https://m.economictimes.com/opinion/et-commentary/planting-6-ideas-for-an-agri-culture/amp_articleshow/125572378.cms
Tuesday, November 25, 2025
Monday, November 24, 2025
Tuesday, November 18, 2025
Pros and cons of a big bank push bl-premium-article-image: Businessline 19th November 2025
The issue of having big banks has come back to the discussion table. The Indian banking system has a unique model where there are differentiated banks serving specific purposes.
Hence besides the commercial banks which are virtual universal banks, there are small finance banks, payments banks, and the cooperative banking system. There are evidently benefits from such a structure.
Case for big banks
With the aura of going global pervading economic thinking there are arguments being made for having big banks. First, there is the reputation issue. Today it has become axiomatic to be at the top — whether it is GDP or banks given the economic power that vests with India in the global space. Therefore, being a part of the top 100 or top 500 is an aspiration, and here size of banks matters. A globally integrated economy necessitates large banks.
Second, with big banks, there is scope for taking larger exposures. This is because large banks have a bigger balance sheet which is supported by capital. As lending is linked with capital, intuitively more capital allows larger exposures. This becomes pertinent when infrastructure is involved where banks are taking the lead.
Third, the RBI recently relaxed the large exposure norms and allowed for funding of M&A activity. This means that larger banks would be able to work in this business segment more effectively than smaller ones. Given the pace of M&A activity in the country, financing it will potentially be big business for banks in future.
Fourth, larger banks tend to have the wherewithal to invest more in innovation and compete in global markets. As we talk of globalization of the rupee, our banks need to be at the forefront, and it is the larger ones which can follow this path.
Further, in a digitally-oriented banking system, big banks will find it easier to invest in technology. AI, which will be an integral part of banking in future, is an area which requires substantial investment on an ongoing basis.
Therefore, there are compelling reasons to have larger Indian banks. In fact, the concept of banks being financial supermarkets fits into this canvas where a large bank offers all financial products through subsidiary outfits under one umbrella.
The downsides
Interestingly, there are also arguments which support the status quo.
First, size in the global context is notional. This is so because given the exchange rate and conversion to dollars for comparison purposes Indian banks will always be lower down the pecking order. In fact, if size of banks were reckoned based on purchasing power parity, we would feature in this list already as GDP in PPP is almost 4.5 times GDP in nominal terms.
Second, having a few large banks will mean increasing risk in the system due to the large exposures taken. The ‘too big to fail’ hypothesis is often put forward here as any fissure can have major repercussions for the financial system. Rescuing a small or medium size bank is less complicated than a large bank. Therefore, having such banks would mean creating such monoliths and then putting them under the scanner under the systemically important banks regulation. This can be countered, however, with stronger regulations in the system.
Third, given the asset-liability profile of banks, they may not be suitable for infrastructure lending. Deposits are typically for three years, and funding infra for 10-15 years creates continuous mismatches. Efforts are being made to deepen the bond market and create new long-term lending institutions, which could be more effective alternatives. But the counter argument here is that this takes time to develop based on experience and hence banks must perforce do the main work here.
Fourth, given that infra lending involving long tenures cannot be eschewed, the consortium approach is already there which ensures that all the eggs are not put in a single basket. This has worked well for us and hence creating new big banks to replace such lending is not necessary.
Fifth having large and fewer banks would automatically lead to the creation of an oligopolistic structure which may not be desirable. For example, a company seeking a large sized loan may not have much of a choice if there are just 3-4 banks. Reduction in competition could lead to mispricing of capital. Customers will also have fewer choices of banks.
An analogy is often drawn with the aviation sector where customers do not really have an option when flights are delayed or flights cancelled with no compensation. Here too it is counter argued that a strong regulatory structure should be in place to ensure that this does not happen.
Tough choices
So whether or not to create big banks is a hard decision to make given the arguments for and against them.
The Indian experiment with bank mergers among PSU banks has been an unequivocal success. This has sparked the debate once again.
Our need to ramp up growth will entail an investment level of 35 per cent of GDP. . Financing this will be the challenge. While foreign capital can support such investment, the primary driver will be domestic institutions. The corporate bond market needs further development to cover corporates with lower ratings. The government has already furthered the idea of special financial institutions targeting infrastructure. Until these structures develop, the onus will be on banks to finance growth.
Capital requirements of banks tend to rise as credit growth averages 15 per cent a year. Incremental capital required would be around ₹5 lakh crore by 2030, increasing to ₹38 lakh crore by 2045 when the nation would be on the threshold of being a developed nation. Therefore, on balance there may be merit in pitching for more big banks.
Given the healthy state of the banking system, this is perhaps the right time to debate on the issue of big banks.
Monday, November 17, 2025
Time is ripe for a pollution tax: Financial Express 14th November 2025
With rationalisation of both direct and indirect tax rates this year, the Budget is betting on higher buoyancy in income to ensure the tax revenue increases. It is also seen that growth in nominal GDP can no longer be assumed to be 11-12%. With deflation in several product segments, nominal growth was less than 10%. At the same time, the expenditure commitments on social welfare as well as capex has increased over time, which cannot be lowered. This may be the right time to explore new avenues of revenue. Besides, there cannot be over-reliance on central bank transfers as such funding tends to amount to monetisation.
Here, a cue could be to introduce a comprehensive pollution tax. The concept is not new, as there are vibrant exchanges which trade in carbon credits. However, the idea here is more Pigouvian in nature—any polluting activity needs to be taxed. Arthur Cecil Pigou was an English economist who espoused the imposition of a tax on any negative externality caused by economic activity. Pollution is a clear case where society in general gets affected. Hence, the concept of tax moves away from the commercial variety of “cap and trade”—here, the idea is to directly tax either the producer or consumer of a product or service which causes pollution.
The idea of such a tax is twofold. First, all entities causing pollution must pay for the same, making it democratic. Second, if the entities which pollute the environment (as producers or consumers) choose not to get into such activities, it will mean lower revenue for the government; however, this will ensure better quality of life for society. For instance, if people switch fully to electric vehicles, the revenue will dip for the government but air quality will improve across the country.
There are different ways of imposing such a tax. The first approach is to tax the polluting industry. A very rudimentary criterion would be to look at the ratio of power and fuel to turnover. While this assumes that the only pollutant is power and fuel, it is still easy to implement. Companies’ profit and loss accounts can serve as the basis for levying tax.
It is also possible to complicate the system and move beyond a single expenditure item. There are classifications of industries under the pollution index—red, orange, and green categories, having scores of 60 and above, 41-59, and 21-40 respectively. The white category is virtually non-polluting with a score of 20 and below.
The corporate tax rate could have an additional surcharge of 5%; or the tax rate could be a flat 32% instead of 30% for industries in the red category. For green, it could remain at 30%, and 31% for orange. There is, however, the issue of classifying companies, as they often produce multiple products.Companies producing 51% of any product would get classified under this heading and taxed accordingly. The norm of 51% could also be changed to 33% to cover those involved in two to three main products. If companies produce multiple, “diversified” products, the sales of the top three products can be summed up.
This levy would be a direct tax and only affect profits and shareholders. It is, hence, a fair charge. A legitimate question could be on the possible allowances for companies involved in activities that improve the environment—common under corporate social responsibility spends. However, any allowance should be avoided as it can lead to tax arbitrage. The idea is to tax the polluting activity—any mitigating factors should not be allowed to be used as an umbrella.
The alternative approach can be through an indirect tax, where the levy is at the consumer end. Here, the end user pays tax on products classified under the three categories. Hence if petrol and diesel are taxed at 1/ litre, the cost is borne by the consumer. There will be an incentive to shift to other forms to escape the tax. The government can earn a lot of revenue on just motor fuel. The1 tax can fetch 15,000 crore annually. Intuitively, any increase can lead to proportionately higher revenues for the government. Further, every air ticket can have a pollution tax that is part of the fare—a100 tax on 200 million passengers annually can fetch `2,000 crore. The only consideration for the government, however, would be the inflation impact.
Balancing inflation with revenue will be the main consideration, and it is not possible to cover all products and services at once. It must be done in phases. The suggestion is to impose the tax selectively on the most polluting products—fuel and power, fashion, livestock, transport, data centres, construction, plastics, and chemicals—with the tax being variable.
Another ideological issue is taxing pollution caused by farming and livestock, given that it falls under the unorganised sector. Exemptions will be required, given the sensitive nature of such products. Hence, in the first phase, the pollution tax could be imposed on specific industries and services that are less controversial and easy to administer.
A pollution tax can be a major alternative revenue stream for the government, and it can be harnessed gradually. It will bring in more consciousness within the society and help reduce overall levels of pollution in future.
Monday, November 10, 2025
Sunday, November 9, 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.
Wednesday, November 5, 2025
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
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