Economic Policy and Development - Newspaper Summary

 The sources reveal a dynamic period in October 2025 where Policy and Development spanned major regulatory reforms, strategic geopolitical maneuvers concerning energy and trade, crucial infrastructure dispute resolution, and significant state-led pushes for energy transition and innovation.

1. Financial and Market Regulatory Reforms

The Securities and Exchange Board of India (Sebi) and the Pension Fund Regulatory and Development Authority (PFRDA) introduced sweeping changes aimed at transparency, efficiency, and expanded options in capital markets and retirement savings.

• Mutual Fund Regulation Overhaul (Sebi): Sebi proposed major changes to how mutual funds operate and charge investors, seeking increased transparency and easing business restrictions.
  • Total Expense Ratio (TER) Structure: Sebi outlined an overhaul of the TER structure to include all associated charges (base expense ratio, brokerage, regulatory fees, etc.). However, statutory levies like Securities Transaction Tax (STT), Goods and Services Tax (GST), and stamp duty are proposed to be excluded from the main TER limit.
  • Capping Brokerage: The proposal suggests capping brokerage and transaction costs charged to investors, specifically reducing the brokerage limit for cash market transactions from 12 basis points (bps) to 2 bps (0.02%), and for derivatives from 5 bps (0.05%) to 1 bp (0.01%).
  • Eased Business Restrictions: Sebi proposed allowing Asset Management Companies (AMCs) to offer investment management and advisory services to non-pooled funds (funds not catering to retail investors), a move welcomed by industry leaders as aligning with global models.
• Pension Fund Reforms (PFRDA): PFRDA is shifting the focus of the National Pension System (NPS) from centrally designed products to enabling Pension Fund Managers (PFMs) to innovate.
  • Multiple Scheme Framework (MSF): The new framework permits up to 100% equity allocation, increased from the previous 75% cap, allowing PFMs to design multiple schemes across asset classes for customized options.
  • Expanding Payout Options: PFRDA is working to expand pension payout choices beyond the current narrow range of annuity products, including exploring increasing the withdrawal limit.
  • Targeting the Gig Economy: PFRDA is encouraging pension funds to design schemes specifically for platform workers (e.g., in e-commerce or delivery) by exploring mechanisms to route tips (like ₹20 or ₹50) into their NPS accounts.
• Commodity Exchange Oversight: Following a technical glitch at the Multi Commodity Exchange of India (MCX), Sebi rules were highlighted, which mandate declaring a "disaster" within 30 minutes and restoring trading within 45 minutes to avoid potential fines. The MCX faced a potential fine of approximately ₹25 crore based on these rules.

2. Strategic Economic Policies and Geopolitics

India is navigating complex international trade pressures while launching massive domestic initiatives in banking and energy.

• Public Sector Bank Mega-Mergers: The Finance Ministry is drawing up a blueprint for banking sector reforms aimed at scaling up and streamlining public sector lenders.
  • The primary discussion involves merging Union Bank of India and Bank of India, which would create the country's second-largest state-run lender by assets after SBI. The merged entity would have assets of ₹25.67 trillion.
  • Further consolidation being considered includes merging Indian Overseas Bank and Indian Bank.
  • The Ministry is also weighing the privatization of smaller lenders like Punjab & Sind Bank and Bank of Maharashtra in later phases.
• Geopolitics and Energy Sourcing (Oil): India is managing international pressure regarding its oil imports.
  • India's oil imports from the US surged to a daily 540,000 barrels in October, the highest since 2022, potentially driven by the pursuit of arbitrage opportunities between US (WTI) and global (Brent) crude prices, rather than a purely geopolitical shift.
  • Russia remained India's top oil supplier at around 1.75 million barrels per day.
  • State-run Indian Oil Corp. Ltd (IOC) explicitly stated it will “absolutely not” halt buying Russian crude while confirming compliance with international sanctions. This is despite fresh US sanctions targeting major Russian suppliers Rosneft and Lukoil, which account for about 55% of India’s Russian oil supply.
• Energy Transition and Behavioral Change (Niti Aayog): Niti Aayog recommended adopting a national mission for energy security focusing on behavioral shifts alongside technology deployment.
  • Recommendations include the mandatory use of 5-star-rated air conditioners and energy-efficient industrial motors, and enforcing energy codes for building construction.
  • Niti Aayog proposed a "concerted push" towards public transport, non-motorized options like bicycles, and pedestrian-friendly initiatives for travel under five kilometers in large cities.
  • Experts noted that pricing is a key challenge, suggesting the government may need to offer concessions or sops on expensive, sustainable equipment (like 5-star ACs) compared to cheaper variants.

3. Trade Disputes and Subsidy Design

India's economic policies face international scrutiny, requiring careful subsidy design to avoid trade conflicts.

• WTO Dispute over EV Subsidies: China has initiated a World Trade Organization (WTO) dispute over India’s subsidies for electric vehicles (EVs), alleging they fall into the "prohibited subsidies" category.
• Subsidy Compliance Requirements: Subsidies are classified as either Prohibited (contingent on using domestic over exported products, or on export performance) or Actionable (directed at domestic producers, but countervailable if they injure the importing country’s industry).
• Policy Imperative for Mitigation: India must design subsidies to mitigate legal risks by integrating trade-compatibility assessments into policy formulation. The safest approach is linking incentives to investments in R&D, design, innovation, and employment, rather than mandated domestic production or export performance requirements.
• Shrimp Export Tariffs: Indian shrimp exporters face challenges due to tariffs, including a 50% duty imposed by the US. Furthermore, US senators have proposed "The Indian Shrimp Act," which seeks to impose an anti-dumping duty of up to 40% on top of existing tariffs.

4. Infrastructure and Arbitration Policy

Policy changes are underway to address crippling infrastructure dispute backlogs.

• Curbing Arbitration Delays (NHAI): The government is introducing additional safeguards and scrutiny to prevent road and highway arbitrations against the National Highways Authority of India Ltd (NHAI) from running longer than expected and escalating costs.
  • Arbitration claims against NHAI swelled to nearly ₹1 trillion as of March.
  • The Union government directed regional officials to seek MoRTH’s (Ministry of Road Transport and Highways) approval before granting extensions to arbitrators or seeking court extensions for the arbitration period beyond two years. These changes aim to improve the efficiency and certainty of dispute resolution.

5. Innovation and Talent Development Policies

Policies are emerging to foster innovation, attract talent, and secure critical technology access.

• Space Sector Opening: The three-year-old policy allowing private companies into the space sector is yielding results, with Skyroot Aerospace set to conduct India's first commercial satellite launch by January 2026.
• Foreign University Entry and Faculty Demand (NEP): The incoming wave of foreign universities, aligned with the National Education Policy (NEP)'s expansion targets, has triggered a severe scarcity of top-tier academic talent and boosted faculty salaries.
• AI Access and Sovereignty: India faces a policy challenge in securing access to cutting-edge AI models, given that most frontier AI labs are in the US. Experts recommend negotiating model escrow arrangements and ensuring that inference endpoints reside in India's sovereign cloud environments to prevent access from becoming a geopolitical tool.
• R&D Data Reform: India's ambition to become an innovation-driven economy is handicapped by an outdated R&D data system. Policymakers rely on a biennial survey that suffers from low participation by private firms (less than 35% response rate) and lacks alignment with global standards (OECD’s Frascati Manual). Reforming this system is required to accurately track progress toward the ambitious target of raising national R&D spending to 2% of GDP by 2030.
• Pay Commission Approval: The Union Cabinet approved the Terms of Reference (ToR) for the 8th Pay Commission, which will impact 5 million central government employees and 6.9 million pensioners, with recommendations likely effective from 1 January 2026. The commission will review emolument structures based on prevailing conditions in Central Public Sector Undertakings and the private sector.