Just a little nudge.

"As India prepares for the Union Budget, salaried individuals and middle-class taxpayers are hoping for relief measures to ease financial stress and boost disposable income. With direct and indirect tax collections at robust levels, expectations are high for reforms that balance relief with growth," wrote Homi Mistry. In 2019, corporate tax rate was reduced to an effective rate of 25.17%, inclusive of surcharge and cess. For a new investment, the effective rate was even lower at 17.01%. pib.gov.in. In 2025, the threshold for personal income tax was raised to Rs 1.20 million and to Rs 1.275 million for salaried individuals. Bajaj Finance. If tax collections have been robust, why "India's fiscal deficit for April to November, of the first eight months of this fiscal year, was at Rs 9.76 trillion, equivalent to 62.3% of annual estimates, widening from the previous year's 52.5%?" ET. In 2023-24, 6% of the population filed income tax returns. However, in 2022-23, 63% of filers did not pay any income tax. PRS. We do not know how many people would have dropped out of the tax bracket after the increase in income tax threshold. However, the 2025 Budget estimated income tax revenue to rise 14.4%, from Rs 12.57 trillion in 2024-25 to Rs 14.38 trillion in this financial year. PRS. This acts as a target for income tax (IT) officials who then resort to unjustified demands, known as 'tax terrorism' in India (ET), with the result that around 600,000 disputed tax cases, amounting to a total of over Rs 16 trillion, are pending before courts (BW). To fulfill their targets, "Under its 'nudge' initiative, the tax department sent automated alerts asking taxpayers to re-evaluate their 2024-25 returns and revise them before 31 December 2025. I-T officials have used Artificial Intelligence, Annual Information Statement, Form 16 and foreign reporting mechanisms to issue such alerts." ET. IT officials have corrupted Prof Richard Thaler's Nobel Prize winning 'Nudge Theory' to help people BBC) into a weapon and utilised AI and other tech tools terrorise legitimate taxpayers. "The daily average price of various crude grades (popularly known as Indian basket) dipped to $59.29 a barrel." "A research report by State Bank of India (SBI) said...that crude oil prices would 'soften significantly in 2026' to touch $50 per barrel by 2026." HT. This would be of no benefit to Indian citizens because the government intends to levy taxes on the windfall gains of fuel retailing companies, instead of reducing fuel prices at pumps. HT. Toll collections on national highways are expected to cross Rs 1 trillion in financial year 2026-27, about 25% higher than Rs 750 billion this year. ET. High cost of fuel translates to high transport cost which affects prices of all goods and services, causing inflation. Inflation erodes wealth so that savings of Rs 100 million, which looks luxurious today, will be worth just Rs 15 million in 30 years with an average inflation rate of 6-7%, calculated Chartered Accountant Nitin Kaushik. ET. The Budget is another eyewash. A nudge for us, a cudgel for IT.      

Trying to beat 1991?

"India's foreign exchange reserves witnessed a massive surge of $14.167 billion to reach $701.36 billion in the week ended January 16, the Reserve Bank of India (RBI) data showed." Reserves increased by $392 million the previous week. Zee. "RBI...announced a series of liquidity measures that will inject more than $23 billion (around Rs 2 trillion) into the banking system, following a review of current liquidity and financial conditions." ET. On Friday (23 Jan), "The rupee slipped close to the 92 mark before ending the day at 91.94 against the dollar, down 24 paise." The RBI sold dollars to support the rupee, pulling rupees out of the banking system. "This tightening of liquidity tends to push up short-term interest rates," making borrowing more expensive. So, the RBI conducted a dollar swap to solve the problem. "Under this arrangement, banks sell dollars to the central bank and receive rupees, with an agreement to reverse the transaction after three years." This increases liquidity and reduces yields on bonds, while the RBI sells dollars in the spot market to push the rupee up. TOI. In effect, the RBI is short-selling borrowed dollars. The rupee lost 5% against the US dollar in 2025. This will raise the cost of durable goods like air-conditioners and washing machines etc. where imported components comprise 20-60% of material costs. Hence the core inflation, which ignores volatile food and fuel prices (Investopedia), "has stayed above 4% for 11 consecutive months and hit 4.6% in December." As prices rise, consumers may cut or postpone purchase which may impact earnings and profits of companies, wrote Rumki Majumdar & Swapnil Kothari. "India typically runs a current account deficit (exports minus imports) and a surplus on the capital account (it receives more capital than it sends out)." Mint. Foreign Direct Investment (FDI) and remittances by non-resident Indians (NRI) contribute to the capital account. "The overseas Indian community transferred $135.46 billion to India during the previous fiscal year (2024-25), setting a new record." TOI. Although, inward FDI has held steady, repatriation of FDI by foreign investors has "jumped from around $18 billion pre-pandemic to $44 billion and $51 billion in 2023-24 and 2024-25 respectively." Also, outward FDI by Indians has more than doubled from $13 billion in 2019-20 to $28 billion in 2024-25, most of it going to tax havens like Singapore, Mauritius and the UAE. Rich Indians are protecting their wealth against high taxes and the depreciation of the rupee. To add to the outflow, Indian exports to China increased by a negligible $5.5 billion to $19.75 billion during January-December 2025, while imports from China soared 12.8% to $135.87 billion, so that the trade deficit with China jumped to a record $116.12 billion. TOI. While, fertilizer imports "are expected to surge 76% from a year earlier to a record $18 billion." ET. While dollar inflows fall, outflows and deficits rise, the rupee will continue to fall. The RBI can print the rupee but it cannot create dollars. The Budget could expect a dividend up to, or over, Rs 3 trillion, since the RBI paid Rs 2.56 trillion last year. MC. Will the RBI run out of reserves? And if so, what happens to the rupee? The rupee was devalued by 20% in July 1991. wikipedia. The present government may want to beat that. 30% or 50%?        

Sell anything, except that one, please.

"I have a great respect for your prime minister (Modi). He is a fantastic man and a friend of mine. We are gonna have a good deal," said President Donald Trump. Talks have been going on since March-April 2025, ever since Trump imposed 50% tariffs on India. HT. At the same time, he claimed to have stopped the India-Pakistan conflict, called Operation Sindoor, from 7-10 May (wikipedia). "Trump has made this assertion upwards of 80 times, according to news reports, despite New Delhi maintaining that the two countries had no help from a third country in arriving at the decision to end tensions." The Wire. Perhaps, to freshen memories, "The US Securities and Exchange Commission has asked a US court for help in serving summonses upon Indian billionaire Gautam Adani and group executive Sagar Adani over alleged fraud and a $265 million bribery scheme, filings show." "Serving a summons is often routine, but the SEC said India's law ministry had refused two requests to have its summonses served on the Adanis." Reuters. As a result, Adani Group stocks plunged. "The combined market capitalisation of all 10 listed entities fell Rs 1.40 trillion to Rs 12.20 trillion during the day." msn.com. In February 2025, after Prime Minister Narendra Modi said that MAGA + MIGA = MEGA, Congress MP Jairam Ramesh remarked, "Actually, the only equation that counts is Modi + Adani = Modani." ANI. Did someone whisper it into Trump's shell-like? Meanwhile, 27 January is the expected D-Day for the signing of the Broad-based Trade and Investment Agreement (BTIA) between India and the EU. "This will be the mother of all deals," said Commerce and Industry Minister Piyush Goyal. ET. "The real impact of the India-EU FTA will be shaped by how effectively it is implemented, how ambitiously industry engages with it and how decisively both governments support collaboration beyond tariff restrictions and legal frameworks." HT. As an encouragement, "India's exports to the European Union is facing higher tariffs from January 1, 2026 after the EU suspended Generalised Scheme of Preferences (GSP) benefits for 87% of Indian goods," which "means that a large share of Indian exports will now be charged full Most Favored Nation (MFN) tariffs, ending years of preferential access under EU's unilateral trade arrangement for developing countries." TOI. The suspension applies to, "minerals, chemicals, plastics and rubber, textiles and garments, stone and ceramics, precious metals, iron and steel, base metals, machinery, electrical goods and transport equipment." At the same time, EU's Carbon Border Adjustment Mechanism (CBAM) will add costs to Indian steel and aluminium exports. TOI. So tight is the squeeze that the "government has asked Indian embassies and commercial missions to step up outreach across all markets, big or small, with a clear message from the PMO (Prime Minister's Office). The message is simple, almost an ad theme like: 'Har ek country zaroori hota hai'." ET. No harm in our ambassadors hawking pakodas (The Hindu). Just stay off cough medicines (BBC) please. Not good ad.  

Growth, not in the middle.

"Even with external uncertainties lingering, the Indian economy is expected to record a healthy growth of 7% in the upcoming financial year 2026-27." According to CareEdge Ratings, "The growth momentum has been supported by income tax cuts, GST rate rationalisation, continued momentum in services exports, easing inflationary pressures and RBI rate cuts." ET. All this is maybe true, "Yet beneath the headline numbers sits a quieter, more uncomfortable reality: urban India, especially its middle class, is still holding back." "Rural demand has led the recovery," but "Urban consumers drive discretionary spending, from cars and appliances to housing upgrades and lifestyle services. When they delay purchases, entire value chains slow." ET. Rural demand partly depends on the National Rural Employment Guarantee Scheme (NREGS) which entitles "every rural household to demand up to 100 days paid manual work each year at a statutory minimum wage." The central government paid 90% of the cost. Now the scheme has been replaced by a scheme called G RAM G which will force states to pay over 40%, wrote Soutik Biswas. Already, "A surge in borrowing by Indian states is complicating the central bank's efforts to lower interest rates as officials worry the increased supply of bonds could affect the yield curve." "State governments are issuing debt at a pace that increasingly rivals sovereign borrowing, significantly boosting bond supply for a shared pool of investors." Reuters. The central government may be slyly trying to shift its expenditure on the states but increased cost of borrowing will nullify some of the gain. As a result, "The delay in including Indian bonds in a key global index has raised the chances of the central bank extending its record government debt buying, seeking to cushion the market from weaker foreign inflows and rising yields." Reuters. This is also known as monetizing government debt by creating new money and is considered to be inflationary  (wikipedia), but the RBI may think it can get away with it because the Consumer Price Index (CPI) inflation came in at a low 1.3% in December (HT), while the Wholesale Price Inflation was even lower at 0.83%.  Such low inflation rates is because food prices fell by 0.43% in December after falling 4.16% in November, with vegetable prices falling 3.50% in December after falling by an enormous 2023% in November. TOI. Vegetables are perishable so the crash in prices will hurt farm income and may adversely affect rural spending. "With just 17 net hires in the first nine months of the 2025-26 financial year, India's top five IT companies eased off the hiring throttle and moved firmly into caution mode." TOI. Bad news for first-time job seekers. According to the State of Working India 2023 report by Amit Basole and his team at Azim Premji University, "Although upward mobility at the lower end of the hierarchy has improved somewhat in recent years, it's still severely restricted." "Folks at the top of the ladder don't see the teeming masses as a meaningful market," while "those at the bottom of the pyramid lack the education and skills to manufacture things for the wealthy at home and overseas." ET. Gig work will not raise them to the middle class. "An unambitious elite spoiled by finance - plus a working class held back by inadequate education and inequities of caste and gender - are stymying the emergence of a global middle class in India." No middle class, lower tax collections. Will the RBI keep printing money to support the government? The world watches.              

Unilateral national interest.

"As New Delhi prepares to host the European Union's top leadership for India's 77th Republic Day celebrations and the 16th India-EU Summit on January 27," "the long-pending India-EU Free Trade Agreement (FTA), formally the Broad-based Trade and Investment Agreement (BTIA), would mark a strategic, economic and geopolitical turning point." "The EU is pressing India to sharply reduce export duties on cars, which can exceed 100%." ET. But what happens if Ford, a US company, claims the same tax reductions on its exports from its manufacturing plants in Europe (wikipedia)? Will our tax officials suddenly present it with a huge tax demand for using the EU to avoid taxes on its sales in India, even as President Donald Trump imposed 50% tariffs on Indian goods in August 2025 (BBC). Recently, the tax authorities in India demanded a capital gains tax of Rs 145 billion (over $1.7 billion) on Tiger Global (TG) Mauritius over the sale of Flipkart Singapore shares to Walmart. Flipkart Singapore owns Flipkart India so TG is accused of using the FTA with Mauritius to avoid tax on an Indian company. ET. The Supreme Court upheld the tax demand saying that "Treaties should be driven by national interest, not pressure from foreign governments and corporations." PTI. Indeed. But that surely must be during negotiations and not as an afterthought, to increase revenue. "Indian government data shows that in the 23 years to 2023, foreign investment inflows from Mauritius were the largest at $171 billion - a quarter of all investment inflows in that period." "An updated India-Mauritius treaty in 2017 ended the tax-free system but said all pre-2017 investments would continue to enjoy the previous benefits under a so-called grandfathering clause." Reuters. In the case of Nestle, a Swiss company, in 2024, the Supreme Court ruled that a tax benefit offered to one nation could not be extended to another even though both have Double Tax Avoidance Agreement (DTAA) with India. dpncindia.com. Switzerland promptly revoked India's Most Favored Nation (MFN) status under the DTAA and imposed 10% duties on Indian imports. NDTV. "India has issued a final warning to Apple that it will proceed in an antitrust case against the US tech giant as the company has delayed responses to officials," as "Apple has said it fears it could be fined up to $38 billion if India's competition watchdog uses its global turnover calculation for penalties, after an investigation found it had abused its position on its app store." ET. "Apple Inc's manufacturing push in India has resulted in a dramatic surge in iPhone exports, with shipments crossing the $50 billion mark under the production-linked incentive scheme period." TOI. The manufacturing sector in India comprises just 17% of GDP and the Confederation of Indian Industry (CII) would try to increase this to 25% of GDP. pib.gov.in. Apple is already manufacturing and exporting. Also, both Apple and Tiger Global are US companies and Trump is in the White House. In 2025, India removed a 6% tax on digital advertising, known as Google tax, which would have affected Google, Meta and Amazon. TOI. The Supreme Court ruled in national interest. Is our national interest served by driving away foreign investment even as we continuously run huge trade deficits (TOI)? "National interest" has already bowed to "pressure from a foreign government". Read all the fine print while signing FTAs. Selective change later will invite retaliation and a bad reputation. After all, every country has its own "national interest".    

It's not the foreign media

"In the past, as the adage had it, a story from the subcontinent wasn't newsworthy unless it involved the death of one American, or ten Englishmen, or a thousand Indians." But now that India's economy has improved, the "media elites in places such as New York, London and Doha" are presenting a distorted picture of India, which is spread globally by social media, and harms our democracy and diplomacy. India should pass a law seeking the "right to reply" as in Singapore, wrote Prof Rahul Sagar. The problem with replying is that people are reminded of the original criticism, or are informed of it, if they had missed it in the first place. So, India applies the guillotine. "In 2024, governments across the world imposed a staggering 296 internet shutdowns in 54 countries," of which, "India, which has topped the global list for six consecutive years, recorded 84 internet shutdowns in 2024," second only to military junta of Myanmar. India Today. The government regularly orders social media companies to delete posts it does not like. Meta received thousands of removal orders in 2022, while X received 53,000 orders in 2022. In total, "By 2024, the number grew to 100,000 requests every six months," and "This means every 3 out of 10 posts by India were dropped, surpassing other democracies." Bhaskar English. A foreign organisation, Freedom House rated India as partly free in Internet freedom with 50 out of 100. In August 2025, "In response to a parliament question about the decline in India's press freedom rankings and cases of violence and intimidation of journalists, the Union government has stated that "India has a vibrant press and media ecosystem, which does not need validation from foreign organisations." The Wire. Not foreign, we Indians know that the entire media has been reduced to "Godi Media", meaning 'lapdog media'. wikipedia. Cinema is not exempt. "Indian cinema has seen two major changes post 2014 - a rise in propaganda film supporting the ruling BJP's ideology, and severe censorship or banning of movies that are critical of the BJP-led government and groups like the RSS, or for 'hurting Hindu religious sentiments'." DH. In 2023, Supreme Court Justice KM Joseph opined, "Hinduism is not a religion but a way of life...Hinduism is a way of life and there is no bigotry in Hinduism." TBS. If Hinduism is not a religion, how is it possible to hurt "Hindu religious sentiment"?  "A 24-year-old MBA student from Tripura died after being stabbed during a racist attack in Dehradun." Anjel Chakma was accused of being Chinese by a hate mob even though he told them he is Indian. News18. Four days ago, 33-year old Sheikh Makarand Muhammad was lynched by cow vigilantes in Odisha after being forced to chant a religious slogan. TOI. In December 2025, "Days after multiple incidents of violence across the nation during Christmas, the influential Catholic Church in Kerala ...published a sharp critique of the BJP government at the center and Prime Minister Narendra Modi." The Print. A few days ago, US President Donald Trump launched air strikes against Islamic militants in Nigeria for killing Christians, and warned of more to come. BBC. Prof Sagar may have got it the other way round. It may not be the foreign media which is influencing anti-Indian sentiment, but foreign governments which are communicating their opinions to the media. There are 159 embassies/ high commissions in Delhi (wikipedia) which regularly send classified reports to their parent governments. What is very problematic is that we don't know what they are writing. It certainly will not be validation. Beware.  

The Greenland diversion.

"The United States could have to pay as much as $700 billion if it were to achieve President Donald Trump's goal of buying Greenland." "Officials from Denmark and Greenland have rejected Trump's claims that the US will acquire Greenland 'one way or the other'." NBC. Although only 20% of Greenland is free of ice, it has "critical minerals, from traditional commodities such as copper, lead and zinc that have been mined on a small scale in ice-free coastal areas since 1780," to an estimated "36 million tonnes of rare earths, though only 1.5 million tons are currently considered proven," and "one of the largest deposits of uranium in the world." Atlantic Council. In December, "Copper has sprinted to fresh all-time highs in late 2025, with LME three-month prices repeatedly testing the psychologically important $12,000/tonne mark, while Indian futures have surged above Rs 1,240/kg." ET. "The White House said... that President Trump is discussing options for acquiring Greenland, including potential use of the US military." Reuters. Denmark colonized Greenland in the 20th century and "The Greenland National Council consented to the decision, but they were given little time to decide and there was never a referendum on the matter in Greenland." DIIS. It seems that Greenland residents were presented with a fait accompli and decided to surrender. If Denmark colonised Greenland by force, the US can surely do the same. European nations, which have a bloody history as colonial ravagers, have decided on armed response. "A small French military contingent has arrived in Greenland's capital Nuuk," and "The limited deployment, which also involves Germany, Sweden, Norway, Finland, the Netherlands and the UK," (BBC) is meant to stop the US. So how many brigades or platoons will take on the US? "The UK is sending one military officer, the Netherlands is matching that number, and Finland and Sweden are sending two each." France may have sent a dozen. "The number of troops being committed to Greenland defence reveals Europe's military seriousness." India Today. This is hilarious. Duplicitous European states have repeatedly destroyed US attempts at peace in Ukraine. "The original 28-point plan from the administration proposed recognizing Russia's battlefield advantages. It was an ugly plan ...but it was realistic - a serious effort to end the conflict." "However, the reaction of official Europe was predictable: hysterical opposition." Cato Institute. With Europe occupied with armed defense of Greenland, Trump can move ahead with peace in Ukraine. As an antidote to Trump, UK Prime Minister Keir Starmer is attempting to partially reverse Brexit (Britannica) by forging "a 'closer relationship' with the single market, which would not mean ripping up those new trade deals elsewhere." BBC. Ironically, the European Union was born in 1957 as the European Economic Community, also called the European Common Market. wikipedia. India has already signed a Comprehensive Economic and Trade Agreement (CETA) with the UK (pib.gov.in) and is set to sign a Broad-based Trade and Investment Agreement (BTIA) with the EU (ET). A few days ago, "Venezuelan opposition leader Maria Coria Machado has given her Nobel Peace Prize medal to President Donald Trump during a meeting at the White House (BBC)," but "the Nobel  foundation has issued a statement clarifying that prizes cannot be 'symbolically' given to others (HT)." The Peace Prize is a political symbol anyway, and so may be used politically by its owner. Trump should keep the duplicitous Europeans busy counting soldiers in Greenland while he sorts out Venezuela, Ukraine and Iran and, as an aside, help India with trade agreements. Brilliant. Bharat Ratna?