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A GST overhaul, rare-earth worries, and a dovish RBI mark a volatile week in Indian policy. Elsewhere, Trump’s travel bans and geopolitical brinkmanship remind the world that uncertainty is a feature, not a bug.
India is once again at the intersection of ambition and adjustment. A proposal to rationalize the Goods and Services Tax (GST) regime by collapsing the current four-rate structure into a more navigable three is gaining political momentum. The 12% slab, home to a hodgepodge of household goods and industrial inputs, will likely be retired. This may seem like a technical change, but it could mark a rare step toward clarity in India’s byzantine tax architecture.
The GST Council, the federal body overseeing indirect taxes, has long been plagued by inertia and political horse-trading. Yet the latest mood music suggests a shift. If passed, the move will push items downward to 5% or upward to 18% rates. Whether this achieves the elusive goal of “revenue neutrality” will depend on consumer sentiment, state compliance, and enforcement efficacy. Tax simplification, while popular in principle, is fiendishly complex in practice.
Meanwhile, a far more material risk is unfolding beyond India’s borders. A supply crunch in rare-earth magnets crucial for everything from electric vehicles to precision defense gear has exposed the fragility of India’s dependence on Chinese inputs. Since April, shipments from China have slowed to a trickle. A swirl of cross-ministerial meetings in Delhi suggests urgency, though the remedies remain foggy. Like much of the world, India wants a decoupling that doesn’t come with a bill.
The government is trying to hedge. Last week, the Ministry of Commerce loosened rules for Special Economic Zones (SEZs), lowering land requirements for semiconductor and electronics hubs from 50 to 10 hectares. This may coax investment, but India’s long-standing infrastructure woes and regulatory zigzags still deter global chipmakers. Policy on paper rarely translates into plants on the ground.
Still, financial tailwinds are blowing, at least for now. On June 6, the Reserve Bank of India is expected to announce a third consecutive rate cut, taking the repo rate to 5.5%. A CNBC-TV18 poll shows a growing consensus that soft inflation and lackluster demand warrant monetary easing. If it comes, the move would mark the most aggressive loosening since the pandemic. It will cheer borrowers and fiscal managers alike, though it raises uncomfortable questions about long-term price discipline.
The central bank is reportedly toying with allowing greater foreign ownership in Indian banks. The current threshold of 15%, with anything above 5% requiring a regulatory nod, has kept major global players at bay. A relaxation might boost capital inflows but will almost certainly provoke nationalistic protest from the usual quarters. In a pre-election year, such moves tend to vanish as quickly as they appear.
Elsewhere, the mood has soured. Eleven people died in a stampede during IPL celebrations in Bengaluru, a grim reminder of India’s poor crowd management even at high-profile events. In contrast, Hyderabad will soon be home to a Rafale fighter jet fuselage plant, part of a fresh manufacturing pact between Tata and Dassault. India’s twin narratives of chaos and competence continue to play out.
Globally, the specter of the old world order returning to form is unmistakable. Donald Trump, seeking re-election, has revived his infamous travel bans, this time targeting 12 countries. Never far from political theatre, Elon Musk decried Trump’s latest spending bill as “debt slavery.” And, sensing a vacuum, Vladimir Putin is offering mediation between the U.S. and Iran on nuclear negotiations. It is not 2017, but it’s starting to feel like it.
India’s strategic tightrope reforming at home while containing shocks abroad is nothing new. But rarely has the rope looked this taut. Whether the GST simplification turns into a signature reform or merely papers over structural cracks will depend on the Council’s consensus and the broader economy’s capacity to digest change. In the meantime, Delhi’s policymakers would remember that global turbulence does not wait for domestic housekeeping.
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