The changing face of savings and investment in India: Free Press Journal 10th November 2025

 

In Bihar and beyond, don’t dismiss cash transfers. They serve the general good: Indian Express 10th November 2025

 Cash transfers make headlines during election cycles. The latest to grab attention are those announced for women in various states, normally just before the assembly elections or topped up if the schemes already exist. While some concerns have been voiced, such transfers may not be negative.

Studies show that 12 states are offering such schemes, amounting to around Rs 1.7 lakh crore – 0.5 per cent of GDP. The amounts given can range from Rs 1,000 a month per woman in a family in Chhattisgarh to Rs 2,500 in Jharkhand. Several other states are debating introducing such schemes. Interestingly, larger states such as UP, Gujarat and Rajasthan do not appear to be doing so. There are several positive consequences of “cash and kind” transfers. Remember that the free food scheme has helped to raise several families out of poverty and proves that direct interventions work. The same holds for benefits given to farmers either directly through cash or through subsidies.

Three issues need to be discussed. One, whether such transfers provide direct economic and social benefit. Two, whether they upset fiscal math. And three, the ideology of the role of the state.

These cash transfer schemes cover almost 100 million women. This has led to empowerment as they are less dependent on their spouses. It helps them spend money more meaningfully, which matters in lower-income groups. Schemes like free bus rides have helped increase mobility, easing access to educational and occupational institutions. Schemes which involve distribution of laptops, cycles or sewing machines help in social advancement either through better education or providing avenues for employment. Hence, “cash and kind” transfers are good if directed well. The broader question is whether this process can be sustained when governments spend more on such avenues and less on, say, infrastructure. Here, the Fiscal Responsibility and Budget Management Act ensures fiscal discipline. There are rules in place on how much a state can borrow. The issue is whether such unconditional transfers in cash or kind are better than, say, an infrastructure project, considering that even money transferred adds to spending and growth.

This leads us to the role of the state. It is to ensure fair distribution, and giving cash is a direct way of raising living standards, just like how the free food scheme has benefited society at large. States have been allocating funds for capex, too. But, at times, these have been pruned to meet fiscal targets. This can be considered the cost of keeping the less privileged in a society above the level of deprivation.

Schemes involving unconditional cash transfers do serve the general good. Though, arguably, in the long run, more jobs must be created. There is no substitute for that.

Money saved with banks serve worthy purposes: Why deposits need a break: Mint 6th November 2025

 https://www.livemint.com/opinion/online-views/india-bank-deposit-fd-interest-income-tax-equity-mutual-funds-new-regime-old-regim-11762248036130.html

Why are 10-year bond yields sticky downwards? Businessline 27th October 2025

 

India's economy faces critical tests, results by March 2026 Free Press Journal October 27, 2025

 

Book review: Fixing the system: Financial Express 19th October 2025

 For a person who has been tracking Indian polity and economy for about eight decades, Shashi Budhiraja brings out a rather hard-hitting book on India’s progress, titled The Governance Gap. As the title suggests he points out the gaps in our political and economic systems based on facts and data and devoid of emotion. The political superstructure needs reforms that can come only from within, as people design the systems that they ultimately operate. The economic scenario needs improvement, which can be done provided we get the political ideology right, which is hence a circular puzzle. Yet, he is very optimistic about the future of India.

The book is partly a narrative of developments in various sectors since independence, along with his commentary on them. While these facts are well known, putting them together cogently with deep analysis is what makes Budhiraja’s book stand out.

Let’s start at the beginning. Yes, India has had fair elections since we started our democratic journey, which is something that we can be happy about, given how democracies have tended to wilt at different points of time. However, he points out that over time elections are driven significantly by money power and the majority of those who get elected have high levels of wealth. Moreover, given that up to over 40% of legislators have a criminal background does not bode well for a democracy.

The same degradation gets reflected in the quality of proceedings in both Parliament and state legislatures. Backed by data he shows how the number of sessions have come down, with most of the time spent in heckling one another, thus making meaningful debates impossible. Due to paucity of time it has been pointed out that even serious policies like the Budget have been passed without any discussion. He brings up an imperative point when he says that criminality and corruption are now well permeated in the legislature. This, he points out, holds true for all parties and none have been an exception, which is worrisome.

In the same vein, he highlights the challenges of governance. As criminality and corruption dominate elections, the winning set of parties have to accommodate all winning candidates. This has led to larger jumbo-sized ministries with several ministries being split to keep all parties happy. Coalition politics makes it expedient to do so. Yet, in recent times, he observes that the PMO has become even more important, with several decisions being taken without the ministries concerned being taken into confidence. This has actually meant that while there can be ministries and ministers, the power lies right up at the PMO. He gives examples of major revolutionary policies like the response to Covid or even demonetisation, which were all decided at the highest level. Also, there have also been conflicts in federalism. While the Finance Commission ensures there is distribution of income based on a formula, the process of allocations has been questioned by states as those that do well get fewer funds.

In the same vein he also has spoken of how the judiciary had to get involved even four to five decades back with constitutionally elected governments being dismissed. The problem at the judicial level can be seen by the number of pending cases. The courts are understaffed and vacancies pending for several years, which makes it hard to deliver speedy justice.

Lastly, on the political front, he discusses the touchy subject of reservations. These numbers can go up to 60% in several states. The politics in play is the inclusion of various categories of people under reservations for political gains. This is totally against the ethos of the concept when they were introduced. When we read on this subject almost every year in the media, one can sense the author’s angst as the issue has become fully political in most states, with every party supporting groups from where votes can be garnered.

Quite clearly these cogs need to be removed as India moves towards becoming a developed nation. The author then analyses progress in the economy with a historical perspective. The issues highlighted are agriculture, education, health and workforce. Rather than talking of the achievements in sectors such as manufacturing or services, which most books do, Budhiraja directly focuses on areas that need to be addressed.

India’s progress in agriculture has been remarkable, but in the past few decades it has slipped, with greater dependence on subsidies, resulting in overuse of fertilisers affecting the quality of soil. Clearly, the progress we made at the time of Green Revolution is not sustaining of late, and politics again has focused on issues like subsidies and loan waivers. This has resulted in little incentive at the farmer level to become more productive.

The issues of health and education are also well known and have to be addressed, as this has led to inequality in the country. The author quotes several standard publications to show that there is a lot of work to be done on this front.

While demographic advantage is definitely a strength, we often harp on this without paying attention to skilling the workforce, which starts with education. Mere enrolment does not help and we need to have more teachers and better administration of the curriculum to change the structure.

The fact that the bottom 50% own just 15% of income in the country means that development has missed a large section of the population. While growth at the macro level has been impressive without taking this section along, one can imagine the high potential if there is greater inclusion.

What one can conclude from this book is that India can become better. There has to be more political determination to improve social indicators, which is the route to foster equality. The political superstructure, however, still remains in suspension, and the author says things have not exactly improved over time. Clearly, it is the people that matter and there is need for a larger change to take place.

The Governance Gap: Unlocking India’s Superpower Potential

Shashi Budhiraja 
Edited by 
Rajeev Budhiraja
Rupa Publications

Pp 296, Rs 695

The importance of innovation: Financial Express 14th October 2025

 

he future of growth models will be driven by innovation, and this is both a challenge and an opportunity, as reflected in this year’s economics Nobel winners

The story of Kodak is now well-known to all—how the leader in the business of cameras became outdated. The same story was witnessed in areas such as music, where cassettes gave way to CDs that have now been replaced by the virtual delivery of content. Businesses built on these edifices have closed or had to innovate to remain viable. A similar wave can be seen in the electric vehicle or renewable spaces where the future of a petrol-driven car can be uncertain given how the world is moving. The oil-producing nations are cognisant of these change.

At a more macro level, AI has swarmed all businesses, and everyone is trying to balance its use with the given skill sets. Job losses are being spoken of in hushed tones. This is something which was never envisaged and jobs done by AI—starting from a rudimentary search on the Internet—have changed the way in which business operates. What does all this mean?
The future of growth models will be driven by innovation, and this is both a challenge and an opportunity. This is what Joel Mokyr, Philippe Aghion, and Peter Howitt have studied for decades. Their work on the subject has been rewarded with the Nobel Prize in Economics this year.

The role of innovation in driving economic growth is not new, though its importance is greater today. Innovation was also highlighted by economists such as Robert Solow who spoke of the importance of technology in getting out of the low-productivity trap. There were limits to productivity of labour and capital, which tended to come down beyond a point. The only way forward was to bring in technology to improve productivity given the same levels of factors of production (land and labour) and eschew the economic process of diminishing returns.

The Nobel winners have worked on this subject more at the macro level with mathematical models showing how progress in terms of growth can be accelerated with the use of innovation. The underlying concept, however, is the same.

Quite significantly, they draw a lot from Joseph Schumpeter’s concept of creative destruction where a natural process for obsolescence comes in. Economic evolution begins with inventions that take countries by storm, just like the Industrial Revolution did in the mid-19th century. But, after a point of time, there is a tendency to imitate where it becomes difficult to distinguish superiority or quality of products. Thus, monopolies turn to what economists call “imperfect competition”. With innovation, there would be a natural process of creative destruction—those who innovate move ahead, while the others wither away. This engenders subsequent growth cycles, seen when innovative products in automobiles, electronics, engineering, etc. replace existing ones. Innovation has driven the East Asian story or the ascent of China. The same held for Japan in the ’60s and ’70s and the Asian tigers subsequently..

Mokyr, Aghion, and Howitt did not just stop at these principles but also emphasised the role of the state. This is critical because countries need to have systems that encourage such creative processes. For that, countries need to invest a lot in R&D which can happen if there are high savings. Mokyr specifically spoke of distinguishing between what he called propositional knowledge, which is theoretically sound but not practically feasible, and prescriptive knowledge, which is what really works in the real world. So to derive the best results there is a need for support from the financial system that provides funds at competitive interest rates even as cost of experimentation can be high and results uncertain. This is probably why some economies of the West and East have galloped at high growth rates for sustained periods while those in say Africa, or even Latin America, have seen slower progress.

The question that comes up is how India stacks up in this theory of innovation-led growth. Significant strides have been made in several sectors, manifested not just by innovative products and processes but also in start-ups that have leveraged technology to contribute to growth. India is considered a pioneer in start-up founders. Also, in a globalised setting, borrowing technologies is easier than when the world economy was not flat. The fact that Indian manufacturing has done well can be judged from the fact that almost all products that were earlier imported at the consumer end are manufactured within the local economy. Further, with a favourable business environment being created, foreign direct investment has poured in. This has been the most convenient way to bring in innovation as technology comes along with such investment.

Funding too has become universal where besides investment, it is easy to borrow from external sources that can fill the gap in financing innovation. The government has had several schemes that offer direct support to start-ups. In fact, the performance-linked incentive scheme is another incentive provided by the government to encourage innovation and production.

Therefore, the importance of innovation in the growth process is extremely high. This is probably the only way to excel growth. A globalised world makes it easier to borrow both ideas and funds to prune the time taken to grow faster. At the micro level, firms have to constantly innovate as there are always new ones with new ideas that have an advantage over legacy companies which find it hard to dislodge outdated shibboleths.