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Business Standard
an hour ago
- Business
- Business Standard
Finance Commission must focus on strengthening local bodies: Raghuram Rajan
Former Reserve Bank of India Governor Raghuram Rajan on Wednesday said the 16th Finance Commission should focus on handing over more funds to local bodies, including municipalities and panchayats, to empower them to address issues affecting the people more effectively. Speaking to news agency PTI, Rajan noted that the previous finance commissions devolved more funds to the local bodies. He said, 'Now we need to focus also on devolving funds from states to municipalities to panchayats, etc. That third level of devolution is what we need far more of.' The Finance Commission, established under the Indian Constitution, plays an important role in improving the financial health of municipalities. The commission evaluates the fiscal condition of municipalities and advises state governments on various aspects of fiscal decentralisation. Highlighting the contrast with other major economies, Rajan noted that local government employees in India are significantly lower than in countries like China and the United States. Rajan also called for the need to decentralise in a large country like India, noting that the country is overly governed from the Centre and state capitals. He added, 'I think the 16th Finance Commission should focus on making that happen through carrots and potentially sticks.' Panagariya urges local resource boost It's noteworthy that in November last year, 16th Finance Commission Chairman Arvind Panagariya asked the local rural and urban bodies to focus on raising their resources, stating that such a move will mobilise the citizens in terms of their expectations and demands from the local bodies. Recently, Panagariya also pointed out that most states have urged the Union government to raise their share of the tax pool to 50 per cent. According to a PTI report, states currently receive 41 per cent of the divisible tax revenue, while the Centre retains the remaining 59 per cent. Rajan's views on PLI scheme While speaking to PTI, the former governor also shared his assessment of the government's Production Linked Incentive scheme and added, 'I do not think we have any strong public data to evaluate the PLI scheme.' With all government programmes, he said, there has been some success as the country is now exporting more cell phones. However, he questioned, 'But has it (PLI scheme) done enough to move the needle on jobs in a big way? I think at job numbers you see in the periodic labour force surveys (PLFS) suggest not yet.' In 2021, the Central government introduced PLI schemes for 14 crucial sectors, including telecom, electronics, pharma, textiles, and auto. The scheme, launched with a total allocation of ₹1.97 trillion, aims to boost domestic manufacturing and enhance export competitiveness. Rare earth curbs Commenting on the rare earth export curbs from China to India and other countries, Rajan stated, 'We need a strategic view of different industries and ask where we can be held up by bottlenecks, and where it is relatively easy for us to undertake production to elevate those bottlenecks.' Commenting on the semiconductor sector, Rajan said that while some sort of 'antagonistic' power could restrict India's chip access, building a complete chip-making ecosystem domestically would be prohibitively expensive.
Reuters
an hour ago
- Business
- Reuters
Rise in overnight swap rate, lower US bond yields boost forward premiums
MUMBAI, July 23 (Reuters) - India's dollar-rupee forward premiums rose across tenors, due to the combined impact of a rise in the cost of borrowing the rupee overnight and a dip in near-term U.S. Treasury yields, while the local currency was flat in the spot market. The dollar-rupee overnight swap rate rose to 0.38 paisa on Wednesday, lifting near-tenor forward premiums to a one-month high and supporting long-term tenors as well, aided by a dip in the one-year U.S. Treasury yield. The one-month forward premium advanced to 12.50 paisa, while the 1-year implied yield rose by 2 basis points to a three-week high of 2.05%. The 1-year U.S. Treasury yield was last at 4.08% after hitting a two-week low overnight. Tighter rupee liquidity in the banking system pushed up the overnight swap rate, according to traders. India's banking system liquidity is currently hovering near a seven-week low but it is expected to improve in next few days, which may help cool off near-tenor forward premiums. On the far end, "there is limited appetite to run a paid position," a trader at a large private bank said, citing rising chances of the Federal Reserve holding interest rates steady for longer and growing expectations of a rate cut by the Reserve Bank of India in its August policy meeting. Meanwhile, in the spot market, the rupee was nearly flat at 86.37 per U.S. dollar as of 12:15 p.m., wedged between positive cues from gains in most regional peers and routine dollar demand from local importers. The dollar index was steady at 97.5, while the Chinese yuan strengthened to a three-week high, buoyed by fresh signs of easing trade tensions and a persistently stronger-than-expected guidance fix by the country's central bank. U.S. and Chinese officials are slated to discuss an extension to the tariff deadline of August 1 for negotiating a trade deal.
Bloomberg
an hour ago
- Business
- Bloomberg
India Overnight Borrowing Cost Tops Key Rate as Liquidity Thins
India's overnight rates have risen above the central bank's key policy rate, driven by monthly tax outflows, which could result in weakened participation at the central bank's next liquidity absorption auction. The weighted average call rate — a key gauge the Reserve Bank of India uses to guide monetary policy — climbed to 5.81% on Wednesday, surging above the policy rate of 5.5%. Rates in the secured lending market also jumped, with the tri-party repo — a common funding instrument — trading at 5.73% on Wednesday. That extends a sharp rise on Tuesday, when the call rate settled above the key rate for the first time since March.
Hans India
2 hours ago
- Business
- Hans India
India's GDP to grow at 6.5 pc in 2025, robust 6.7 pc in 2026: ADB
The Asian Development Bank (ADB) on Wednesday said that India's GDP growth is projected to grow at 6.5 per cent in 2025, and a robust 6.7 per cent in 2026, amid strong domestic demand, a normal monsoon and monetary easing in the country. When it comes to inflation, the country is likely to clock 3.8 per cent inflation this year, followed by 4.0 per cent in 2026 -- well within the reach of the Reserve Bank of India (RBI) projections, ADB said in a statement. In India, falling food inflation also helps contain headline inflation. Consumer Price Index (CPI) inflation slid to 2.1 per cent in June, the lowest in 77 months, as food inflation turned negative. India's real GDP growth is projected to grow in a range of 6.4-6.7 per cent this fiscal, reinforcing the country's position as the fastest-growing major economy in the world, the Confederation of Indian Industry (CII) said earlier this month. Meanwhile, the Asian Development Bank lowered its growth forecasts for economies in developing Asia and the Pacific this year and next year. The downgrades are driven by expectations of reduced exports amid higher US tariffs and global trade uncertainty, as well as weaker domestic demand. ADB forecasts the region's economies will grow by 4.7 per cent this year, a 0.2 percentage point decline from the projection issued in April. The forecast for next year has been lowered to 4.6 per cent from 4.7 per cent, according to Asian Development Outlook (ADO) July 2025. Prospects for developing Asia and the Pacific could be dented further by an escalation of US tariffs and trade tensions. Other risks include conflicts and geopolitical tensions that could disrupt global supply chains and raise energy prices, and a worse-than-expected deterioration in the property market of the People's Republic of China (PRC). 'Asia and the Pacific have weathered an increasingly challenging external environment this year. But the economic outlook has weakened amid intensifying risks and global uncertainty,' said ADB Chief Economist Albert Park. 'Economies in the region should continue strengthening their fundamentals and promoting open trade and regional integration to support investment, employment, and growth,' Part mentioned. Growth projections for the PRC, the region's largest economy, are maintained at 4.7 per cent this year and 4.3 per cent next year. Economies in Southeast Asia will likely be hardest hit by worsened trade conditions and uncertainty. ADB now predicts the subregion's economies will grow 4.2 per cent this year and 4.3 per cent next year, down roughly half a percentage point from April forecasts for each year.
India.com
2 hours ago
- Business
- India.com
India's GDP To Grow At 6.5% In 2025, Robust 6.7% In 2026: ADB
New Delhi: The Asian Development Bank (ADB) on Wednesday said that India's GDP growth is projected to grow at 6.5 per cent in 2025, and a robust 6.7 per cent in 2026, amid strong domestic demand, a normal monsoon and monetary easing in the country. When it comes to inflation, the country is likely to clock 3.8 per cent inflation this year, followed by 4.0 per cent in 2026 -- well within the reach of the Reserve Bank of India (RBI) projections, ADB said in a statement. In India, falling food inflation also helps contain headline inflation. Consumer Price Index (CPI) inflation slid to 2.1 per cent in June, the lowest in 77 months, as food inflation turned negative. India's real GDP growth is projected to grow in a range of 6.4-6.7 per cent this fiscal, reinforcing the country's position as the fastest-growing major economy in the world, the Confederation of Indian Industry (CII) said earlier this month. Meanwhile, the Asian Development Bank lowered its growth forecasts for economies in developing Asia and the Pacific this year and next year. The downgrades are driven by expectations of reduced exports amid higher US tariffs and global trade uncertainty, as well as weaker domestic demand. ADB forecasts the region's economies will grow by 4.7 per cent this year, a 0.2 percentage point decline from the projection issued in April. The forecast for next year has been lowered to 4.6 per cent from 4.7 per cent, according to Asian Development Outlook (ADO) July 2025. Prospects for developing Asia and the Pacific could be dented further by an escalation of US tariffs and trade tensions. Other risks include conflicts and geopolitical tensions that could disrupt global supply chains and raise energy prices, and a worse-than-expected deterioration in the property market of the People's Republic of China (PRC). 'Asia and the Pacific have weathered an increasingly challenging external environment this year. But the economic outlook has weakened amid intensifying risks and global uncertainty,' said ADB Chief Economist Albert Park. 'Economies in the region should continue strengthening their fundamentals and promoting open trade and regional integration to support investment, employment, and growth,' Part mentioned. Growth projections for the PRC, the region's largest economy, are maintained at 4.7 per cent this year and 4.3 per cent next year. Economies in Southeast Asia will likely be hardest hit by worsened trade conditions and uncertainty. ADB now predicts the subregion's economies will grow 4.2 per cent this year and 4.3 per cent next year, down roughly half a percentage point from April forecasts for each year.
