing.

Domestic Demand:

The impact on domestic prices and supply would depend on the strength of domestic demand for steel and aluminum. If domestic demand remains strong, even with higher imports, the price might not drop as much as expected.

Reciprocal Measures:

The US could also retaliate with tariffs on Indian goods, potentially harming other sectors of the Indian economy.

How Tariffs Reduce Real Wages and Incomes:

Increased Costs for Businesses:

Tariffs raise the cost of imported goods, including raw materials and components, which can increase production costs for businesses, particularly those heavily reliant on global supply chains.

Higher Consumer Prices:

Increased costs for businesses are often passed on to consumers in the form of higher prices for goods and services. This reduces consumer purchasing power and negatively impacts real incomes.

Reduced Demand and Employment:

Higher prices and reduced consumer demand can lead to a decline in sales and profitability for businesses. This can result in job losses, reduced wages, and lower overall income.

Trade Wars and Retaliation:

Tariffs can trigger retaliatory measures from other countries, further disrupting trade and potentially leading to trade wars. This can create uncertainty and instability in the global economy, harming businesses and consumers alike.

Why Tariffs are Sub-Optimal:

Reduced Economic Growth:

Tariffs can impede economic growth by limiting trade, disrupting supply chains, and increasing costs for businesses.

Negative Impact on Global Welfare:

Tariffs can reduce overall global welfare by hindering international trade and resource allocation.

Increased Inequality:

Tariffs can disproportionately affect lower-income consumers who spend a larger portion of their income on basic necessities, leading to increased income inequality.

Distorted Resource Allocation:

Tariffs can lead to misallocation of resources by protecting less competitive industries and discouraging innovation.

Reduced Access to Advanced Technologies:

Tariffs can limit access to advanced technologies and expertise from other countries, slowing down technological progress and innovation.

Examples of Impact in India:

Automotive and Electronics Sectors:

The U.S. reciprocal tariffs announced in April 2025 could particularly impact India's auto and electronics sectors, which rely on imports of components and raw materials.

Potential for Dumping:

Other countries may retaliate by dumping goods in India, which could further disrupt the market and harm Indian manufacturers.

Overall GDP Impact:

Experts estimate that the U.S. tariffs could erode India's GDP by up to 50 basis points, as a result of reduced exports and slower economic growth.

Higher tariffs in both the US and India could lead to reduced real wages and incomes due to increased costs for businesses and consumers, ultimately harming overall economic welfare. While tariffs might protect domestic industries, their negative impacts on global trade and supply chains outweigh the benefits. The higher prices and potential trade wars could lead to slower economic growth and lower living standards.

 

A Minsky moment can lead to a loss of confidence in the financial system.....

 India's public debt, encompassing the center and state governments, is a significant component of the overall debt landscape, and its management against private debt is a crucial aspect of economic stability. Understanding the interplay between public and private debt, especially in the context of potential "Minsky moments" (sudden asset price declines leading to financial instability), is essential for informed economic policy. India's public debt, is a major factor in the overall debt and is important for stability. Understanding the relationship between public and private debt, especially the risk of a "Minsky moment" (sudden asset price collapse), is vital for sound economic policy. India's high debt levels, especially from the central government, can lead to higher borrowing costs, potential currency instability, and increased inflation expectations, impacting government spending and overall economic growth.

Public Debt in India:

Fiscal Responsibility and Budget Management (FRBM) Act:

This act aims to ensure fiscal discipline at both the central and state levels by setting targets for fiscal deficits and debt levels, according to a report from the National Institute of Public Finance and Policy (NIPFP).

Debt-to-GDP Ratio:

The total debt of the Indian government (central and state) as a percentage of GDP is a key metric for assessing debt sustainability. The ratio was 89.45% in 2020-21 due to increased expenses during the COVID-19 pandemic, and it is expected to remain at 83.6% until 2027-28.

Central and State Debt:

The central government's debt-to-GDP ratio is generally lower than that of the states, with states relying more on market borrowings, according to a report from the Reserve Bank of India (RBI).

Impact of COVID-19:

The pandemic led to a significant increase in public debt as governments increased spending to support the economy and mitigate the crisis.

Debt Management:

The Reserve Bank of India (RBI) manages the public debt of the union government and undertakes the management of state debts by agreement.

Revenue Mobilization:

Efforts are being made to improve revenue mobilization, including the implementation of the Goods and Services Tax (GST), to sustain expenditure and avoid further increases in fiscal deficits.

Private Debt in India:

Growing Private Credit Market:

The private credit market in India has been expanding rapidly, with a significant increase in the assets under management (AUM) of private debt funds, according to Preqin.

Private Debt Deals:

Large private debt deals, such as the $3.4 billion deal by Shapoorji Pallonji, indicate the increasing appetite for private credit in India, according to Bloomberg.

Impact on Economic Growth:

The rapid growth of private credit can contribute to economic growth, but it also carries the risk of asset bubbles and potential "Minsky moments".

Potential for "Minsky Moment":

A sudden decline in asset prices could lead to a situation where private debt is unsustainable, causing financial instability and potentially requiring intervention by banks.

Balancing Public and Private Debt:

Fiscal Consolidation:

A structured approach to fiscal consolidation is needed to balance economic growth and debt management, including reducing fiscal deficits and debt-to-GDP ratios.

Debt Sustainability:

Assessing the sustainability of both public and private debt is crucial for long-term economic stability.

Risk Management:

Understanding the risks associated with both public and private debt, including the potential for "Minsky moments," is essential for effective policymaking.

Interplay between Public and Private Debt:

The government's borrowing decisions can influence the private credit market, and vice versa, highlighting the need for a coordinated approach to debt management.

Transparency and Disclosure:

Increased transparency and disclosure regarding government borrowing and off-budget liabilities are necessary to address concerns about rising hidden debt.

Public Debt as a Significant Component:

India's public debt, which includes the liabilities of both the central and state governments, is a substantial portion of the country's overall debt burden. As of early 2025, the total debt of India was estimated to be around ₹181.68 trillion, encompassing both internal and external borrowings.

Interplay with Private Debt:

The relationship between public and private debt is complex. High public debt can crowd out private borrowing, making it more expensive for businesses to invest. Conversely, a healthy private sector can contribute to economic growth, which helps the government manage its debt.

"Minsky Moment" Risk:

A "Minsky moment" occurs when asset prices unexpectedly and rapidly decline, leading to a sudden crisis of confidence in the financial system. Both public and private debt can be vulnerable to this type of shock. For example, if a large number of private debts are tied to asset prices that collapse, it can put pressure on banks and financial institutions, which could then have difficulty servicing their public debt obligations.

Economic Policy Implications:

Understanding the interplay between public and private debt is crucial for informed economic policy. For example, policymakers should consider the impact of public debt on private borrowing, the potential for "Minsky moments," and the need to manage both types of debt sustainably.

India's Specific Challenges:

India faces specific challenges related to its high public debt, including potential currency instability, increased inflation expectations, and the need to maintain a stable exchange rate. These challenges highlight the importance of managing both public and private debt responsibly.

A subprime crisis in India, similar to the US in 2008, is unlikely, but a crisis in the Indian microfinance sector is possible. The Indian banking system is generally considered sound, and direct exposure to subprime mortgages is minimal. However, the rapid expansion of subprime lending, particularly in microfinance, has led to concerns about a potential debt crisis.

Here's a more detailed breakdown:

1. Subprime Crisis vs. Microfinance Crisis:

Subprime Crisis (US 2008): This involved a collapse of the US mortgage market, driven by risky loans to borrowers with poor credit history.

Microfinance Crisis (India): This is a different type of crisis, where small, collateral-free loans are being given to low-income individuals, often those working in informal sectors.

While the US subprime crisis was due to irresponsible lending practices and a bubble in the housing market, the Indian microfinance crisis is more about the rapid growth of this lending sector and the potential for defaults due to low-income borrowers facing financial distress.

2. Signs of Distress in Microfinance:

Surveys show distress among borrowers:

Data indicates that a significant portion of subprime borrowers (68%) are showing signs of financial distress, says Business Standard.

Increase in overdue loans:

The share of loans overdue for 91-180 days has risen from 0.8% to 3.3%, indicating a growing repayment crisis, reports The420.in.

Borrowers taking new loans to repay old ones:

This is a sign that borrowers are struggling to manage their debts, according to Business Standard.

Some families resorting to extreme measures:

In some cases, families are pulling their children out of school to cope with debt burdens, says The420.in.

3. Factors contributing to the potential crisis:

Rapid growth of microfinance:

The microfinance industry has seen a massive expansion (2,100% growth), leading to a concentration of risk, according to eFiletax.

Unsecured loans to low-income borrowers:

This is a risky proposition, as borrowers may have limited ability to repay, says eFiletax.

Erosion of social collateral:

The pandemic has disrupted group lending practices, making it harder to assess creditworthiness and enforce repayment, notes Dvara Research.

4. Potential Impact and Concerns:

Higher defaults: The industry is bracing itself for a wave of defaults as borrowers struggle to repay their debts, says The420.in.

Excessive Credit and Speculation:

A Minsky moment often follows a period where investors and borrowers have become overly optimistic about the future, leading to rapid increases in borrowing and asset prices.

Asset Price Collapse:

When this unsustainable growth stops, asset prices can fall unexpectedly and rapidly, triggering a crisis.

Financial Instability:

Banks and other financial institutions may be forced to sell off assets quickly to meet their obligations, which can further depress asset prices and create a vicious cycle.

Impact on Debt:

Private debts tied to falling assets become harder to repay, and this can put pressure on banks' balance sheets and their ability to service public debt.

Loss of Confidence:

A Minsky moment can lead to a loss of confidence in the financial system, as investors and lenders become wary of future asset prices and credit expansion.

In essence, a Minsky moment in India would be a sudden and significant economic shock that highlights the inherent instability of financial markets and the potential for excessive credit expansion to lead to a crisis. 

UN projections indicate that India's population will peak at 1.7 billion in 2061 before declining...

 India's dependency ratio, the proportion of dependents (under 15 and over 64) to the working-age population (15-64), is projected to decline significantly. This means that the number of dependents supported by each working-age individual is expected to decrease. The share of the working-age population is projected to reach its highest point, at 68.9%, by 2030, and the dependency ratio is projected to reach its lowest point at 31.2% by that year.

Key Demographic Changes and Projections:

Declining Dependency Ratio:

The dependency ratio is projected to fall from 66% in 2001 to below 50% now and further down to 45% in the 2030s.

Increasing Working-Age Population:

The share of India's working-age population is expected to reach its peak at 68.9% by 2030.

Population Peak:

UN projections indicate that India's population will peak at 1.7 billion in 2061 before declining.

Aging Population:

The share of the population over 60 years is projected to increase from 10.5% in 2022 to 20.8% in 2050.

Median Age:

India's median age is relatively young at 28.4 years, which provides a competitive advantage in terms of workforce and consumption power.

Population Growth:

India's population is projected to reach 1.67 billion in 2050 and 1.53 billion in 2100.

Population Density:

India's population density is projected to increase to 483.68 people per km².

The statement accurately describes India's demographic shift and its potential implications. A declining dependency ratio, coupled with a large working-age population, presents a significant opportunity for economic growth. However, the statement also correctly highlights the potential risk of India failing to harness this demographic dividend, which could lead to slower progress toward its goals by 2047.

Here's a more detailed breakdown:

India's Demographic Landscape:

Declining Dependency Ratio:

India is experiencing a reduction in the ratio of dependents (those under 15 and over 64) to the working-age population (15-64). This shift indicates a larger portion of the population is potentially contributing to the economy.

Larger Working-Age Population:

A larger working-age population translates to a greater potential workforce, which can drive economic growth and productivity.

Projected Population Peak:

While the working-age population is growing, India's total population is projected to peak around 2061 before declining. This means the share of older adults will increase significantly, potentially impacting the dependency ratio in the future.

Potential Risks and Challenges:

Failing to Harness the Demographic Dividend:

India needs to invest in education, healthcare, and infrastructure to fully utilize its large working-age population. If these investments are not made, the potential for economic growth could be squandered.

Challenges of an Aging Population:

As the population ages, healthcare costs and social security systems will face increased pressure. This could strain the government's resources and impact economic growth.

Uneven Growth:

India's states have varying levels of development, and some regions may not be able to fully benefit from the demographic dividend. This could exacerbate regional disparities.

Unemployment and Underemployment:

Even with a large working-age population, if there are insufficient jobs or skills gaps, unemployment and underemployment could hinder economic growth.

Conclusion:

India's demographic shift presents a significant opportunity for economic growth, but it also comes with potential challenges. By proactively investing in human capital, infrastructure, and social security, India can leverage its demographic dividend and achieve its goals by 2047. If these investments are delayed or inadequate, India could face slower economic growth and increased social and fiscal pressures.

The LFPR data reveals a complex picture of joblessness in India, with significant challenges.....

 Unemployment and inflation disproportionately impact India's poor, making their lives even more challenging. While unemployment has seen a slight improvement, the underlying issues remain severe, particularly for those in the informal sector and women. Inflation erodes the purchasing power of low-income households, making basic necessities less affordable. The Labour Force Participation Rate (LFPR) reveals a complex picture of joblessness in India. While the unemployment rate has seen some improvements, the LFPR, particularly among women, suggests that many potential workers are not actively seeking jobs, and there's a considerable mismatch between the number of people in the labor force and the number of available jobs. India's slow improvement in Labor Force Participation Rate (LFPR), particularly for women, compared to other countries is a significant concern. This slow improvement is not just a statistical anomaly; it represents a missed opportunity for economic growth, social progress, and gender equality. The low female LFPR, in particular, is a major factor contributing to the overall sluggishness of India's LFPR.

Unemployment:

Recent Data:

The Periodic Labour Force Survey (PLFS) reported a decline in the unemployment rate to 3.2% in 2023-24, a notable improvement from 6% in 2017-18, according to Vajiram & Ravi. However, the rate increased slightly from the previous year (3.1%).

Informal Sector:

The informal sector, where many poor people work, is particularly vulnerable to job losses and low-paying positions.

Women:

Women face higher unemployment rates and lower labour force participation compared to men, exacerbating the challenges for poor women.

Educational Disparity:

Unemployment among the educated is also a growing concern, adding to the overall problem, according to Kharagpur College.

Historical Context:

The problem of unemployment has been a persistent challenge in India since independence, according to EPRA JOURNALS.

Inflation:

Impact on Poor:

Inflation erodes the purchasing power of low-income households, making it more difficult to afford basic necessities like food and shelter.

Rising Food Prices:

Inflation, especially in food prices, can significantly impact the poor, who spend a large portion of their income on food.

Limited Financial Resources:

Poor households often have limited financial resources to cope with rising prices, making them more vulnerable.

Overall Impact:

Unemployment and inflation create a vicious cycle, making it difficult for poor people to escape poverty.

The lack of employment opportunities and rising prices can lead to increased social and economic inequality.

Addressing these problems requires comprehensive strategies, including job creation, income support, and price control measures, according to the National Institute of Open Schooling.

Key Observations from LFPR Data since 2014:

Overall LFPR:

The overall LFPR in India has remained relatively stable, with minor fluctuations. This indicates that the proportion of the population actively participating in the labor force has not shown significant upward or downward trends.

Gender Inequality:

Female LFPR continues to be significantly lower than male LFPR. This gap is particularly pronounced in urban areas, where female unemployment is higher. This suggests that many women are not participating in the labor force, either due to societal expectations, lack of opportunities, or other factors.

Youth Unemployment:

A large portion of the unemployed workforce consists of youth, especially those with secondary or higher education. This indicates that there may be a mismatch between the skills and qualifications of the youth and the available job opportunities.

Stagnation in Employment:

While the overall unemployment rate has seen some decline, the LFPR and the Worker Population Ratio (WPR) show minimal year-on-year changes, suggesting that job creation is not keeping pace with the growth of the population and that many people are not entering or remaining in the workforce.

Rural Dependence:

A large portion of the rural workforce remains engaged in low-productivity or subsistence work, indicating that the overall employment situation in rural areas may not be improving as rapidly as in urban areas.

Impact of COVID-19:

The COVID-19 pandemic significantly impacted the labor market, leading to a decrease in LFPR and an increase in unemployment. However, there are signs of recovery in the employment scenario post-pandemic, with increased economic activity after the lifting of lockdowns.

Implications of LFPR Data:

Jobless Growth:

The slow increase in LFPR and the relatively high unemployment rate suggest that economic growth may not be translating into meaningful job creation.

Underutilization of Skilled Workforce:

The data suggests that there may be a significant mismatch between the skills and qualifications of the workforce and the available job opportunities, particularly among women and youth.

Need for Inclusive Growth:

Policies need to be implemented to address gender inequality in the labor market, improve access to education and skills training, and create more job opportunities in rural areas.

Impact of Social and Cultural Norms:

Factors such as child-rearing responsibilities and societal expectations can play a significant role in women's participation in the labor force, highlighting the need for policies that support working mothers and address gender stereotypes.

Informal Sector Challenges:

The prevalence of informal jobs and underemployment in the rural sector suggests that policies need to focus on creating more formal and secure employment opportunities.

Criticism Points:

Missed Economic Potential:

A higher LFPR, especially among women, would translate to a larger pool of skilled and productive workers, boosting overall economic output and productivity.

Slower Economic Growth:

India's economic growth is potentially constrained by a limited workforce, particularly a workforce where women are disproportionately excluded from the labor market.

Social Inequality:

The low female LFPR perpetuates gender inequality and limits women's access to economic opportunities and social mobility.

Global Comparison:

India's LFPR lags behind other countries, including many developing nations, demonstrating a need for targeted interventions.

Lack of Inclusive Policies:

India's LFPR struggles to match global benchmarks, reflecting a lack of policies that promote female workforce participation and address gender-specific challenges.

Demand-Side Factors:

The decline in the share of agriculture and the rise of capital-intensive service sectors have created a demand-side issue, with fewer opportunities for women in the labor market, according to CEPR.

Supply-Side Issues:

Factors such as higher education, increased household income, and societal norms also contribute to the decline in female participation in the workforce, according to the International Labour Organization.

Challenges Faced by Women:

Women in India face numerous barriers, including gender bias, safety concerns, work-life balance issues, limited access to networks, and societal expectations, according to GigIn.

Ineffective Policies:

Some government policies have been criticized for failing to adequately address the specific challenges women face in the workforce, such as childcare and flexible work arrangements.

India's Labour Force Participation Rate (LFPR) is significantly lower than that of many developed countries. In 2022-23, India's overall LFPR was 58.3% for those aged 15-59. Developed nations like the United States, Canada, Germany, and Japan generally have much higher LFPRs, often exceeding 60%.

Here's a more detailed comparison:

India:

In 2022-23, the overall LFPR was 58.3%. Rural areas had a slightly higher LFPR (59.9%) compared to urban areas (54.2%).

Developed Nations:

Countries like the United States, Canada, and Germany typically have LFPRs above 60%, and some may even reach 65% or higher.

India's Female LFPR:

India's female LFPR is particularly low, with a rate of 32.7% in 2023. This is significantly lower than the male LFPR, which is around 75-80%.

Factors Contributing to Lower LFPR in India:

Several factors contribute to India's lower LFPR, including:

Traditional Gender Roles: Strong societal expectations regarding women's roles in the household can limit their participation in the workforce.

Low Education Levels: Lower levels of education among women can make it harder for them to find employment in the modern economy.

Limited Access to Quality Education and Healthcare: These can also hinder women's ability to participate in the workforce.

Lack of Affordable and Safe Childcare: This can make it difficult for women to balance work and family responsibilities.

Informal Sector Dominance: A large portion of the Indian workforce is employed in the informal sector, which often lacks social security and benefits, which can discourage participation.

Developed Nations have Higher Female LFPRs:

Developed nations generally have higher female LFPRs due to greater access to education, healthcare, and childcare, as well as more flexible work arrangements.

For example, in 2023, India's female LFPR was 32.7%, while developed nations like the US, Canada, and Germany typically have female LFPRs in the range of 50-70%.

To address India's unemployment problem, policies should focus on skill development, promoting entrepreneurship, strengthening the formal sector, and enhancing rural employment opportunities. Specifically, this includes improving education-industry collaboration, incentivizing public-private partnerships, and leveraging digital technologies.

1. Skill Development and Vocational Training:

Focus:

Enhance the employability of the workforce by aligning training programs with market demands.

Interventions:

Collaborate with private institutions and industry experts to offer comprehensive training programs, including vocational training and upskilling initiatives.

Example:

The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) aims to provide skill-based training and certification to the youth.

2. Entrepreneurship and Startups:

Focus:

Create new job opportunities and stimulate economic growth by promoting entrepreneurship.

Interventions:

Provide access to finance, mentorship, and business development services for entrepreneurs.

Example:

The Start-Up India Scheme and Stand Up India Scheme facilitate bank loans and support for startups and women-led businesses.

3. Strengthening the Formal Sector:

Focus: Reduce administrative and legal hurdles to encourage businesses to hire formal workers.

Interventions: Simplify labor regulations and reduce the cost of compliance.

Example: The e-SHRAM Portal aims to register informal workers, potentially formalizing their employment.

4. Enhancing Rural Employment Opportunities:

Focus:

Address unemployment in rural areas, where a significant portion of the population resides.

Interventions:

Invest in rural infrastructure, support agricultural diversification, and promote microfinance initiatives.

Example:

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provides employment opportunities in rural areas.

5. Public-Private Partnerships (PPPs):

Focus:

Leverage the combined resources and expertise of the public and private sectors.

Interventions:

Create public-private partnership funds to support green jobs and other initiatives.

Example:

Incentivize private sector investment in areas like renewable energy and infrastructure development.

6. Leveraging Digitalization and Technology:

Focus:

Harness the potential of digitalization and emerging technologies to create new employment avenues.

Interventions:

Invest in digital infrastructure, promote e-commerce, and support the development of new digital services.

Example:

Support the development of digital platforms that connect job seekers with employers.

7. Strengthening Education and Industry Collaboration:

Focus: Bridge the gap between education and industry requirements.

Interventions: Ensure that educational institutions offer relevant skills training and collaborate with industry experts to develop curriculum.

Example: Implement vocational training programs in schools and colleges.

By implementing these policies, India can create a more dynamic and inclusive labor market, ultimately reducing unemployment and promoting economic growth.

In conclusion, the LFPR data reveals a complex picture of joblessness in India, with significant challenges related to gender inequality, youth unemployment, and the need for inclusive growth. Policies need to be designed to address these challenges and create a more equitable and inclusive labor market. In essence, the slow improvement in India's LFPR, particularly for women, is a cause for concern, representing a missed opportunity for economic and social progress. Addressing the root causes, such as gender bias, demand-side factors, and supply-side challenges, requires a multifaceted approach that involves policy interventions, social reforms, and increased awareness and support for women's participation in the workforce..

The volatility in food inflation, especially vegetable inflation, contributed to fluctuations in overall headline inflation (CPI).....

 In 2024-25, food inflation in India remained elevated at 6.7% despite fluctuations, primarily due to supply shocks caused by weather anomalies. These shocks, impacting vegetable production and supply chains, led to intermittent spikes in food prices, peaking at 9.7% in October 2024 before moderating to 2.9% by March 2025. While vegetable inflation was highly volatile, inflation persisted in other food categories like cereals, fruits, edible oils, and meat and fish, reflecting tight supply conditions.

Here's a more detailed explanation:

Overall Inflation:

Food inflation experienced a significant intra-year peak in October 2024, reaching 9.7%, before declining to 2.9% by March 2025.

Intermittent Spikes:

The 6.7% overall inflation rate in 2024-25 masked periods of high inflation, particularly due to overlapping supply shocks from weather anomalies.

Weather Anomalies:

Unseasonal rainfall and other extreme weather events impacted vegetable production, leading to higher prices and volatility.

Supply Chain Issues:

These weather-related issues also disrupted supply chains, impacting the availability and prices of other food items.

Persistence in Other Food Categories:

Even after vegetable inflation cooled, inflation remained elevated in other food groups like cereals, fruits, edible oils, and meat and fish. This suggests that supply constraints were not solely limited to vegetables.

Tight Supply Conditions:

The continued high inflation in these categories points to tight supply conditions, possibly due to factors beyond weather anomalies, such as production costs and market dynamics.

Headline Inflation:

The volatility in food inflation, especially vegetable inflation, contributed to fluctuations in overall headline inflation (CPI).

Moderation:

While food inflation remained high, it did moderate from its peak in October 2024, indicating that some supply-side issues were being addressed.

With 7% food inflation, the average Indian spends a larger portion of their income on food. Food typically accounts for a significant portion of household expenditure, with rural households spending a larger percentage than urban households. In rural areas, this can be around 48.6% of total expenditure, while in urban areas it's about 38.5%. A sustained 7% inflation would mean that this percentage increases, as the absolute cost of food rises proportionally, impacting the amount left for other essential needs and discretionary spending.

Elaboration:

Significant Food Expenditure:

A substantial portion of household income in India is allocated to food, with rural areas showing a higher percentage than urban areas. This is due to the lower income levels and higher reliance on agriculture for food in rural areas.

Impact of Inflation:

A 7% food inflation rate would mean that the absolute cost of food increases by 7% each year, requiring households to allocate a larger portion of their income to food.

Welfare Implications:

Persistent food inflation can have significant welfare implications for households, particularly for those who rely on food for a large portion of their income. This can lead to a reduction in overall household spending on other essential goods and services, potentially impacting education, healthcare, and savings.

Urban vs. Rural:

The impact of food inflation is likely to be more pronounced in rural areas, where food expenditure constitutes a larger share of total spending.

National Sample Survey Data:

The National Sample Survey (NSS) provides data on household consumption expenditure, highlighting the significant proportion of income spent on food, especially in rural areas.

Food inflation significantly impacts purchasing power in India because a large portion of the Consumer Price Index (CPI) is comprised of food items, meaning a rise in food prices directly translates to a reduction in what people can afford to buy. In essence, food inflation erodes the real value of money, making it harder for individuals to meet their basic needs and impacting overall economic activity. To improve its supply side, India could focus on a combination of measures including infrastructure development, skills training, labor market reforms, and policies that encourage investment and production. Specifically, enhancing infrastructure, especially in transportation and logistics, is crucial for efficient supply chains. Additionally, investing in education and vocational training can address skill shortages and improve labor productivity. Simplifying regulations and reducing barriers to entry for businesses can also stimulate production and investment.

The high levels of NPAs in the Indian housing sector are a serious concern....

 The Indian Insolvency and Bankruptcy Code (IBC) faces criticism for its effectiveness in reducing Non-Performing Assets (NPAs) due to factors like delays, lack of transparency, and challenges in the resolution process. Despite the IBC aiming to expedite debt resolution and improve recovery rates, concerns remain about the time taken for cases to be resolved, the percentage of claims recovered, and the involvement of stakeholders in the process.

Here's a more detailed breakdown of the criticisms:

1. Delays in the Resolution Process:

Prolonged Timelines:

While the IBC aims to be more efficient than previous processes, the average time for case resolution is still significantly longer than desired, often exceeding the mandated 180 days, says PWOnlyIAS.

Complexities and Stakeholder Conflicts:

Case complexities and disagreements among stakeholders (like creditors) can lead to delays, with new applications being filed at almost every hearing, reports The Hans India and ResearchGate.

Capacity Constraints:

The workload on the National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT) can lead to delays due to inadequate infrastructure and manpower, reports iPleaders Blog.

2. Issues with Recovery and Outcomes:

Lower Recovery Rates:

While the IBC aims to improve recovery rates, actual recoveries have been lower than anticipated, says The Hans India and reports Fortune India, leading to higher haircuts (losses) for lenders.

High Liquidation Rates:

A significant portion of cases end in liquidation rather than resolution, resulting in lower recoveries compared to resolution, according to Fortune India.

Uncertainty in Valuation of Stressed Assets:

Accurate valuation of assets can be challenging, potentially affecting the resolution process and the outcome for creditors, reports iPleaders Blog.

3. Concerns about the Role of Key Stakeholders:

Resolution Professionals (RPs):

The expertise and independence of RPs are crucial for a successful resolution. However, there have been criticisms regarding the RPs' impartiality and potential bias towards secured creditors, reports ResearchGate.

Committee of Creditors (CoC):

The CoC plays a key role in the resolution process, but there are concerns about their ability to reach consensus, particularly when dealing with complex cases and disagreements on proposed haircuts.

Incentivizing RPs:

Ensuring that RPs are adequately incentivized to deliver effective and efficient resolutions is crucial, and there are debates about the appropriate mechanisms for incentivization, according to the Bank for International Settlements.

4. Other Criticisms:

Lack of Transparency: Concerns exist about transparency in the resolution process, particularly regarding the valuation of assets and the allocation of proceeds.

While the Insolvency and Bankruptcy Code (IBC) has been credited with significant progress in resolving stressed assets and reducing NPAs, it has also faced criticism for not fully achieving its initial objectives and for certain shortcomings. Critics argue that the IBC's effectiveness is limited by factors like the time taken for resolution, the high number of cases going into liquidation, and concerns about potential undervaluation of assets.

Criticisms of IBC's NPA Reduction:

Time to Resolution:

One of the main criticisms is that the IBC process, while designed to be faster than previous mechanisms, can still take a significant amount of time, often exceeding the initial 270-day target. This delay can exacerbate the problem of NPAs and hinder the overall financial health of banks.

High Liquidation Rate:

While the IBC aims to facilitate resolution through a structured process, a substantial portion of cases end up in liquidation, resulting in significant losses for banks and creditors. This is particularly concerning as liquidation often leads to lower asset values and reduced recoveries compared to a successful resolution.

Potential for Undervaluation:

Concerns have been raised about the possibility of potential buyers strategically low-balling bids during the IBC process, knowing that the case will eventually be liquidated if a resolution is not reached within the allotted time. This can result in banks receiving less than their expected recovery, and the value of the asset is not truly reflected in the resolution process.

Implementation Challenges:

The implementation of the IBC has faced challenges related to the capacity of resolution professionals, the complexity of legal proceedings, and the need for a more robust regulatory framework. These challenges can further impede the process and contribute to the high liquidation rate.

Figures and Evidence:

NPA Reduction:

While the IBC has played a significant role in reducing NPAs, the reduction has been gradual, and the overall level remains a concern. For example, according to the Bank for International Settlements, gross NPAs of scheduled commercial banks declined from 11.2% in March 2018 to 2.8% in March 2024, a portion of which is attributed to the IBC.

Recovery Rates:

The Economic Survey 2020 highlights the recovery rate under IBC as 42.5% of the amount involved, compared to 14.5% under the SARFAESI Act, suggesting a higher recovery rate under IBC.

Liquidation Cases:

Business Today reports that a significant number of cases under IBC end up in liquidation, raising concerns about the overall success of the process in recovering assets.

Asset Value:

Concerns have been raised about potential undervaluation of assets during the IBC process, leading to reduced recovery for banks and creditors.

 

High levels of Non-Performing Assets (NPAs) in the housing sector of the Indian economy are a major concern, reflecting a significant challenge for the financial stability and economic growth of the country. Several factors contribute to this, including weak credit assessment, aggressive lending practices, and adverse economic conditions. The rise in NPAs leads to a credit crunch, reduced bank profitability, and potentially higher interest rates, ultimately impacting overall economic activity.

Here's a more detailed look at the criticisms and concerns:

1. Impact on Bank Profitability and Stability:

Reduced Profit Margins:

Banks are required to allocate capital to cover NPAs, which erodes their profitability.

Credit Crunch:

High NPAs limit banks' ability to provide new loans, impacting credit growth and potentially hindering economic development.

Higher Interest Rates:

To compensate for losses from NPAs, banks may increase interest rates on new loans, further straining borrowers.

2. Factors Contributing to NPAs:

Weak Credit Assessment:

Insufficient due diligence and poor risk assessment during loan disbursal lead to a higher likelihood of defaults.

Aggressive Lending Practices:

Banks, under pressure to increase lending, may compromise on lending standards, leading to a surge in NPAs.

Volatile Macroeconomic Conditions:

Economic downturns, changes in interest rates, and fluctuations in asset prices can significantly impact borrowers' ability to repay loans, leading to defaults.

Inadequate Recovery Mechanisms:

The legal system and recovery processes in India can be slow and inefficient, hindering the recovery of NPAs.

Lack of Proper Monitoring and Verification:

A lack of effective monitoring of loan accounts and borrower performance can lead to delayed detection of potential defaults.

Misuse of Restructuring Norms:

Banks may misuse loan restructuring provisions to avoid acknowledging NPAs, which can worsen the overall problem.

3. Impact on the Economy:

Reduced Credit Flow:

High NPAs limit the availability of credit, impacting businesses and individuals, and hindering economic growth.

Investor Confidence:

High NPAs can erode investor confidence in the banking sector, potentially leading to capital outflows and further financial instability.

Economic Slowdown:

The overall impact of reduced credit flow and lower bank profitability can lead to a slowdown in economic activity.

4. Criticisms of Existing Policies and Regulations:

SARFAESI Act:

While the SARFAESI Act provides banks with the power to recover assets, its implementation can be slow and cumbersome, says the Times of India.

Transparency and Reporting:

There are concerns about the transparency of NPA reporting, with some banks potentially under-reporting or employing other methods to make their balance sheets appear cleaner.

Conclusion:

Banks NPAs have reduced from 8 lakh crore rupees to 5.4 lakh crore rupees, down only less than half since 2016, since IBC came into existence. The IBC has made a significant contribution to resolving NPAs and improving the asset quality of Indian banks, but it has not been without its criticisms. While the IBC provides a structured framework for addressing stressed assets, its effectiveness is limited by factors like time, high liquidation rates, and potential undervaluation. Further improvements to the IBC process, including streamlining the resolution process, strengthening the regulatory framework, and addressing concerns about asset valuation, are necessary to ensure its long-term success in reducing NPAs and improving the financial health of banks. The high levels of NPAs in the Indian housing sector are a serious concern, reflecting weaknesses in the financial system, lending practices, and the regulatory environment. Addressing this requires a multi-pronged approach, including stricter credit assessment, stronger recovery mechanisms, and improvements in the legal framework.