Round The World

New Delhi, 7 June 2025

China Weaponises Brahmaputra

NEW DELHI MUST REACT

By Dr. D.K. Giri

(Professor of Practice, NIIS Group of Institutions) 

China has apparently threatened to curtail the flow of Brahmaputra water to India. This is in retaliation to New Delhi suspending the Indus Water Treaty with Pakistan. It may be Islamabad’s bluff to garner international support against India’s recent military action. Whatever may be the provocation for Beijing to take this drastic action, New Delhi must give a strong reaction. In fact, China needs no excuse to work against the interest of India.

Beijing’s belligerence against New Delhi is no secret. It has been doing so ever since it acquired Tibet by hoodwinking Jawaharlal Nehru. Giving away Tibet conceded the advantage to China in geo-political and security terms. Tibet was created by the British Colonial administration as a buffer state between India and China. Nehru did not secure any reciprocal obligations for letting Tibet go to China. The river Brahmaputra originates from Tibet. However, Chinese threat on Brahmaputra may not inflict a fatal blow to India.

River water experts suggest that China controls at the most 30 per cent of Brahmaputra water and the rest 70 per cent or more is generated in India. The river grows after entering the Indian soil. The river is enriched by several tributaries and the water flowing down from Khasi, Garo and Jaintia Hills. The tributaries into Bramhaputra are Subansiri, Lohit, Kameng, Manas, Daansiri, and Jia Bharali China could not control the water discharged in India. However, the dam building on Brahmaputra river, storing the water and diverting it is a cause of concern.

Dams are built on the upper side of the river. So if the dam burst accidentally or is broken deliberately, India as a riparian state will suffer, the North Easten states will be submerged with heavy toll on life and property. The second probability is remote as China will not try to damage parts of India by flooding them unless both countries are at war. That should demystify the so-called Damocles sword hanging over India in Brahmaputra river.

The larger point is how has India got into this situation where it is being targeted by Pakistan and China and is kept afar by other countries. Even the United States which is perceived to be engaging India as a counterweight to China seems to have “unfriended” it. Only a few days before, the American Secretary of Trade, openly and rather undiplomatically told off India for being part of BRICS, i.e. at the behest of Beijing, is seeking to de-dollarise the world economy; and doing brisk business in the face of sanctions with the other member, Russia.

At the same time, it is worrying to realise that in the recent war with Pakistan, not a single country came out openly for India. Various arguments could be made about the current India’s foreign policy strategy. A good many observers thought that the recent war with Pakistan sounded a wake-up call to India. Again there were several interpretations of that call. I proffered my perspective in this column only last week. Let me expand on that formulation.

India is left alone in the international community for its faulty conception of world politics and thus the consequent struggle to find friends in need. That is that a multipolar world exists or can be constructed. That India can represent one pole, or can be a part of more than one pole. That India can lead the developing world. That New Delhi’s approach of strategic autonomy enables India to deal with any country at the same time— Ukraine and Russia, Israel and Iran, China and Taiwan and so on.

Some of us have debunked these formulations many times. It needs to be told and time again until the leadership heeds it in the interest of India. Thankfully, Prime Minister Modi has taken a correct position against Pakistan. He could do the same on China. But he seems to be bedevilled by the lack of committed international support against Beijing, also in the absence of correct inputs on China. It should have come from the Foreign Minister Jaishankar who served in China as India’s ambassador. Alas, Jaishankar has failed to click on China.

The present foreign policy strategy that is unmaintainable could be attributed to the External Affairs Minister. His combative, seminarian, self-righteous, almost narcissist style has failed to befriend countries. The Prime Minister with his personal warmth and charisma could get many a world leader to openly stand by India if he had a foreign minister who understood India’s critical security needs. If he did, Modi would not have sent delegations of MPs to explain Indian positions.

Modi made a profound statement on how to navigate international politics. He said, “the road to peace is paved by power”. This was in the context of Pakistan. But that could apply to all countries. Now here is where Modi is let down by his foreign minister. How does India deal with Pakistan and its friend China. When China-Pakistan alliance is established which mobilises support from other countries, who does India stand with. Or is it the case that India does not have allies and it plans to take on China and its friends or Pakistan with its friends.

Remember that someone who is every body’s friend is no body’s friend. Even in Mahabharata, both sides of the battle, both Kauravas and Pandavas went around making Allies. Both armies were invincible, yet they both actively sought partners. Even Lord Krishna offered Himself and his army to either party. Jaishankar has succeeded in making India friendless. Even the United States is perhaps reviving its patronage to Pakistan.

Last word in this piece is, if New Delhi focussed its foreign policy on countering China, things would have fallen in place. India has had a reactive China policy, it is time to revise it and have a pro-active China policy which puts Beijing on the defensive. It is not too late to make that dramatic and drastic shift in India’s China strategy.---INFA

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 11 June 2025  

Banking Sector

PROFITABILITY INCREASES

By Dhurjati Mukherjee 

The banking sector has been in good health. Most banks are earning high profits and attracting investors in the capital sector. This is reinforced by the fact that the Reserve Bank of India’s board approved a record surplus transfer to the central government of Rs 2.68 lakh crore for the accounting year 2024-25. This is higher than Rs 2.1 lakh crore that the central bank paid as dividend to the Centre in 2023-24and marginally higher than Rs 2.56 lakh crore dividend receipt that the government has been expecting from the RBI and public sector banks. 

The higher-than-expected pay-out will bring down rates with analysts expecting the yield on government bonds to come down further. According to Aditi Nayar, Chief Economist at ICRA, the RBI’s dividend exceeds Budget assumptions by around Rs 40,000-50,000 crore or 11-14 basis points of GDP. The government will obviously feel financially benefited and would be in a position to manage additional spending. 

The banking sector’s Q4 consolidated net profit crossed Rs 1 lakh crore for the first time. Public and private sector banks together posted a net profit of Rs 100,178 crore in Q4 of financial year F25, up 9 percent from Rs 91,829 crore in the year-ago quarter. This growth came despite a squeeze in net interest margins as lending rates fell, following RBI’s February rate cut while deposit costs stayed high. Lenders, however, offset the impact through treasury giants and recoveries from bad loans. 

Private sector banks posted a relatively modest 5.2 percent rise in net profit to Rs 50.877 crore from Rs 45.214 crore. Among PSUs, four banks -- SBI (40 percent), Bank of Baroda (10.8 percent), Canara Bank (10.3 percent) and Union Bank (10.1 percent) – contributed around 80 percent of the profits. However, SBI was the only PSU bank to report a decline with net profit falling 8 percent to Rs 19,941 crore. 

Another recent development has been an aggressive cut in repo rate by 0.5 percentage points, double than what was expected, and reduction in cash reserve ratio by one percentage point, a move that would go down well for the sector as also for borrowers. This third consecutive reduction is expected to provide a much-needed boost to real estate demand. Coming on the heels of a slight dip in sales during Q1 2025, the timing of this rate cut could help revive momentum in the real estate sector. Homebuyers are expected to benefit from an improved home loan affordability, particularly first-time buyers and those targeting affordable housing, as it is expected that banks would pass on the rate cut to consumers. 

Apart from loans becoming cheaper, statistics reveal that the share of bank deposits in major cities has risen to 53.2 percent in March 2025 from 50.9 percent in 2020 even as their share in bank credit declined to 58 percent from 63 percent during the same period last year. The move is seen as a progress towards a policy goal of equitable distribution of bank funds across regions. This is due to the movement of people and capital from metros to semi-urban areas. These regions have seen a rise in their share of deposits. As of March 2025, total individual deposits stood at Rs 234.5 lakh crore of which, metros accounted for Rs 124.8 lakh crore, urban centres Rs 49 lakh crore, semi-urban areas Rs 36.2 lakh crore and rural areas Rs 24.4 lakh crore. 

However, while all this augurs well for the sector, the amount of fraud in scheduled commercial banks has seen a sharp increase in 2024-25 to Rs 36,014 crore from Rs 12,230 crore in the previous fiscal, even as the number of frauds has seen a decline of 33.5 percent from a little over 36,000 in FY24 to 23,953 in FY25. Private sector banks lead in terms of the number of frauds, constituting 67.2 percent of frauds during the year.  According to RBI, the increase has mainly been attributed to “the removal of fraud classification in 122 cases amounting to Rs 18,674 crore reported during previous financial years and reporting afresh during the current fiscal after re-examination and ensuring compliance with the judgment of the apex court of March 27, 2023”. 

The Supreme Court had directed the banks to give time and offer a detailed explanation to the account holdersand also asked the RBI to issue new directives towards the same. It is understood that the RBI’s department of supervision plans to enhance liquidity stress tests for scheduled commercial banks through advanced cash flow analysis. This aims to assess banks’ ability to withstand extreme but plausible stress scenarios, ensuring they can meet obligations during crisis. As per banking industry officials, the threat landscape is rapidly evolving with fraud detection, particularly in the form of mule accounts, money laundering, QR-based frauds and digital lending becoming a priority. 

The health of the banking sector has been reflected in the recent RBI report. In fact, with higher profits and lower NPAs, banks would be in a better situation to lend, thereby helping entrepreneurs with financial resources. However, it needs to be stated here that while top and middle-level industrialists are getting adequate loans from banks and financial institutions, small and micro level entrepreneurs have great problems in arranging their financial needs. This aspect needs to be looked into. 

The only point of concern has been the increase in frauds which needs to be detected. Both the individual banks and the RBI must join hands to ensure that these numbers are brought down, and the common man does not suffer due to siphoning off their hard-earned money. Apart from this, the banking personnel should extend a helping hand to those not quite educated and unaware of banking rules and regulations, some of which are quite complicated. 

It goes without saying that a vibrant economy needs a strong banking system. Thus, for the sector to thrive, there should be no interference with its operations and loans should be sanctioned by professionals only on merit and not on political pressure. Already Mudra loans are reaching small traders and entrepreneurs, and this should be encouraged by public sector banks with the help and support from the government. 

Though the banking network has spread across the country, there should be special endeavour to bring people from the economically weaker sections to open accounts, specially in PSUs. As the economy emerges strong, a lot depends on the work of banks to help provide financial assistance to professionals and entrepreneurs.---INFA 

(Copyright, India News & Feature Alliance)

Political Diary

New Delhi, 10 June 2025

Modi 3.0

INDIA’s NEW NORMAL

By Poonam I Kaushish 

How does one begin an epitaph of one year of Modi 3.0? Uncork champagne on the wings of new hopes and promises? Or twelve months of steady downhill with no barrier to stop the slide, as Opposition alleges?  Either which way, the year ended on a victorious note with India smelling of roses.  

Yesterday (9June), Prime Minister Modi completed 11 years in power and the first of his historic third consecutive term. He didn’t just make history, emerge victorious, undefeated and unshaken, but shattered every political myth built by the Opposition over the last decade: Of achieving three consecutive terms.

Many believed the BJP-led NDA Government was on shaky ground, relying heavily on allies like Naidu’s TDP and Nitish’s JD(U), both known for switching sides. A year later those fears seem misplaced.  Modi 3.0 looks confident and stable with strong support from allies. Rather than acting as unreliable supporters, TDP and JD(U) have praised Modi’s leadership and stood firmly behind him.

Politically, the year was dotted with vicious below-the-belt tu-tu-mein-mein between Congress-BJP, a tutorial in petty ugly histrionics with communication channels between both drying up underscoring nothing has changed: Its politics as usual, bitter deep divide and trust deficit between Modi Sarkar and Opposition.

Electorally, Modi suffered a loss of face in Election 2024 resulting in a new power paradigm of Modi’s 3.0 which serenades ‘Es baar coalition Sarkar’ instead of ‘Es baar 400 par’.  Yet it did not take long for his juggernaut.to course correct, bounce back and how! One year into his third term it has Modi’s trademark on it, on his terms: Tight control of the political narrative, image of a strong uncompromising nationalist and repeatedly pushing the Opposition into uncomfortable corners.

Under him, BJP managed a successful course correction in Maharashtra by winning a massive landslide victory with allies Shiv Sena-NCP along-with Haryana after its drastic slide in Lok Sabha polls. The icing on the electoral cake was snatching victory from Kejriwal’s AAP in Union Capital Delhi after 27 years cementing its status as the most dominant political force in the country.

Under Modi 3.0, India’s internal and external security has undergone a tectonic shift. Operation Sindoor redefined India’s war doctrine: Establishing a new normal of India’s response to terrorism. It showed the world that India would no longer hesitate to punish terrorism --- anytime, anywhere.

It showed that terrorists and their masterminds have no place to hide as more than 100 terrorists in Pakistan and PoK, including high value targets involved in the Pulwama blast and IC-814.hijack were eliminated. Nine cross-border terror hubs, linked to 25 years of attacks on India were dismantled. This was not mere retribution; it was a clear change in India's war doctrine: India now treats any act of terror as an act of war.

On the back of it, BJP now rides a wave of nationalism across the country. Military successes aside, the Modi Sarkar has leveraged the operation to push the Opposition, especially Congress, on the back-foot. It started with BJP-Congress trading missiles over ‘your list vs my list’ of MPs delegates even as the Government resorted to bipartisan Opposition support in its global diplomatic outreach following Operation Sindoor to portray India’s zero tolerance policy to terrorism and  support in isolating Pakistan sponsored terrorism.

Seven teams of all-Party delegations forsaked their exclusionary and partisan politics at home and spoke in one voice, which is not practised domestically. Even as Congress played spoil sport, its senior leader Salman Khurshid tweeted, “Is it so difficult to be patriotic?” much to Rahul Gandhi’s chargin.

India’s internal security story is no less remarkable. Once infamous as a Left-Wing Extremism hub, Bastar is now nearly free from Naxal terror. Through a combination of precise operations, development initiatives, and inclusive governance, the government has broken the backbone of the red corridor. The promise to make India entirely Naxal-free is no longer a slogan, it is rapidly becoming a reality. The number of LWE-affected districts reduced from 126 to 6 today 

Notably, Modi 3.0 has continued to address its core ideological projects, much like it had done in its first and second term. In April, Parliament passed the Waqf (Amendment) Act, 2025. Much like the 2019 law banning triple talaq, the Waqf Act is borne out of the BJP’s long-stated desire to bring transparency, restore land rights and a sense of justice, especially to women  in matters pertaining to the Muslim community. The law is currently under challenge in the Supreme Court. 

To streamline the worse-than-snail-pace legal system and remove the ‘tareekh pe tareekh’ encumbrance of our slow judicial process the Government overhauled the criminal justice system through three new criminal laws which replaced the colonial-era IPC.

By effectively co-opting Congress’ caste plank, BJP accuses past Congress Governments of not allowing a caste census, “insulting” Ambedkar and putting the Mandal Commission report on OBC quotas on the backburner in the 1980s. Notwithanding, its decision is a sharp reversal of the BJP’s stance in the 2024 election campaign when it had dismissed the demand for a caste census as a move to divide society.

With ‘sabka vikas’ in mind, the Government has laid special emphasis on infrastructural development in the country. And what better example than Chenab Bridge, the world’s highest railway arch bridge connecting Jammu to Srinagar. Its significance is the Kashmir Valley is for the first time connected to the rest of the country by rail, breinging a sense of unity.

With a 6.5% growth rate projected over the next half-decade the country retains the tag of the world’s fastest-growing big economy now a $4 trillion economy. Foreign exchange reserves have soared to $700 billion, reflecting deep financial resilience. Happily, the latest World Bank report shows reduction from 27.1% to 5.3%.

 The year also saw progress on NaMo’s pet idea of instituting simultaneous elections to Lok Sabha and State Assemblies, with the introduction of two crucial Bills in Parliament. Additionally, the Government has been deft in its political manoeuvring by taking all by surprise to enumerate caste in the next census, thereby turning the tables on Congress’s Rahul Gandhi who has invested a lot of political capital on this for close to two years.

 Even as Modi imprints his persona on Bharat, it is high time the Opposition bandies together. Every country and democracy needs a strong Opposition. It is high time the Congress gets its act together even as it struggles to search for direction and unity among its allies. It hasn’t managed a major State poll win, and Opposition parties like TMC and AAP have drifted away from the INDIA bloc. A wake-up call to Rahul, Mamata, Stalin etyc.l

Modi's leadership remains dominant, of a decisive leader with no clear alternative in sight, as his government confidently advances its agenda. But the coming months pose a stiff challenge with unemployment at 45%, rising oil prices, farm distress and consumers buying less. Undoubtedly, bread-and-butter issues will require the Government to put in a lot of time and effort to ensure people get naukri, nyay and vikas.

Undeniably, Modi’s task is not enviable. The burden on him is enormous. Much is expected of him. To fulfil his vote of faith, NaMo will need to reach out and tap best resources, enlarge his catchment area to defend the interests of the Indian State, advance goals of growth, development, national security and stability.

With great power comes greater responsibility. Will Modi continue to redefine politics and deliver? His track record shows that he can and will. Time will tell. ---- INFA

(Copyright, India News & Feature Alliance)

Economic Highlights

New Delhi, 9 June 2025

Trump Can Wait

 RBI BUILDS INDIA FIRST

By Shivaji Sarkar 

In an assertive policy pivot aimed at shielding the Indian economy from both internal slowdown and external headwinds, the Reserve Bank of India (RBI) repo and Cash Reserve Ratio (CRR) cut decisions reflect an urgency to fortify domestic demand and build monetary buffers ahead of any external shocks. 

The repo rate cut by 50 basis points to 5.40 percent and slashing the CRR by 100 basis points, releases a substantial Rs 2.5 lakh crore in systemic liquidity.This move goes far beyond textbook monetary easing—it’s a calculated shift toward growth insulation, driven in part by global trade volatility, slowing capital flows, and protectionist rhetoric resurging from the West, especially from the United States. The RBIisshifting dependence on foreign portfolios to domestic investment. 

The RBI’s sweeping rate and CRR cuts are not just a response to slowing growth—they are a strategic counter to global turbulence. As trade dynamics harden and election rhetoric in the U.S. turns more inward-looking, India is sending a clear signal: We’ll build our growth engines at home, and we won’t wait for the world to stabilise. 

Banks and non-banking finance companies (NBFCs) are now better placed to grow loan books despite global capital uncertainty. The Rs 2.5 lakh crore liquidity injection, through CRR cut, is a strategic play to strengthen domestic credit capacity, in case foreign investment inflows taper due to U.S.-centric policy shifts.In a world potentially heading toward deglobalisation 2.0, the RBI is quietly laying the foundations for an India that is credit-rich, demand-driven, and less vulnerable to foreign tantrums. 

This is crucial for raising industrial production. In April 2025, IIP slowed to 2.7 percent against 3 percent growth in March and 5.2 percent in April 2024. The growth was primarily driven by a 3.4 percent rise in the manufacturing sector.  The core sector, which comprises eight key industries, grew by 0.5 percent in April 2025, according tothe National Statistics Office.  

While headline inflation has remained within the RBI’s comfort band of around 4 percent, the lurking risk of imported inflation— rises to 31.1 percent in February 2025 from 1.31 percent in June2024 - stemming from global prices, shipping costs, geopolitical instability, and currency value decline, continues to be a concern. The RBI appears to have weighed these risks, but is now betting on economic expansion as the bigger imperative, especially as private investment and consumer demand remain below pre-pandemic trajectories. 

Financial markets immediately responded to the RBI’s policy announcement with optimism. Sectorssuch as real estate, banking, automobiles, and financial servicesrallied. This is preceded by severe fall in the stock markets all through the May and before, causing severe losses.The value of currency in circulation was around Rs 16.5 lakh crore in November 2016. It has risen to Rs 38.35 lakh crore in May 30, 2025, up from Rs 34.70 lakh crore on September 6, 2024, rising 0.2 percent a week or 7.4 percent in a year. 

The overall reserve money (RM) rose by 0.4 percent on the week, to Rs 49.62 lakh crore. The RM, the physical cash held by the public, including banknotes and coins as also the CRR and other banks’ deposits with RBI play a crucial role in regulating the money supply and influencing economic activity. It's the starting point for the money creation process, where banks can create more money through lending. 

A more aggressive Trump-driven trade stance, if it materialises, could raise the cost of imports and dent export competitiveness—just as India is trying to recover its industrial mojo. India is hurrying through deals for more imports from the US, including of shale oil adding to further costs. 

The rate cut is also likely to spur affordable housing uptake, shielding the sector from any fallout in foreign investment or imported material cost spikes. Stocks such as Godrej Properties, DLF, and Kolte-Patil Developers surged after the policy, buoyed by hopes of a demand revival and better liquidity for developers.Stocks like HDFC Bank and Bajaj Finserv jumped, reflecting optimism around stronger credit demand and a proactive central bank.The Nifty Financial Services index rose nearly 2 percent, reflecting investor belief that India’s financial ecosystem will now be less dependent on foreign portfolio flows and more driven by internal credit momentum. 

Imported inflation occurs when the cost of imported goods and services rises, leading to higher domestic prices as currency weakens. Gold and major components of India’s imports, significantly contribute to this inflation. Higher import costs raise production expenses for companies causing overall price increases.

While consumer price inflation remains under control, the risk of imported inflation is rising. A Trump-style economic strategy could mean higher tariffs on Chinese goods, pushing up global commodity prices. 

For India, this could translate to costlier imports of electronics, machinery, and chemicals, feeding into core inflation. The RBI seems to be pre-emptively countering this by stimulating growth now, before such inflationary pressures creep in. In many ways, the RBI is borrowing a page from Trump’s own manual: act boldly, defend your domestic economy, and expect volatility.Rising imported inflation could lead to a depreciation of the rupee, which would further exacerbate inflationary pressures. The RBI might need to intervene in the currency markets to manage volatility. 

Certain sectors, such as those reliant on imported raw materials, might face increased costs due to higher imported inflation. This could impact their profitability and pricing power. This could flare up prices of imported raw materials or goods hiking costs leading to higher prices for goods and services. It could impact economic growth if consumers and businesses reduce spending in response to higher prices. 

India is not immune to global shocks, but this move ensures it isn’t caught unprepared. Overall, the RBI's rate cut decision is aimed at supporting growth, but a significant rise in imported inflation could alter the policy landscape and require adjustments to ensure price stability.Still the new policy if done properly could ensure Growth First, Global Noise Later.---INFA 

(Copyright, India News & Feature Alliance)