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India Insider: Weakening the MNREGA Employment Guarantees

by with No Comment Featured HighlightsFinancial InstitutionsIndia

India Insider: Weakening the MNREGA Employment Guarantees

When the Mahatma Gandhi National Rural Employment Guarantee Act was enacted in 2005, it was conceived as more than a poverty-alleviation program. It was a direct intervention in India’s rural labor market. By guaranteeing employment on demand at a statutory wage, MNREGA established what the agrarian economy had long lacked – a credible wage floor.

For India, where nearly half the workforce remains trapped in agriculture and align activities often involuntarily, this mattered enormously. Rural labor markets are structurally weak in India. They are seasonal, informal, and dominated by excess labor. In such conditions, wages do not rise organically. MNREGA altered that balance by providing an outside option. A worker who could demand public employment could also refuse exploitative private wages. That is why rural real wages rose meaningfully during the first decade of MNREGA’s implementation.

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MNREGA Rural Poverty Data from 2005 to 2018

The figure above illustrates the broader context in which MNREGA operated. Rural poverty declined sharply after 2005, falling from over 40 per cent in the mid 2000s to below 20 per cent by the late 2010s. While this decline reflects multiple forces like overall growth, structural change, and social programs, micro-level studies consistently find that districts and households with higher exposure to MNREGA experienced significantly larger gains in consumption and poverty reduction compared to areas where the program was weakly implemented.

The scheme also acted as a counter cyclical stabilizer. During droughts, agrarian distress, or macro slowdowns, MNREGA expanded automatically, injecting purchasing power into rural areas. This supported consumption, reduced distress migration, and softened downturns. In macroeconomic terms, MNREGA transferred income to households with the highest marginal propensity to consume, precisely where fiscal multipliers are strongest.

Despite its strong design, MNREGA has long suffered from implementation weaknesses. Chronic delays in wage payments undermined its credibility as a reliable source of income. Corruption has generated fake muster rolls, ghost workers, inflated material bills, and substandard asset creation. Social audits which meant to be the backbone of accountability were uneven across states while effective in some.

Technological reforms such as Aadhaar linked payments, and digital attendance reduced certain leakages but introduced new problems, including worker exclusion, authentication failures, and further payment delays. The result was not only fiscal leakage, but a weakening of MNREGA’s core economic function which had promised a dependable wage floor.

Yet instead of fixing these implementation failures, a new policy chose to change the promise itself. In December 2025, this shift became explicit with the passage of the VB-G RAM G Act, 2025 in Parliament, replacing the Mahatma Gandhi National Rural Employment Guarantee Act with a redesigned rural jobs framework.

Under MNREGA, employment was a legal right, if work was demanded, it had to be provided. The new framework reverses this logic altogether. Employment now depends on budget limits, administrative approvals, and notifications from the center, not on demand. What was once automatic is now conditional.

This change also quietly shifts risk onto States. With limited revenue powers and tight borrowing limits, States responded by rationing work and delaying payments. As a result, the employment guarantee weakens, rural workers lose bargaining power, and wages come under pressure. What appears as fiscal control for the central government to rein on capital expenditures on paper thus becomes wage suppression in practice for rural workers.

Almost half of India’s workforce, around 46 per cent, still depends on agriculture and allied rural activities for employment, even though agriculture produces a much smaller share of the country’s total output. This gap between employment and output signals very low productivity in rural work and a large pool of surplus labor. For most of these workers, moving out of agriculture is difficult. They face barriers because of a lack of skills, weak urban job absorption, high migration costs, and social constraints. As a result, the ability to bargain for higher wages is structurally limited.

In such an economy, rural labor markets tend not to be competitive. Employers often face many workers competing for few jobs, while workers have few alternative sources of income. This creates conditions close to monopsony, where employers have disproportionate power in setting wages. In the absence of an institutional counterweight, wages tend to settle near subsistence levels rather than reflecting productivity or broader economic growth.

The consequences are visible in wage outcomes. Daily wages in rural areas stagnate or decline in real terms, failing to keep pace with inflation. Over time, this suppresses labor incomes relative to profits and rents, leading to a further decline in labor’s share of national income. In effect, weakening the employment guarantee shifts income distribution away from workers and back toward employers, reinforcing existing structural inequalities in the economy.

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U.S National Security, Part 2: Regional Alliances – Europe

by with No Comment Behavioral SentimentFeatured HighlightsIndia

U.S National Security, Part 2: Regional Alliances - Europe

Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 25th of December via The Angry Demagogue.

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As we continue our tour of the administration’s National Security Strategy we will stay with “part III: What Are America’s Available Means to Get What We Want?” and move to the sixth bullet point: “A broad network of alliances, with treaty allies and partners in the world’s most strategically important regions” and work through the important regions that the strategy documents – Asia, Europe, the Mideast and Africa. For good or for bad we will need to split these regions up since the key point is forming coalitions that can handle their actual region. Sweden can’t be part of a coalition to protect Italy’s interests in the Mediterranean and Japan won’t be protecting Singapore.

Some U.S allied countries, like Australia, Israel and India will be involved in multiple regions helping lead alliances in all areas important to them. With that in mind we will point out the first mistake of the discussion on regions and that is Europe. We will suggest something here that would not usually come from the mouth of a hawk and pessimist and that is that NATO has no real mission and needs to be replaced by a series of alliances that make more sense. While the fear during the Cold War was a Warsaw Pact ground invasion into Germany and beyond which would have required the totality of American and European forces, Europe now is facing a Russia that could not conquer Ukraine in nearly four years of war. That is not to say that Russia is not to be feared only that each part of Europe needs to ally to face a Russian onslaught in its own theatre.

Italy is not going to send troops to Sweden to prevent an attack and Norway won’t be helping Greece in any fight. Turkey is a country that other NATO countries fear more than trust, especially regarding Russia.

In short, NATO needs to be broken up into different alliances where each country will be allied with countries whose fall would affect its national security. The United States can either be a signatory to these alliances or it can decide how involved it wants to get in any conflagration depending on its own interests at that time. It can decide to position ground troops in the countries, supply air cover or, as in the 12-day war between Israel and Iran, help with missile defense and in providing the final blow with weapons only America has. Or – it can decide that it will never participate. One hopes that that won’t happen, but each alliance will need to be ready to fight on its own.

We can include France and the U.K as large countries with advanced armed forces as allies to all of these alliances. France certainly can contribute air power to each of the alliances that are faced against Russia. As for the U.K, it is difficult to know where that country is going but its navy and air force are still powerful.

Today we will deal with north, central and western Europe.

The Baltic Alliance

This would be an alliance that includes Poland, Germany, Sweden, Finland, Norway, Denmark, Latvia, Lithuania and Estonia and would provide cover for land, air and naval battles. Each of these countries, with the exception of Germany, has a border with Russia and all are on the Baltic Sea – a key waterway for them and for Russia.

An alliance of these countries would force them to concentrate on those areas necessary for their defense. An incursion, for example into Finland would force Poland to mass forces on its border with Russia and Belarus (Poland borders Russia in Kaliningrad which is separated from Russia proper by Lithuania) and Germany to move forces to Poland. All countries could also contribute ground forces to Finland as well as naval and air power.

The only thing missing is the lack of a nuclear umbrella. That is no small issue but can be dealt with by support or threats from France or the U.K.

The Atlantic Alliance

Aside from helping the Baltic Alliance, France and the U.K will have major responsibility along with the Netherlands for patrolling the North Atlantic and, with help from Portugal, and Spain the South Atlantic. As the Atlantic Ocean can be considered one of America’s seas, this alliance will need to have the close cooperation if not outright membership of the United States. Canada too, will need to be part of this alliance. We can include the increasingly important Arctic Ocean into this alliance’s responsibilities.

As we move towards the south Atlantic countries such as Morocco, can be included as well as other western African allies of the west. An alliance like that could encourage western African countries to abandon close security and economic ties with China and Russia. The “border” of this alliance would be that squiggly line in the middle of the Atlantic that separates the Eastern and Western hemispheres.

The Central European Alliance

We can look at the smaller central European countries that formed the heart of what was the Hapsburg Empire but are not front line countries bordering Russia – Romania, Hungary, Slovakia, Czech Republic, Austria, Serbia and Bulgaria – and we have an alliance that, backed by Germany, Poland and the United States, would create a further deterrence to Russian encroachment into Europe proper.

Where, do you ask does Ukraine fall in this European alliance structure? That answer will have to come from the major European powers in concert with the United States. Adding Ukraine to the Baltic alliance might be viewed as another attempt to NATO-ize them by the Russians. However, attaching them to the less threatening Central European Alliance of smaller countries might be the excuse and “victory” that Putin would need to end the war. But we are getting ahead of ourselves here. Ukraine is a problem that can only be solved if the West decides to actively join the fight against Russia (unlikely) or when Putin and Russia get tired of the fight and look for a way out that could allow them to claim victory (more likely than the former, but sadly, a long way off).

The Administration’s concentration on regions and how certain countries can become leaders in support of western and American interests is correct – but the breakdown of the regions has to go beyond the post WWII world. The place of America in the post-cold war world, with a China that wants to challenge America’s economic and military interests and leadership needs to break down old alliances into more manageable and logical pieces.

The wild card in all of this is, of course, the will of the European powers to take their own defense seriously. The Baltic Alliance we spoke about seems to be filled with countries that understand the threat from Russia, but do they recognize the threat to them from the alignment, the Axis if you will, of Russia, Iran, North Korea and China? And of more importance have they yet come to understand the threat to their countries, as they know them, from open immigration and from their own abhorrence of families? The former is something only the governments can handle, the latter though, must come from the people themselves.

A whole generation (or two in many instances) of Europeans have grown up not only as “only children” but in families that have no aunts and no uncles, no cousins and only very elderly grandparents, if that. They have grown up in other words without families. Will the young generation see the importance of families to themselves and their countries or will they continue the nihilistic lives that they parents have “sanctified”? Religious institutions, too will have a major role in this challenge. No amount of “parental leave” and childcare subsidies will convince the young to marry and have children – will only come from a change in the culture. Is Europe up to it?

Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.

You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/ 

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India Insider: U.S Credit Crunch vs. Indian Banking Paralysis

by with No Comment Featured HighlightsFinancial InstitutionsIndia

India Insider: U.S Credit Crunch vs. Indian Banking Paralysis

When the U.S suffered a severe credit crunch in the early 1990s, the triggers were clear: the collapse of the leveraged buyout (LBO) boom, commercial real estate price corrections, and the failure of Savings and Loans (S&L) Associations, created the need for a $160 billion taxpayer bailout. Regulators, determined to act tough, declared many banks undercapitalized. The result was a nationwide squeeze from 1991 to 1993, where capital shortages – not liquidity, froze credit markets.

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Reserve Bank of India Borrowing Rates 1935 to 2025

Fed Chairman Alan Greenspan slashed the Federal Funds rate to 3%, but banks couldn’t lend without capital. The unique twist was that, even as lending slowed, competition among borrowers pushed prime lending rates to 6%. This gave banks a fat 3–4% spread. Greenspan let this persist for nearly three years, enabling banks to earn profits equal to more than 10% of assets. With capital requirements at 8%, the windfall repaired balance sheets. By 1994, the U.S had exited the crisis and returned to strong growth.

India’s trajectory was very different. For decades, the country ran structurally high interest rates, which in theory should have allowed banks to recapitalize through spreads, just like the U.S. However, the reality was distorted by governance failures. Public sector banks (PSBs) , which dominate the system did not use their spreads to strengthen capital. Instead, politically connected lending to oligarchs and large industrial houses left the banks saddled with non-performing assets (NPAs).

I witnessed the aftermath up close in 2019 while working at Edelweiss Brokerage. Shadow banks were stressed, some private banks were crumbling, and PSBs were finally forced to acknowledge their bad loans. The selloff in the banking stocks were brutal that year, Catholic Syrian Bank’s IPO, one of the prominent South Indian banks went undersubscribed. To counter the slowdown, the government slashed corporate taxes from 30% to 22% to stimulate capital expenditure.

Unlike the U.S, India’s stress was on the asset side. Corporates were dragged into Insolvency and Bankruptcy Code (IBC) proceedings, where assets were monetized through painful restructurings. Piramal Finance bought DHFL at 30 cents on the dollar, and ArcelorMittal acquired Essar Steel at 90 cents. This was the hard clean up the system had avoided for years.

The NDA (National Democratic Alliance) government made the right call in restructuring the banking sector. Weak public sector banks were merged with stronger ones. Yes, it was costly. Households bore the burden via higher taxes, hidden charges, and high borrowing rates. But at least the problem was confronted.

The contrast is striking. The U.S endured a sharp three-year crunch, recapitalized its banks through spreads and market discipline, and bounced back quickly. India endured nearly a decade of paralysis, requiring taxpayer recapitalizations, corporate asset fire-sales, and systemic restructuring. The eventual stability allowed private sector banks to quietly capture market share from their weaker state-owned peers.

The lesson is simple: interest rate spreads can heal banks only if governance is strong. Without accountability, as India’s PSB saga shows, high rates merely tax households and businesses without fixing the system.

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India Insider: Speculation, IPO Mania, and Capital Erosion

by with No Comment AMT MarketsFeatured HighlightsIndia

India Insider: Speculation, IPO Mania, and Capital Erosion

A speculative frenzy is reflected nowadays via India social media around quarterly results and IPOs. Animated talk about investment potential in India can be compared in some respects to the Dot-com bubble in the U.S which grew in stature into the late 1990’s and peaked in March of 2020 before imploding. Retail speculators in India rush into untested technology stocks hoping for quick profits, often without understanding the businesses. Avoiding a Dot-com like crash is important.

Hedge funds and institutions with their superior supply of capital often speculate across stocks, bonds, Forex and commodities as part of their strategies. However, retail investors should only purchase individual corporate stocks like pieces of businesses which they want to own when they have the ability. Market fluctuations lower can be used to buy quality companies when intrinsic value has been discounted allowing investors with limited funds to take advantage of stock volatility.

Charlie Munger, the right hand man of Warren Buffett, when asked what the secret of running Berkshire Hathaway Inc. was replied, “Warren likes to say, just tell us the bad news, the good news can wait. So people trust us in that (decision making process), and that helps prevent mistakes from escalating into disasters. When you’re not managing for quarterly earnings and you’re managing only for the long pull, you don’t give a damn what the next quarter’s earnings look like.” And this has proven to be advice that all investors can learn from.

Lessons from Yes Bank and Ola Electric:

Many speculative investors rely on technical charts using support and resistance patterns for trading decisions. This frequent buying and selling enriches brokers but rarely investors. Technical trading entices because it often is easier to look at a chart and feel that by glancing at past results you are able to predict the future, but this frequently proves to be incorrect. Fundamentals should always be a large part of investment decisions.

Yes Bank is a classic example. Investors assumed strong fundamentals in 2018, but allegations against founder Rana Kapoor revealed critical issues which proved to be damaging. The Reserve Bank of India stepped into the mess, forcing a consortium of banks to inject equity. Small investors who bought the dips blindly learned the cost of ignoring fundamentals and were hurt financially.
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Yes Bank Share Value from 9th of August 2018 to 9th of August 2019 in India Rupees

Another example unfortunately is Ola Electric Mobility Ltd which highlights a similar trap. Ola’s 2024 IPO raised 75 billion Indian Rupees ($900 million USD) at a value of 76 INR per share. It was hailed as a ‘BYD of India’, and despite high valuation warnings, investors pushed share value towards 160 INR. Predictably as cash burn mounted and with no operating profitability, Ola Electrical Mobility value soon fell below the IPO price and speculators who dreamed big soon began to feel like they had lost. The Yes Bank and Ola Electric Mobility cases demonstrate the dangers of investing outside one’s circle of competence.

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Ola Electric Mobility One Year Chart as of 17th September 2025

Valuations and Investor Behavior:

From October 2022 to October 2024, Indian markets moved significantly higher, stretching valuations beyond earnings. Even after U.S. Liberation Day tariffs triggered a pullback in India, investors continued pouring money into mutual funds through SIPs (Systematic Investment Plans), ignoring glaring fundamental problems. This raises concerns and creates doubts about whether SIP passive investing is wise without understanding individual businesses.

Investment becomes more intelligent when it is done with a business like approach. As Warren Buffett said, “the stock market is a device for transferring money from the impatient to the patient.” But patience should not mean overpaying for growth stories. Predicting future earnings is difficult, and paying lofty prices for stocks in the EV, battery, and micro-processing chip sectors based only on expectations can be dangerous.

When competition or innovation shifts, stock prices collapse as Ola Electric Mobility has shown. True investing is businesslike. It requires understanding, discipline, and buying below intrinsic values. Chasing hype, speculation, and every new IPO can lead to erosion of capital. Smaller investors can do better and they should desire to study fundamentals in order to make good decisions.

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India Insider: Working with the West as it Deals with Others

by with No Comment AMT MarketsFeatured HighlightsIndia

India Insider: Working with the West as it Deals with Others

India’s Prime Minister Narendra Modi visited Tianjin, China for the 2025 Shanghai Cooperation Organization Summit in early September, which was attended by over twenty nations. Before India visited the conference in August, Washington D.C had already imposed a 50% punitive tariff on India’s exports. The initial tariff was a 25% duty, but included another 25% penalty because India purchases a large amount of Russian Oil, which the U.S seeks to reduce. An uneasy trade dilemma looms for India.

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Many Western analysts quickly concluded that Prime Minister Modi was tilting India towards a stronger relationship with the Russian and Chinese camps, by potentially embracing warmer associations with Presidents Vladimir Putin and Xi Jinping, and defying Washington’s previous warnings.

Yet, the trade composition and the underlying reality highlights a different story. Despite India being positioned in the global South politically, the nation recognizes its higher value exports – which include textiles, gems and jewelry, apparel, and pharmaceuticals are primarily sold to the West. The United States clearly remains India’s biggest consumer. In essence President Trump holds a trump card.

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In contrast, China’s total exports to the global South (excluding Western Europe, Australia, New Zealand, and North America) has doubled since 2015. Chinese exports to the U.S were $525 billion USD in 2024, but to the global South, China’s exports grew to nearly $1.3 trillion USD.

As Professor Michael Pettis accurately points out, “countries with expanding trade surpluses with the U.S, use their higher revenues to fund deficits with the rest of the world.”

India Exports More to the West:

India’s trade surplus with United States, the European Union and U.K stands at $72.18 billion USD. If India wants to be competitive with China in terms of manufacturing, it should affiliate more astutely with the Western camp.

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Dependence on Anti-Western Countries Hurts India’s Trade Balance:

India’s combined trade deficit with Russia and China is approximately $158 billion USD, which demonstrates how much less India exports to these two countries. India’s overall merchandise trade deficit is $282 billion USD, with a deficit of almost 56% in total attributed to Russia and China.

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Service Exports a Crucial Metric in India’s Balance of Payments:

India’s services exports stood at $383 billion USD in financial year 2025, earned primarily from the U.S and other Western countries. Washington has imposed tariffs on India’s tradable goods sector, while the nation’s non-tradable sector has been operating without much stress.

India’s overall trade deficit stood at minus $94.26 billion USD in financial year 2025. Without service exports (predominately from the software services sector), India’s current account deficit would be much larger and the Indian Rupee would face greater depreciation pressures.

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India’s economic stability is precarious, equilibrium needs to be found. Solid domestic outcomes for manufacturing and a stable Rupee, including exchange rates, could be achieved with a well-defined calibration that looks West but does not weaken India’s stance as a non-aligned nation. New Delhi should focus on maintaining neutrality and strategic autonomy.

While India may shake hands with Presidents Vladimir Putin and Xi Jinping, an important economic lifeline runs firmly through Washington, Brussels, and London. Crucial negotiations are said to be taking place between Prime Minister Narendra Modi’s team and President Trump’s White House behind closed doors. New Delhi could become vulnerable if it does not find adequate solutions. President Trump has recently reiterated his friendship with the Prime Minister Modi, perhaps an agreement can be produced in the mid-term.

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India Insider: Women in Agriculture Need Manufacturing Power

by with No Comment Featured HighlightsIndiaInvesting

India Insider: Women in Agriculture Need Manufacturing Power

India has long been a society that has neglected Women’s Empowerment. While various states pursue proactive policies to enhance the role of women in society, their inclusion in the job market and ability to have financial independence is still lacking.

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Small Scale Farm in Tiruvannamalai, India

In the suburbs of Tiruvannamalai City, in Tamil Nadu, Mrs. Revathi runs an agricultural farm where she grows rice, flowers, and vegetables. She sells them to local commission agents or directly to customers from her farm. Mrs. Revathi, who lost her husband in 2019, has two daughters, both of whom are educated and working. One of the daughters is getting married. She said that although agriculture helps her family earn money, it does not lift them out of the poverty trap because of uneven flower cultivation. The land is becoming less and less suitable for irrigation – a matter that worries her greatly too. Flowers are one of the major sources of income for many farming families in Tiruvannamalai City in Tamil Nadu.

This is just a small example of the challenges faced by women working in agriculture.
According to recent Periodic Labor Force Surveys, 64.4% of women in India work in agriculture, compared to only 36.3% of men.

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Labor Workforce Percentage in India per Gender

Self employment and Access to Credit is not the Solution:

Many argue that self-employment and steady access to credit via microfinance institutions will help women become entrepreneurs and create movement up the social ladder. This is true in some cases, but many women struggle with raising families in their husband’s absence, and when working on farms where agricultural productivity is lopsided or unfit for growing vegetables or corn, times remain difficult.

First of all, why do women choose agriculture and remain small-time sellers? Because they are not able to find employment easily in formal sectors like manufacturing or other service oriented businesses.

Even within related agricultural sectors, women employed in vegetable processing plants, or value-added goods like masala manufacturing and tomato sauce production companies earn higher wages.

Unfortunately, low productivity and long spells of inactivity render agricultural workers significantly underemployed periodically. They are stuck, with nowhere else to go. Unlike in East Asian nations, which created mass employment through dynamic exports of manufactured goods, the Indian manufacturing sector’s low productivity makes it globally uncompetitive.

Manufacturing as a Solution for Women Empowerment:

Across Asia manufacturing has proven to be a powerful driver for upwards mobility. Incomes have risen, poverty has declined, and women are central parts of this transformation. In Vietnam, where a factory boom has been especially momentous, more than 68 percent of women and girls over 15 years of age are working for pay in some capacity, this according to data compiled by the World Bank. In China the rate is 63 percent, in Thailand 59 percent, and in Indonesia 53 percent of workers in manufacturing are women. Yet in India, less than 33 percent of women account for the workforce in recorded in official surveys.

In a pattern demonstrated in many industrializing societies, when more women gain jobs, families promptly invest further in education for girls. Manufacturing also lifts household spending power, fueling economic expansion that encourages investors to build more factories, providing additional jobs and reciprocal wealth creation. India is missing out on this dynamic manufacturing growth and is failing to broadly participate in the spread of improved industrialization which has helped bolster fortunes in many Asian economies and benefitted families. A vital component for a stronger Indian economy necessitates the empowerment of women.

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India Insider: Labor Productivity and Rising Household Debt

by with No Comment Featured HighlightsIndiaRisk Management

India Insider: Labor Productivity and Rising Household Debt

The desire for India to become a fast growing economy can be alluring, but without proper distribution of income and improved labor codes, this remains a major challenge to achieve. During coronavirus, acute problems were faced by those working in private enterprises. While some businesses and institutions supported their employees, many people were left behind without social protective measures.

According to Business Line newspaper analysis, from July 2022 to June 2023, an average salaried Indian male made 20,666 Rupees ($236 USD) and a woman made 15,722 Rupees ( $180 USD) per month.

Experience tells us that lower salaries in the rural areas are pervasive. Many private sector nurses, schoolteachers, and other service workers earn less than the international poverty line of $3 per day (around 250 Rupees per current Forex). Sometimes due to extensive workforce supply, some educated people must work blue collar service jobs additionally to make their ends meet.

Agriculture and Low Productivity:

Wage disparity and underemployment exists rampantly. Half of India’s labor force works in agriculture, where productivity is poor. In agriculture, farmers are both producers and consumers. There are barriers in food supply and demand for agricultural products. Farmers need access to local markets where their buyers can afford to purchase their produce. Without solid markets or better road infrastructure to reach them, many rural areas have less incentive to improve productivity.

As a result, many farmers produce low volumes. This is also one of the reasons why New Delhi is reluctant to permit U.S imports of agricultural and dairy products. Smaller farmers cannot afford to invest in education, which hinders their efforts to move into industries with higher wages. Without increasing labor productivity and better opportunities, most of the population will continue to work in agriculture.

Stagnant Wages, Informal Work and Problems in Micro-Finance:

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India’s Micro-Finance Lenders Culminative Returns Past Year

A large portion of the workforce is employed via informal and low-paying jobs. If wage growth does not keep pace with increased productivity, domestic consumption will remain weak, making the economy more fragile during global downturns. Drivers and gig workers provide some insights because of their inability to make ends meet. Minimum wage policies are lacking for many gig workers. Employees work higher hours in these enterprises. Yet another reason why Indian households prefer to prepare their children for government jobs.

India’s micro lending industry is under stress as delinquencies rise at an alarming pace. This has prompted the Reserve Bank of India to intervene and impose fines on lenders charging excessive interest rates. Loan disbursements shrank 13.5% year-on-year, and shares of some small finance banks have fallen, this as they have been forced to set aside higher provisions for bad loans.

Total loans outstanding in the industry are around 3.75 lakh crore rupees ($43 billion USD) in financial year 2025, with non-housing retail loans accounting for nearly 55% of total household debt. Small ticket loans were meant to ensure financial inclusion in underserved areas. The RBI defines microfinance as collateral-free loans to households with annual incomes of up to 3 lakh Rupees (approximately $3,400 USD).

But when wages do not rise in line with inflation, households begin to borrow to cover deficits, often at high interest rates. This creates risk for small finance banks when borrowers default, besides many consumers who are clearly struggling. A bank employee in Tamil Nadu has said loan disbursements are now scrutinized more closely, and applicants with monthly EMIs – equated monthly installments – above 10,000 Rupees ($115 USD) are no longer eligible for micro-loans.

Job creation in the Manufacturing:

Despite media portrayals of India’s manufacturing ascent, Harvard economist Dani Rodrik offered a compelling remark paraphrased here which points out obstacles ahead, ‘what made manufacturing a vehicle for transformational growth was its ability to generate productivity while drawing unskilled labor from traditional farming’. Rodrik seems to believe manufacturing remains a lower income sector in India due to its large work force and inability to transform efficiently, while also facing globalization problems from other Asian competitors.

The reason why manufacturing companies in India can pay lower salaries is because of high unemployment ratios and a steady supply of new graduates every year, making it easy to find new employees. Wages don’t see much improvement because workers are replaced easily. Many employees working in manufacturing actually have engineering and Masters’ degree backgrounds. Their average salary is around 15,000 Rupees a month ($170 USD), the same amount paid to low skilled employees who have technician diplomas.

India needs to work on improving core manufacturing capabilities, creating better infrastructure via land reforms and logistical capabilities. Implementing a fair minimum wage policy would also influence the economy via better household wages. Yes, inflation is a concern, but India’s aspiration to become a $10 trillion economy will remain hard to attain unless coordinated policy changes occur.

Notes: 1 USD = 87.5 Rupees

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India Insider: Manufacturing Strategy to Create Rural Jobs

by with No Comment BusinessFeatured HighlightsIndia

India Insider: Manufacturing Strategy to Create Rural Jobs

Across much of India’s rural landscape, manufacturing remains scarce and finding a solution for this remains a priority. While some towns do have small scale industries that offer jobs, this is still limited. As of financial year 2023, agriculture accounts for only 16% of India’s GDP, down sharply from around 35% in the 1990s, due to a structural shift toward services and manufacturing.

A large share of rural families still depend on agriculture, often engaging in farming and irrigation with modern equipment. However, marketing their produce remains a persistent challenge. Meanwhile, many rural workers are engaged in low-wage trade and commerce, often in informal settings such as small shops and roadside businesses. These roles typically offer limited income and little upward mobility. Falling real wages have pushed many to migrate to India’s urban centers or venture overseas to Singapore, Malaysia, and the Gulf countries in search of better livelihoods, aided by favorable exchange rates.

Capitalism and Efficient Manufacturing

Adam Smith, in his seminal work The Wealth of Nations wrote that, ‘it is not by gold or silver, but by labor that all the wealth of nations is created’. This fundamental idea underpins the modern economic thought that wealth is not derived merely from money, but from the productive capacity of people.

When capital is invested in a capitalist enterprise, it generates profits for the owner, provides wages for employees, and delivers returns (such as dividends) for shareholders. But this cycle of value creation depends on active and efficient enterprise, particularly manufacturing which has been missing or underdeveloped in many parts of rural India.

Unlike countries such as the United States, where people readily relocate across States, India faces some unique challenges. Like the European Union, India is a union of diverse linguistic and cultural regions. It is uncommon for a small business owner from Himachal Pradesh to directly access markets in Tamil Nadu or Karnataka due to language barriers, cultural differences, and logistical constraints. These frictions further isolate rural producers from wider markets.

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Garment Industry Values in India, Bangladesh and Vietnam

Strategic Solutions and the Role of State Governments

To revive rural economies, business people along with their state governments must identify and invest in strategic sectors that create jobs and add value. Kerala is a fine example: as one of India’s top spice-producing States, Kerala has the potential to establish local industries focused on spice processing, packaging, and export. Coordination between agriculture and manufacturing can generate employment, stimulate local economies, and enhance foreign exchange earnings.

Albert Hirschman, a development economist, highlighted this approach through his theory of unbalanced growth and economic integration. He argued that certain industries have strong reciprocal connections with other parts of the economy. By prioritizing sectors with good synergy potential, developing countries can achieve significant growth even with limited resources.

Growing competition from countries like Bangladesh and Vietnam which both enjoy favorable trade agreements do pose new challenges, this must be taken seriously by India and create a focus on forward looking international commerce. There will always be competition from distant enterprises and nations, this must be accepted and planned for via commercial insights.

Within India is Tiruppur, a city in Tamil Nadu, known as the ‘Manchester of South India’ due to its vibrant textile industry. The city has created an ecosystem of manufacturing that consistently offers higher real wages compared to other towns in the region. It has successfully shifted labor from agriculture to industry, thereby increasing productivity and income. It is a bright example and defines one way to make progress.

Protecting New Industries and Creation of Success

In his book How Rich Countries Got Rich and Why Poor Countries Stay Poor, economist Erik Reinert argues that nations develop not just by doing what they are currently good – such as agriculture or mining, but by nurturing industries that can become more productive long-term. Typically manufacturing and technology sectors lead to greater innovation and economic resilience.

Reinert provides numerous examples, like South Korea’s emerging growth in steel and its automotive industries, and Ireland’s rise in information technology where specific protections and support for young industries has led to long-term prosperity.

India’s rural transformation cannot rely on New Delhi alone. State governments along with business people must take the lead by identifying sectors that have the potential to foster high growth and employment. Helping to create local value chains, investing in infrastructure, training, and market access will build resilience in these communities. By encouraging small-scale manufacturing and leveraging regional strengths, the country’s rural areas can become engines of economic growth.

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T20 World Cup 2024: New Cricket Contenders and Shifting Powers

by with No Comment CricketFeatured HighlightsIndia

T20 World Cup 2024: New Cricket Contenders and Shifting Powers

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The 2024 T20 Cricket World Cup has unfolded as a fascinating saga of unexpected performances and shifting dynamics. Hosted jointly by the United States and the West

Indies, this year’s tournament has been a platform for emerging teams to shine and traditional powerhouses to stumble. Here’s a look at the highlights, surprises, and

predictions as the tournament enters the next phase of Super 8s.

The 2024 T20 World Cup has seen newer teams stepping up their game, bringing fresh excitement and proving that they are no longer mere participants but serious contenders on the global stage.

Nepal: Nearing a Historic Upset

Nepal’s match against South Africa was a nail-biter, showcasing their evolution at the international level. Despite being up against a seasoned and formidable South African side, Nepal pushed their opponents to the brink, almost clinching what would have been a historic victory. This performance underscored their potential and the growing depth in their cricketing skills.

Namibia: Close Calls and Narrow Losses

Namibia’s participation in the World Cup has been marked by tight contests and commendable efforts. They came close to winning on few occasions, showing that they are not far from breaking through to the next level. Their ability to compete closely with more established teams speaks volumes about their preparation and potential for future tournaments.

Scotland: Dominating Giants

Scotland has been a revelation, delivering top performances against some of the tournament’s biggest teams. Their matches against England and Australia were particularly impressive, where they played with confidence, proving that they are a force to be reckoned with in the T20 format.

USA: A Wild Card with a Wild Ride

As co-hosts, USA received a wild card entry into the tournament and seized the opportunity with both hands. They stunned Pakistan with a remarkable win and pushed India to their limits in a well contested match. Their spirited performances have been a breath of fresh air in the tournament. However, despite their on-field success, it remains uncertain whether these efforts will translate into a broader interest in cricket within the United States. The sport still predominantly attracts expatriate communities, and it will take more than a few wins to embed cricket deeply into American culture.

Oman, Uganda and Papua New Guinea: Learning the Hard Way

For teams like Oman, Uganda and Papua New Guinea, the World Cup has been a tough lesson in the rigors of international cricket. The disparity in skill and experience was evident as they struggled against seasoned opponents. However, participating in such a high-level tournament provides invaluable exposure and learning opportunities,

which are crucial for their development.

Netherlands, Canada and Ireland: A Nothing Tournament

Netherlands, Ireland and Canada have been on the Associate level circuit for a while. In fact, Ireland and Netherlands have played in past international tournaments and caused upsets. Who can forget Netherlands knocking out the giant South Africa at the last T20 world cup. Unfortunately, these 3 teams played mediocre cricket. Although not many expected them to win games, they were certainly expected to give a decent fight. That of course did not happen.

While emerging teams have shown promise, some traditional cricketing powerhouses have surprisingly struggled, failing to live up to their reputations.

New Zealand, Pakistan, and Sri Lanka: A Rough Road

New Zealand, Pakistan, and Sri Lanka have faced unexpected challenges, each failing to advance to the next round. Their early exits are a stark reminder of the unpredictable nature of T20 cricket, where even the most experienced sides can falter. These teams have not only lost games but also a bit of their aura as formidable opponents in the shortest format of the game.

Afghanistan and Bangladesh: Rising Up the Ranks

In contrast, Afghanistan and Bangladesh have played admirably, securing their spots in the next round. Their performances suggest a shift in the balance of power within the cricketing world. Both teams have shown resilience and skill, stepping into roles traditionally occupied by the likes of Pakistan and Sri Lanka.

England: Living Up to Expectations

England, known for their aggressive and adaptable T20 style, have lived up to their billing. They have performed consistently, leveraging their dynamic approach to secure

 

their place in the next stage of the tournament. Their ability to play fearlessly under pressure continues to make them a formidable T20 side.

The Dominant Forces

As the tournament progresses, the established giants continue to dominate, reaffirming their positions as the top teams in the world. India, South Africa, Australia, and the West Indies have each topped their respective groups, showcasing their strength and depth.

These teams possess a blend of talent, experience, and aggression that makes them formidable opponents.

India: Combining tactical acumen with explosive batting and a versatile bowling attack, India has consistently outperformed their rivals.

South Africa: Despite their scare against Nepal, South Africa’s robust team dynamics and skilled lineup have seen them through to the top.

Australia: Known for their relentless competitiveness, Australia has continued to display their dominance with powerful performances.

West Indies: Leveraging their home advantage, the West Indies have played with flair and confidence, making the most of familiar conditions.

The Home Advantage: West Indies have the Upper Hand

With the remaining games scheduled in the Caribbean, the West Indies have a significant home advantage. Their familiarity with local conditions, coupled with enthusiastic home support, positions them strongly as favorites to lift the trophy. While all four group leaders are strong contenders, the West Indies’ home advantage could be the crucial factor tipping the scales in their favor. Given their current form and the benefits of playing on familiar grounds, they are poised to be the team to beat in this year’s tournament.

The 2024 T20 World Cup has been a spectacle of emerging talent and unexpected twists. As newer teams rise and traditional powers recalibrate, the tournament highlights the dynamic and ever-evolving nature of T20 cricket. Whether this year’s surprises will lead to lasting changes in the cricketing landscape remains to be seen, but one thing is certain: the excitement and unpredictability of T20 cricket continues to captivate the fans.

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ICC Men’s Cricket World Cup 2023 – Thoughts and Predictions

by with No Comment CultureFeatured HighlightsIndia

ICC Men’s Cricket World Cup 2023 – Thoughts and Predictions

The 13th edition of the ICC Men’s Cricket World Cup is scheduled to commence in October 2023, featuring a total of 48 thrilling matches. This tournament holds the prestigious title of being the “flagship event of the international cricket calendar,” according to the International Cricket Council (ICC). India has the honor of hosting this edition, a choice that aligns well with India’s global prominence. This decision gains added significance in a year when India became the world’s most populous nation, and its GDP growth rate ranks among the fastest of any major economy.

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The sport of cricket has expanded its footprint across the globe, being embraced by numerous countries. However, in this edition, only 10 teams will participate, a deliberate choice to maintain the intensity of the matches. Eight out of these 10 teams earned their spots through the super league performance, while the final two, Sri Lanka and Netherlands, secured their places via a “world cup qualifier tournament.” It’s important to note that there are no newcomers in this edition; all participating teams have previous experience at this level.

Based on performance rankings, four teams stand out as strong contenders for a spot in the semifinals: India (ranked 1), England (2), Pakistan (3), and New Zealand (4). However, it’s crucial to remember the disclaimer from financial investment products: past performance is no guarantee of future results. The eventual World Cup winner will likely be a team that doesn’t rely solely on star players, but boasts a balanced composition with multiple match-winners. In another analogy with the financial world, it’s akin to maintaining a diversified investment portfolio, a prudent allocation strategy that can weather various market conditions and risks.

India currently holds the top ranking and demonstrated their prowess by convincingly defeating Sri Lanka in the recent Asia Cup. Throughout the Asia Cup, diverse Indian players showcased their talents in different games, highlighting the team’s depth of match-winners and individuals capable of thriving under pressure. These qualities are pivotal during major tournaments, making India a favorite to claim the World Cup. Additionally, as the host nation, India enjoys the advantage of playing on home soil, further boosting their prospects in the tournament.

England enters the competition as defending champions, having triumphed in the thrilling 2019 World Cup finals against New Zealand, a match that ended in a tie. Ultimately, England secured victory based on a technicality. It’s essential to note that this outcome in no way diminishes England’s deserving win, as the result could have swung in either direction. Since then, England has maintained their dominant form, boasting a squad teeming with players capable of leading their team to victory. On paper, this team is arguably the most well-balanced, featuring a batting lineup that combines power hitters and run accumulators, as well as a versatile bowling attack capable of delivering both pace and swing or employing a slow, stifling approach.

Pakistan’s performance often oscillates, creating a roller-coaster of emotions for their dedicated fan base. On their best days, Pakistan can outclass the favorites, but they also exhibit a tendency to falter in tight contests. In the recent Asia Cup, despite being favored, they fell short of reaching the finals due to injuries to key players and lapses during critical moments. Pakistan’s success frequently hinges on the prolific scoring by their captain, Babar Azam, and the batting prowess of Mohammed Rizwan. In the bowling department, their reliance on superstars like Shaheen Shah Afridi and Haris Rauf is evident. This dependency on specific players presents a challenge to their World Cup aspirations.

New Zealand is somewhat of a statistical anomaly, consistently producing a remarkable number of world-class players from a relatively small population. They excel in identifying promising talent and nurturing it to create high-performance athletes. Furthermore, the New Zealand team is affectionately known as the ‘nice guys’ of cricket, celebrated for their amiable nature. Like Pakistan, the New Zealand team places considerable reliance on specific players, with the batting finesse of Kane Williamson and Tom Latham, combined with the lethal fast bowling of

Trent Boult, serving as a cornerstone of their success. The success of the team will depend on these star players maintaining their form throughout the tournament.

Two teams with contrasting World Cup histories deserve attention: Australia, a five-time champion, and South Africa, a team that has never reached the finals despite its quality. Australia, while not as dominant as in the past, continues to display a solid brand of cricket. The team is currently undergoing a transition, with younger players assuming leadership roles. Recent performances may not indicate peak form, so Australia lifting the cup would underscore their commitment to process and mental training.

South Africa finds itself in a similar situation to Australia, boasting numerous talented players but struggling to maintain consistent performance. Both Australia and South Africa appear to have individual excellence, but face challenges in cohesively functioning as a team.

In conclusion, India and England emerge as the front-runners for a coveted spot in the World Cup final. These two teams showcase a balanced roster with game-changing abilities. However, the question looms: can Pakistan’s star-studded lineup carry them to the summit, or will New Zealand’s proficient athletes secure another final berth? Could Australia recreate history, or will South Africa, long awaiting their breakthrough in a World Cup tournament, finally shine on the global stage? Alternatively, could an underdog team spring a remarkable surprise? Only time will tell. One certainty remains, though: winning a high-pressure World Cup tournament requires more than just physical fitness and mental resilience; it demands unwavering heart and determination.