Impact of the Unified Pension Scheme: Will Festivities Bring Hope?

India's GDP growth is expected to slow to 7.1% in Q1 FY25, according to SBI economists. The new Unified Pension Scheme could increase the fiscal deficit to 5.1%, Macquarie forecasts. Rural jobs are recovering but remain below pre-pandemic levels. The RBI has eased infrastructure funding rules. Janmashtami sales surged, and gig economy rider demand is expected to rise 40% during the festive season. The Finance Commission recommends cutting Centrally Sponsored Schemes by one-third. Several factors, including policy changes, global uncertainties, and domestic challenges, are contributing to this downward trend. Read more Business & Economy News Update complied by team TICE 

Key Business & Economy Developments

• Fiscal Deficit Concerns: The introduction of the Unified Pension Scheme (UPS) is projected to increase India's fiscal deficit by 15 basis points to 5.1% in FY25, according to Macquarie's report. This additional burden of ₹45,000 crore on government finances could have implications for the overall economy.
• Rural Distress Persists: Despite a slight improvement in rural employment under MGNREGS, the sector has not fully recovered to pre-pandemic levels. The data indicates a shortfall of 230 million person-days created in FY25 compared to the previous year, highlighting ongoing rural distress.
• Government Streamlines Services: In an effort to enhance efficiency and improve public satisfaction, the Centre has reduced the public grievance redressal timeframe from 30 to 21 days. Dedicated officers will handle complaints using a 'whole of government' approach.
• RBI Considers Easing Infrastructure Funding Rules: To mitigate the impact of stricter infrastructure financing rules on lenders, the RBI is exploring a phased implementation. The central bank may also provide leeway to projects nearing completion, allowing financial institutions to adjust gradually.
• Focus on Core Inflation: Ashima Goyal, an outgoing member of the RBI's Monetary Policy Committee, has emphasized the importance of paying attention to core inflation. She believes that it significantly influences household expectations and long-term economic stability.
• Festive Season Boosts Gig Economy: The upcoming festive season is expected to drive a significant increase in demand for gig workers. Platforms like Blinkit and Swiggy Instamart are anticipating a 40% surge in demand,leading to the hiring of 1-2 million additional gig workers.
• Janmashtami Spurs Consumer Spending: The Janmashtami festivities generated over ₹25,000 crore in business,according to the Confederation of All India Traders (CAIT). This highlights the festival's contribution to India's economy and strong consumer spending.
• FSSAI Withdraws Milk Product Labelling Order: In response to concerns from stakeholders, the FSSAI has withdrawn its directive on the labelling of A1 and A2 milk products. This decision follows expert criticism that the order could hinder the development of indigenous cattle breeds.
• Rising Property Prices: Despite an increase in new supply, residential property prices in India's top seven cities have surged by 45% over the last five years. Micro-markets in Bengaluru and Hyderabad have seen particularly significant price hikes of up to 90%.
• India and Singapore Strengthen Ties: India and Singapore have reaffirmed their commitment to collaborating in emerging areas such as digital connectivity, green economy, and fintech. The two countries also pledged to enhance cooperation in healthcare, skill development, and food security.

India's economic landscape is facing a mix of challenges and opportunities. While the festive season is expected to provide a temporary boost to certain sectors, concerns about fiscal deficit, rural distress, and global uncertainties persist.The government's efforts to streamline services and the RBI's measures to support the economy may help mitigate some of these challenges. However, the country's long-term economic stability will depend on its ability to navigate these headwinds effectively.