Editor's Desk

Rainfall conditions deteriorated last week and now are tracking IMD’s seasonal forecast of a 12% shortfall. Cumulative rainfall between 1 June and 27 August was 12% below normal, down from a 9% shortfall last week. The geographic distribution remains similar, with 21 out of 36 regions reporting normal rainfall conditions (22 last week), and another 7 close to normal levels. After a poor July, rainfall in August has also been weak, currently running ~24% below normal.

With almost 80% monsoon season is over, the deficit in rainfall is unlikely to be filled, and even if remaining weeks have normal rainfall, the deficit is likely to remain close to 9%. The Indian Meteorological Department (IMD) has maintained its forecast

Cross-country evidence suggests that the introduction of GST has no correlation with GDP growth. Although the introduction of a single GST limits inefficiencies created by a heterogeneous taxation system, there is little evidence that it helps boost economic activity. However, the introduction of GST helps in reducing inflation by removing the problem of dual taxation and thereby reducing the cost of doing business. It also helps in boosting the tax:GDP ratio, provided the GST is introduced at a high enough rate i.e., higher than the revenue neutral rate (RNR), which in India seems to around 18%.

Whilst the introduction of GST will undoubtedly

We had a look at the Narendra Modi government performance over the last 1 year. While meeting sky high expectations following the election results was always a tall task. The new government is a significant improvement and would rate their first year a 8/10.

Fiscal reforms (9/10) – Subsidy has been cut by hiking petrol/diesel price, implementing Direct Benefit Transfer and avoiding populist dole outs. GST hill could also get approved by July and would broaden the tax base.

Business (7/10) – no more crony capitalism, most of

The Indian rural story is unraveling amidst poor output, weak prices and slump in wages. It is partly a fall out of the Modi government’s virtuous and successful attempt to tackle food inflation, but exogenous factors—collapse in international food prices and inclement weather—too have played a role. Unfortunately, forecast of sub-par 2015 monsoon, if it pans out, will only worsen the woes. In this interplay of virtue and misfortune, the Modi government is facing its first formidable political challenge. The turn of events assumes significance as Bihar, with ~90% rural population, is gearing for assembly polls during