India's Economic Update: Inflation Bites, But Gov Initiatives Sprout

In the rapidly evolving landscape of business and economy, a range of crucial developments have emerged, shaping the financial and industrial sectors across India.

Recent surveys and reports shed light on critical issues like stagnant income growth for low-income households, rising consumer contentment with salaries, and the impact of inflation on everyday essentials. Additionally, significant government initiatives and regulatory changes are poised to influence various industries, from IT hardware and telecom to renewable energy and infrastructure.

This comprehensive update by team  TICE NEWS aims to provide a clear and concise overview of these pivotal trends and policy shifts, highlighting their potential implications for stakeholders and the broader economy.

77% of Low-Income Households See No Raise in 5 Years - Can India Bridge the Gap?

• Approximately 77% of low-income households reported no increase in income over the past five years, according to a survey by Redseer Strategy Consultants. Slight increases in income were often offset by rising inflation, particularly in essential areas such as food, housing, healthcare, and transportation. Most low-income individuals work in informal or unregulated sectors with irregular income streams, leading to financial instability. Limited access to formal banking and financial services further complicates their ability to save and invest efficiently.

73% of Indian Workers Content with Their Salary: ADP Survey

• Nearly 73% of Indian workers are satisfied with their salaries, a significant increase from 49% in 2023, according to ADP’s annual flagship survey, "People at Work 2024: A Global Workforce View." This is the highest percentage globally among the 18 countries surveyed, with salary remaining the most important factor for 55% of Indian workers.

Soaring Vegetable Prices Strain Indian Budgets - But There's Hope

• A Local Circles survey reveals that 16% of household consumers have reduced consumption or are feeling the pinch of rising prices of onions, potatoes, and tomatoes. Another 31% are likely to be impacted once prices exceed INR 50 per kg for these items. Consumers are currently paying Rs 25/kg or more for tomatoes, Rs 30/kg or more for potatoes, and Rs 35/kg or more for onions.

Rents in India Increase by Up to 64% in Five Years

• The average rent for a standard two-bedroom house in seven major Indian cities has increased by up to 64% since 2019, according to a recent report.

India Upskills Workforce, Green Push Amidst Inflationary Pressures

• The Ministry of Labour & Employment plans to conduct a training workshop for state government labour officials to familiarize them with the new labour codes. The workshop aims to address the discrepancies in the draft rules formulated by states, ensuring they align with central laws.

RBI Cautious on Monetary Policy as Private Wealth Steps Up in AIFs

• Reserve Bank of India Governor Shaktikanta Das emphasized the need to focus on reducing inflation towards the target of 4% and cautioned against "adventurism" in monetary policy. He stressed the importance of clear evidence of moderating inflation before considering a change in policy stance.

Banks Highlight ATM Shortage to Government and RBI

• Banks have raised concerns with the government and the Reserve Bank of India about a shortage of automated teller machines (ATMs) and the need for clarity in procurement norms via the government e-marketplace (GeM) portal. The issue of ATM vendors' capacity was highlighted during a recent meeting with officials.

Private Wealth Funds and Family Offices Fill Void Left by Banks at AIFs

• Following the RBI's tightened norms for financial institutions investing in alternative investment funds (AIFs), private wealth funds and family offices are stepping in to fill the gap. Vivriti Asset Management’s latest fund is composed entirely of private wealth investments, with no participation from banks and NBFCs.

India to Adopt "Pillar-2" Minimum Corporate Tax Rule in Upcoming Budget

• The Central government is expected to announce the adoption of the “Pillar-2” tax regime by the Organisation for Economic Cooperation and Development (OECD) in the upcoming Budget. The new provisions will come into effect in September, aiming to combat global tax avoidance.

Digital Boom: Fintech Soars 49% While UPI Battles Transaction Failures

• UPI transaction failures are primarily due to technical and business declines. The Reserve Bank of India is working with banks to address these issues, which often arise from network problems on the banks' end.
• Digital lending witnessed a 49% increase in disbursements, reaching Rs 1.46 trillion in FY24, according to the Fintech Association for Consumer Empowerment (FACE). The number of loans disbursed grew by 35% to over 10 crore borrowings.

April-June Direct Tax Collection Rises 21%

• The government’s net direct tax collection increased by 21% year-on-year to ₹4.62 lakh crore in the April-June period. Corporate income tax and personal income tax, including securities transaction tax, contributed significantly to this growth.

Law Committee Recommends CGST Law Amendment

• The GST council's law committee has recommended amending the GST act to address low tax payments due to legal interpretation or lack of clarity. This could provide relief to industries like online gaming from retrospective tax notices.

MeitY Considers Industry Feedback on Digital Competition Bill

• The Ministry of Electronics and Information Technology (MeitY) held consultations with industry stakeholders on the draft Digital Competition Bill. The bill aims to protect domestic industries from anti-competitive practices by Big Tech in digital markets.

Consumer Affairs Ministry Warns E-commerce Platforms Against Dark Patterns

• The Department of Consumer Affairs cautioned e-commerce platforms against using deceptive user interface designs, known as “dark patterns.” Such practices will be considered unfair trade practices and violations of consumer rights.

Anti-Dumping Duty on PCBs Affects IT Hardware PLI Beneficiaries

• IT hardware manufacturers under the production-linked incentive (PLI) scheme are struggling due to a 30% anti-dumping duty on bare printed-circuit boards (PCBs). This duty makes their products less competitive globally.

Jewellery Consumption Growth to Moderate Due to High Gold Prices

• Jewellery consumption growth in India is expected to moderate to 6-8% in FY25 due to high gold prices, according to an ICRA report. The growth rate is down from the 18% expansion in FY24.

AC and Ice-Cream Companies See Record Summer Sales

• Air conditioner, ice-cream, and cola companies reported a 40-50% sales growth in the April-June period compared to last year, driven by a prolonged heatwave.

Govt Plans Telecom PLI Scheme Revamp

• The Department of Telecommunications plans to revamp the Production Linked Incentive (PLI) scheme to boost exports and incorporate more MSMEs into the telecom manufacturing sector.

NHAI to Offer Rs 44,000 Cr Worth of BOT Road Projects

• The National Highways Authority of India (NHAI) plans to offer 15 road projects worth Rs 44,000 crore under the build-operate-transfer (BOT) mode in FY25, marking a potential revival of public-private partnership projects in highways.

Investments in Renewable Energy, Roads, Real Estate to Grow

• Investments in key infrastructure sectors like renewable energy, roads, and real estate are expected to grow by 38% in fiscals 2025 and 2026, reaching Rs 15 lakh crore, according to a CRISIL Ratings report.

India's Warehousing Sector to Exceed 300 MSF by 2025

• India's warehousing sector is set to surpass 300 million square feet by 2025, driven by rapid industrial growth and the expansion of real estate segments.

Govt Aims to Eliminate Coal Imports by FY26

• The government plans to eliminate coal imports by FY26, with 20 new mines set to become operational this fiscal year. India aims to produce 1.08 billion tonnes of coal in the current financial year.

Govt Discusses Revamping SHAKTI Policy

• The government is considering revamping the SHAKTI policy to streamline the coal linkage process for private electricity projects.

Expert Panel to Review Generic Substitution for Prescription Drugs

• An expert committee will soon review a proposal to allow generic substitutions for prescription drugs, a contentious issue between major drug makers and health organizations.

Govt Proposes Export Obligation Period Review

• The government proposed to amend the export obligation period for several sectors, including wheat, raw sugar, and pharmaceuticals, to facilitate exports.

Export Duty on Onions to Remain

• The government is unlikely to remove the 40% export duty on onions as domestic prices have nearly doubled over the past month.

As we navigate these dynamic times, the interplay between economic policies, market conditions, and consumer behavior continues to drive the evolution of India’s business landscape. From addressing the challenges of income stagnation and inflation to leveraging technological advancements and sustainable practices, the path forward requires a balanced approach to foster growth and stability. Stakeholders must remain vigilant and adaptable to capitalize on emerging opportunities and mitigate potential risks. By staying informed and engaged, businesses and policymakers can collectively work towards a resilient and prosperous future for the Indian Economy.