Newspaper Summary 160526

 

Singapore Airlines’ investment in Air India is a long game: says CEO

FLYING HIGH. We are committed to supporting the Indian airline’s transformation, says Goh Choon Phong.

MOVING ON. Goh Choon Phong said Air India’s loss in FY26 was due to closure of Pakistan airspace and depreciation of rupee.

Singapore Airlines’ investment in Air India is a long game, said CEO Goh Choon Phong in a post-results conference call on Friday. He stated that Singapore Airlines backs Air India management’s transformation efforts and noted that the Indian carrier’s $2.6 billion loss (₹26,000 crore) in FY26 was due to external factors such as the closure of Pakistan airspace and the depreciation of the rupee against the dollar.

Singapore Airlines’ own net profit declined 56 per cent in FY26, weighed down by Air India’s weak performance. Singapore Airlines currently holds a 25.1 per cent stake in Air India and invested an additional ₹1,080 crore in the carrier last March.

CAPITAL INJECTION

When asked about further capital injection, Goh replied that this would need to be discussed with Tata Sons. He reiterated that Air India’s challenges are largely external but insisted the airline continues to make tangible progress. “It is going to be a long game. There will be no short cuts,” he added regarding the transformation.

Goh, who serves as Singapore Airline’s nominee on the Air India board, highlighted significant transformations in training, in-flight services, and lounges. He cited that Air India’s net promoter score has improved by 50 points, which he credited to these transformative efforts for customers. To support the transformation, Singapore Airlines has seconded two senior executives to Air India: Captain Basil Kwauk as Chief Operations Officer and Jeremy Yew Jin Kit as Head of Engineering.

MULTI-HUB STRATEGY

The investment in Air India is part of Singapore Airlines' multi-hub strategy, driven by its limited home market and lack of domestic operations in Singapore. The airline aims to capitalize on India’s long-term growth opportunities. Despite facing questions over Air India’s current performance, Goh remains optimistic. “This is a market that holds tremendous potential and is even more obvious today,” he asserted.

Monsoon to hit Kerala coast on May 26

DESPITE EL NINO. IMD says the South-West monsoon is expected to arrive 6 days before the normal onset date.

Prabhudatta Mishra New Delhi

RAIN ARRIVAL. Pre-monsoon clouds blanket the skyline in Thiruvananthapuram. The monsoon is keenly awaited this year amid the IMD’s forecast of below-normal rainfall.

The India Meteorological Department (IMD) on Friday said that the monsoon will hit the Kerala coast on May 26, which is six days earlier than its normal schedule of June 1 in the mainland. The IMD also said that the South-West monsoon is very likely to advance into the South Andaman Sea, some parts of the south-east Bay of Bengal and the Nicobar Islands on May 16, against the normal May 20.

“This year, the South-West monsoon is likely to set in over Kerala on May 24, with a model error of plus or minus 4 days,” the IMD said in a statement. This year’s monsoon is keenly awaited amid forecasts by the IMD of below-normal rainfall during the June-September season and predictions of a super El Nino.

‘CORRECT’ FORECASTS

The weather bureau said its “operational forecasts” (inclusive of error margin) of the date of monsoon onset over Kerala during the past 21 years (2005-25) were proved correct, except in 2015. “Advance of the monsoon over the Indian mainland is marked by monsoon onset over Kerala and is an important indicator characterising the transition from hot and dry season to a rainy season,” IMD said. As the monsoon progresses northward, relief from the scorching summer temperatures is experienced over the areas.

The IMD has been issuing operational forecasts for the date of monsoon onset over Kerala from 2005 onwards, based on a statistical model. The six predictors that are used are:

• Minimum temperatures over North-West India.
• Pre-monsoon rainfall peak over the South Peninsula.
• Outgoing long wave radiation (OLR) over the South China Sea.
• Lower tropospheric zonal wind over the equatorial south-east Indian Ocean.
• Outgoing OLR over the south-west Pacific Ocean.
• Upper tropospheric zonal wind over the equatorial north-east Indian Ocean.

Last month, the IMD predicted the monsoon to be 92 per cent of the long-period average. This is in view of the drought-bearing El Nino likely to emerge by July.

India’s goods exports rise 14% in April despite W. Asia disruptions; deficit up on import surge

Amiti Sen
New Delhi

Despite continued trade disruptions in West Asia, India’s merchandise exports started the new fiscal year on a strong note, rising 13.79 per cent year-on-year to $43.56 billion in April. This growth was propelled by strong performances in engineering goods, electronics, and pharmaceuticals.

According to the Commerce Department’s quick estimates, imports grew 10 per cent to $71.94 billion, driven by a massive 81.69 per cent surge in gold arrivals to $5.62 billion. Consequently, the merchandise trade deficit widened to $28.38 billion, up from $20.67 billion in March and $27.1 billion in April 2025.

NEW MARKETS

Commerce Secretary Rajesh Agrawal stated that higher global prices and market diversification, including expansion into African nations like Tanzania, buoyed exports despite the ongoing Gulf turmoil.

However, significant challenges remain. Pankaj Chadha, Chairman of EEPC India, pointed out that the engineering sector is facing a sharp increase in input costs and skyrocketing logistics expenses. Furthermore, steel and its related products continue to face high tariffs in the US, which is India’s largest export market.

India’s exports to West Asia saw a sharp decline of 28 per cent, falling to $4.16 billion in April from $5.78 billion a year earlier. Agrawal noted that the Gulf war and the Strait of Hormuz blockade have continued to restrict trade in the region. Imports from West Asia, including petroleum, also declined by 31.64 per cent to $10.47 billion during the month.

The US maintained its position as India’s top export market, with shipments totaling $8.48 billion. Exports to Singapore saw a dramatic increase to $3.2 billion (from $1.14 billion), while shipments to the UAE fell to $2.19 billion. China ranked as the fourth-largest export market, with shipments valued at $1.77 billion.

IMPORTS RISE

Goods imports from China, India's largest source, rose to $11.97 billion in April from $9.91 billion last year. Imports from Russia also increased to $7.36 billion. Conversely, imports from the US saw a marginal decline to $5.27 billion, and those from the UAE dropped to $4.07 billion. Imports from Saudi Arabia grew to $3.85 billion.

US TEAM COMING

A US team is expected to visit India in June for further talks on an interim trade agreement, though specific dates are not yet finalized. This follows a visit by the Indian side to Washington in April to discuss details of the interim pact and broader bilateral trade negotiations.

Delegation from BRICS nations visits GIFT City

Our Bureau Ahmedabad

The GIFT City on Friday hosted a delegation comprising representatives from BRICS nations, providing them with an overview of India’s evolving International Financial Services Centre (IFSC) ecosystem and the growing opportunities in cross-border finance, fintech, trade and global business services. The visit assumes significance as India holds the BRICS Chair for 2026 under the theme “Building for Resilience, Innovation, Cooperation and Sustainability”. India is also set to host the 18th BRICS Summit and related ministerial engagements during the year, according to an official release.

As part of the visit, the delegation was apprised of GIFT City’s development as India’s maiden IFSC and its emergence as a gateway for international financial services, global capital flows and foreign currency transactions from within India. Senior officials from GIFT City and the International Financial Services Centres Authority made a detailed presentation covering the city’s regulatory ecosystem, globally benchmarked infrastructure, business environment and sectoral opportunities across banking, capital markets, fund management, insurance and reinsurance, aircraft leasing, fintech and global capability centres.

Commenting on the visit, Sanjay Kaul, Managing Director and Group CEO, GIFT City, stated, “GIFT City is steadily emerging as a globally competitive financial and innovation hub, enabling international financial services and cross-border business from India. The visit by the BRICS delegation provided an important opportunity to showcase GIFT City’s integrated financial and urban ecosystem, and to exchange perspectives on areas such as cross-border investments, sustainable finance, fintech innovation and economic cooperation”.

India-Korea partnership needs deeper engagement

Reji K Joseph

The CEPA has not met the expectations of either side. India faces market access barriers, and Korean investments are falling.

During South Korean President Lee Jae Myung’s visit to India in April, he announced, with Prime Minister Narendra Modi, a Joint Strategic Vision for the India-Korea Special Strategic Partnership. The vision calls for expanding bilateral trade to $50 billion by 2030, speedy conclusion of the upgrade of the Comprehensive Economic Partnership Agreement (CEPA), in force since 2010, and cooperation in critical areas such as supply-chain resilience, green hydrogen and nuclear power.

This is an opportune time for the two economies to tap their complementarities. Korea is a manufacturing powerhouse, and India is determined to transform its manufacturing base. India offers an attractive alternative location for Korean firms looking to diversify their supply chains. India’s deep human-resource pool and software ecosystem also complement Korea’s hardware strengths — a natural fit for collaboration in semiconductors, electronics and artificial intelligence.

The key question, however, is why the existing CEPA has not met the expectations of either side. Three issues stand out:

MARKET ACCESS BARRIERS

One, Indian exporters face major market access barriers in Korea. Despite India’s rising share in global merchandise trade, Korea’s share in India’s exports has declined from 2 per cent in 2009 to 1 per cent in 2024, while India’s merchandise trade deficit with Korea has quadrupled from $4 billion to $16 billion.

A study at ISID has identified 26 product groups — including pharmaceuticals, textiles and apparel, marine products and leather — where India has a global comparative advantage but only a marginal presence in the Korean market. In pharmaceuticals, complicated import procedures make market access effectively impossible for Indian exporters: though India accounted for 3 per cent of global imports in 2024, its share in Korea’s imports was barely 1 per cent.

INVESTMENT SLOWDOWN

Two, the missing second wave of Korean investment is a serious concern. The first wave came in the 1990s, when Samsung, LG and Hyundai established their operations in India. Korean FDI accounted for close to 4 per cent of India’s inflows in that decade, peaking at 13 per cent in 1999.

The post-CEPA period was expected to bring a second wave, with expectations rising further in the wake of Make in India initiatives and the Production Linked Incentive (PLI) scheme. Yet Korea’s share in India’s FDI inflows over the last five years has been only about 0.7 per cent. Korea has been diversifying its outward investment as part of a broader restructuring of its supply chains: its manufacturing OFDI (Outward FDI) in the last two years is more than double pre-pandemic levels.

The Fast Track Mechanism set up by DPIIT and Invest India in March 2024 to address the grievances of Korean investors is a useful start, but much more needs to be done to end this elusiveness.

CEPA COMMITMENTS AND RULES OF ORIGIN

Three, Korea has long maintained that India’s commitments under CEPA have not been substantial — pointing to the deeper concessions in India’s other FTAs, for example CEPA with Japan. Korea has also flagged that India’s rules-of-origin requirements are unusually stringent and have deterred Korean firms.

On the first count, India is now better placed to make deeper commitments in the upgraded CEPA. The second is harder. India is seriously concerned about third-country routing through FTAs and has tightened its rules of origin accordingly. The notification of April 2025 has shifted the regulatory burden from compliance certificates issued by the partner country to a verification-based regime imposed on the importer. Korean conglomerates, whose procurement, pricing and supplier management are generally centralised at headquarters rather than at local subsidiaries, will find the new rules harder to navigate.

CONCLUSION

The Joint Strategic Vision has identified the right priorities and laid down a credible framework for transforming the India-Korea economic partnership. However, market access barriers facing Indian exporters, the missing second wave of Korean investment, and rules-of-origin compliance need immediate attention from policymakers in both countries.

The writer is faculty member, Institute for Studies in Industrial Development, New Delhi

Regulators as board leaders?

SN ANANTHASUBRAMANIAN & MS SAHOO

Moving from certainty of legal frameworks to ambiguity of markets requires a different approach.

In India’s evolving governance landscape, a quiet but significant trend has taken root: retired secretaries to the Government of India and former heads of statutory regulatory agencies are increasingly stepping into boardrooms as non-executive chairpersons, shaping the strategic trajectory of listed companies. The appeal is intuitive: who better to steer governance than those who have helped define and enforce it?. In an era of heightened scrutiny, their presence lends gravitas and reassures investors and stakeholders alike.

The transition from regulator to board leader is, however, not always seamless. Public office is typically defined by hierarchy, guided by precedent, and oriented towards risk minimisation. The boardroom, in contrast, demands strategic judgment, commercial foresight, and the ability to guide rather than direct. The chairperson’s role extends beyond compliance to shaping the firm’s long-term direction, mentoring management, and balancing prudence with enterprise. The issue, therefore, is not one of intent or integrity, but of institutional fit and role adaptation.

UNDERSTANDING THE SHIFT

This shift is best understood as a change in institutional logic rather than capability. Moving from the certainty of legal frameworks to the ambiguity of markets requires a different orientation: from enforcing rules to enabling outcomes, and from formal authority to influence exercised through engagement. Governance in this setting depends not on past designation, but on the capacity to interrogate assumptions, contribute to strategy, and exercise independent judgment. Absent these attributes, even the most distinguished appointments risk becoming symbolic rather than substantive.

Moving from regulator to board leader involves a shift from adjudication and enforcement to strategy and performance. The point is not about competence, but about context: expertise is domain-specific, and institutional roles require recalibration when carried across settings. This gap is not universal, but where it exists, it tends to be specific. It often lies in areas such as capital allocation, industry structure, and competitive positioning, as well as in the softer skills of boardroom engagement: questioning, dissent, and consensus-building.

These distinctions become most visible in decision-making styles. Public officials are accustomed to operating within clearly defined authority structures, where decisions are backed by ministerial responsibility. Boards, however, are deliberative bodies that rely on collective reasoning, where accountability is direct and cannot be externalised. Effectiveness depends less on authority and more on persuasion, listening, and constructive challenge. Without conscious adaptation, hierarchical instincts may sit uneasily within a collaborative governance environment.

REGULATORY OVERHANG

A related concern is the risk of a regulatory overhang. Boards led by individuals steeped in regulatory culture may exhibit excessive caution. While this strengthens compliance and reduces downside risk, it may also constrain strategic flexibility in sectors where innovation, speed, and calculated risk are essential. The result is not governance failure, but a potential imbalance between prudence and enterprise that may affect competitiveness, at the margin.

It is equally important to recognise that past performance in public office is not a reliable predictor of effectiveness in competitive markets. Unlike regulatory roles, where outcomes are often episodic and compliance-driven, corporate leadership is continuously tested by market performance, capital allocation decisions, and quarterly expectations. The metrics, rhythm, and accountability structures differ in material ways.

That said, it would be reductive to view such appointments sceptically. Former public officials bring valuable strengths in governance discipline, crisis management, and public accountability. These attributes can significantly enrich board deliberations, particularly in regulated sectors. The question is not whether they add value, but how that value can be fully realised.

IMPROVING OUTCOMES

The answer lies in calibration. One way to improve outcomes is through structured sequencing. Former regulators could first serve as independent directors, gaining exposure to business models, competitive dynamics, and boardroom processes, before assuming chair positions. This, in turn, raises a broader institutional issue: the effectiveness of independent directors themselves. While views may differ on how well the institution has delivered on its promise, one principle remains uncontroversial: no role of consequence can be performed effectively without preparation.

If independent directors are expected to exercise judgment, oversee complex management structures, and challenge corporate strategy constructively, they must be equipped accordingly. This requires more than familiarity with law or finance; it calls for capabilities in strategic thinking, risk assessment, communication, scepticism, and ethical reasoning, regardless of whether they come from public service or private sector, as each brings distinct strengths but also potential blind spots. The recent regulatory emphasis on structured training and capacity-building is a positive step, but it may not be sufficient to meet the demands of increasingly complex corporate structures.

It is time to reconceptualise independent directorship, and, by extension, board leadership, as a profession in its own right. This would entail structured induction, continuous professional development, and certification through rigorous assessment, without grandfathering. Crucially, it must be anchored in a stringent conflict-of-interest framework, including cooling-off periods and robust fit and proper evaluations. It would also require clearer standards of accountability for contribution, not just conduct. Without such professionalisation, expectations will continue to outpace outcomes.

Within such a framework, the role of former regulators as Chairmen becomes easier to situate. Their experience remains valuable, but the effectiveness depends on preparation, sectoral understanding, and integration into a board culture that balances regulatory wisdom with commercial acumen. The journey from a full-time regulator to a part-time chairman is not merely a change in position; it is a shift in mindset and mode of engagement. Those who navigate this transition successfully can strengthen boards and contribute meaningfully to corporate India; those who do not may remain distinguished, but not decisive.

As India’s governance architecture matures, the focus must move beyond credentials to competence, and beyond optics to outcomes. The objective is not merely to populate boardrooms with experience, but to ensure that such experience translates into effective oversight, strategic insight, and sustained value creation.

The writers are former President and former Secretary, respectively, of the Institute of Company Secretaries of India.

Newspaper Summary 150526

 

WPI inflation hits 42-month high of 8.3% in April as fuel prices surge

By Shishir Sinha, New Delhi

Driven by a surge in fuel prices, wholesale inflation, measured by the Wholesale Price Index (WPI), reached a 42-month high of 8.3 per cent in April. This is a significant jump from the 3.88 per cent recorded in March.

The Ministry of Commerce and Industry stated that this positive rate of inflation is primarily due to rising prices for mineral oils, crude petroleum and natural gas, basic metals, non-food articles, and other manufactured products. Specifically, inflation in the fuel and power segment skyrocketed to 24.71 per cent in April, up from just 1.05 per cent in March. Crude petroleum inflation reached 88.06 per cent, largely reflecting the impact of the West Asia crisis and the effective blockade of the Strait of Hormuz.

Further details from the fuel and power basket include:

• Petrol: Increased to 32.40 per cent (from 2.50 per cent in March).
• High-speed diesel: Rose to 25.19 per cent (from 3.26 per cent).
• LPG: Reached 10.92 per cent (from -1.54 per cent).

Despite a 50 per cent spike in global crude oil prices, the government has maintained stable rates for fuel pumps and household LPG to protect consumers, though prices for commercial LPG cylinders have been raised.

In other categories, inflation for non-food articles rose to 12.18 per cent (from 11.5 per cent), while food articles saw a slight increase to 1.98 per cent (from 1.90 per cent).

Outlook and Economic Impact Rahul Agrawal, Senior Economist at ICRA, noted that the significant jump between March and April suggests that March's figures may be revised upward in June. He expects the WPI print for May to exceed 9 per cent due to hardening food prices, continued pass-through of elevated energy costs, and the depreciation of the rupee.

Additionally, the gap between CPI and WPI prints widened to a 44-month high of 482 basis points in April. Agrawal anticipates that CPI inflation will cross 4 per cent in May, but expects the Monetary Policy Committee (MPC) to remain on hold during the June review due to uncertainty surrounding the duration of the West Asia conflict.

Air India losses drag SIA Group’s FY26 net profit down 57 per cent

By Rohit Vaid, New Delhi

The Tata Group-led Air India’s losses have significantly weighed on the net profit of its other major stakeholder, the Singapore Airlines (SIA) Group, which holds a 25.1 per cent stake in the carrier.

Accordingly, Singapore Airlines Group’s net profit declined 57 per cent to SGD 1.184 billion in FY25-26, down from SGD 2.778 billion in the previous fiscal year. In its annual report, the SIA Group noted that Air India posted a loss of SGD 3.56 billion (equivalent to over ₹26,000 crore) during FY25-26.

Difficult Conditions and Accounting Factors

The group’s auditors have flagged the Air India investment as an area of financial risk due to difficult operating conditions and geopolitical uncertainty. However, following a review, the SIA Group did not write down the value of its investment.

SIA stated that the decline in net profit was primarily due to the absence of a SGD 1.098 billion non-cash accounting gain that had been recognised in November 2024 after the completion of the Air India-Vistara merger. Additionally, the swing from profits to losses for associated companies in FY25-26 resulted from SIA accounting for its share of Air India’s full-year losses, compared with only four months in the previous fiscal year. This resulted in a negative earnings impact of SGD 846 million during the year.

Commitment to India Operations

Despite the financial strain, the SIA Group reiterated its commitment to the Air India investment, describing it as a “core component” of its long-term multi-hub strategy. The group noted that the investment provides critical exposure to one of the world’s largest and fastest-growing aviation markets while complementing its Singapore hub. SIA is working closely with Tata Sons to support Air India’s multi-year transformation programme.

Air India’s Headwinds

According to the SIA Group, Air India faces several challenges, including:

• Industry-wide supply chain constraints.
• Air space restrictions and constraints on operations to key West Asia markets.
• Elevated jet fuel prices.

Amidst this growing pressure, senior executives from Singapore Airlines recently travelled to India to discuss the carrier’s operational and financial situation with Tata Sons.

Impact on Workforce and Operations

During an internal interaction with employees, Air India management indicated that no workforce reduction is currently planned. However, the airline has deferred annual salary hikes for at least one quarter.

Chief Executive Officer and Managing Director Campbell Wilson informed employees that external developments continue to exert pressure on profitability. Consequently, Air India has temporarily suspended flights on multiple international routes and reduced frequencies across several overseas operations between June and August 2026.

‘India ready for global headwinds, revenue loss will not affect stability’

STABILISATION PUSH. Measures taken over past 2 months will protect economy, say FinMin officials
FISCAL CUSHION. The Centre said it can comfortably manage an estimated ₹1 lakh crore revenue loss from recent excise duty cuts on petrol and diesel, citing strong fiscal buffers and reforms

By Shishir Sinha, New Delhi

The Centre on Thursday said it had sufficient fiscal headroom to manage the impact of global economic turbulence despite an estimated revenue loss of nearly ₹1 lakh crore from the recent cut in excise duty on petrol and diesel. While outlining a series of measures taken over the past two months to shield the economy from external shocks, Finance Ministry officials stated the government’s ability to absorb this impact stemmed from “prudent fiscal management and sustained reforms over the last decade”.

“The ability to act proactively, allocate resources and provide relief where needed is the result of prudent fiscal management and sustained reforms over the last decade,” an official said, adding that the government remained committed to protecting economic stability amid global uncertainty. Officials noted that the ₹10 per litre reduction in central excise duty on petrol and diesel, announced on March 26 in response to sharp rises in global crude oil prices, could result in a revenue loss of approximately ₹1 lakh crore this financial year.

Fuel Tax Cuts

According to the government, the fuel tax cut was intended to:

• Cushion consumers from rising fuel prices.
• Contain inflationary pressures.
• Support the transport and logistics sectors.
• Ease pressure on oil marketing companies.

Simultaneously, the Centre imposed export duties and cesses on petrol, diesel, and aviation turbine fuel to discourage overseas shipments and ensure domestic availability amid volatile energy markets. Officials revealed that 16 measures have been introduced over the past 72 days to mitigate the economic impact of the global crisis, particularly disruptions stemming from tensions in West Asia. One key step was the creation of an Economic Stabilisation Fund with a corpus of ₹1 lakh crore to serve as a fiscal buffer against supply-chain disruptions and other external shocks.

Industry Relief

The government also announced targeted relief for domestic industries:

• SEZ Relief Window: Notified on March 31, this allows eligible manufacturing units in Special Economic Zones to sell goods in the domestic tariff area at concessional customs duty, helping companies utilize idle capacity.
• Petrochemical Inputs: Customs duty exemptions were granted from April 2 to June 30 to support sectors like textiles and pharmaceuticals that rely heavily on imported raw materials.
• ECLGS 5.0: The Cabinet recently approved the Emergency Credit Line Guarantee Scheme 5.0 to ease working capital stress for MSMEs, traders, and airlines affected by the West Asia crisis. This scheme is expected to facilitate an additional credit flow of ₹2.55 lakh crore, with 100 per cent government guarantee coverage for MSME loans.

Import Duty Tweaks

On Wednesday, the government further raised import duties on gold, silver, and platinum to curb non-essential imports, aiming to reduce pressure on foreign exchange reserves and stabilize the rupee.

‘Nifty may hit 42K by 2029 if FII flow reverses’

By Our Bureau, Bengaluru

The Nifty 50 could potentially scale 42,000 by 2029 if historical flow patterns and domestic growth momentum sustain, according to a report by CNI InfoXchange that analysed past trends, particularly following periods of heavy selling by foreign portfolio investors.

Market Resurgence

The report, titled Nifty’s Resurgence With the Return of FII, suggests that equities have increasingly become flow-driven rather than purely earnings-led over the last several years. The study highlighted two significant periods:

• Nearly $54 billion in FII inflows between 2019 and September 2021 powered a 63 per cent rally in the Nifty.
• An additional $45 billion in inflows between July 2022 and September 2024 resulted in a 68 per cent surge in the benchmark index.

The report notes that India's market structure has fundamentally strengthened due to expanding domestic institutional investor (DII) participation, systematic investment plan (SIP) inflows, and growing alternative investment fund activity. These factors have collectively reduced the market’s vulnerability to foreign selling, keeping market corrections relatively contained even during periods of heavy FII outflows.

Projections for 2029

If the country attracts another $50 billion in FII inflows over the next two years, historical dynamics could push the Nifty toward 40,000-42,000 by 2028-29. Key factors supporting this rally include:

• Sustained GDP growth above 7 per cent.
• Supportive RBI policy and large-scale infrastructure and manufacturing reforms.
• Strong domestic liquidity and a continued capex cycle backed by government spending.

Furthermore, the report expects India’s weight in the MSCI Emerging Markets Index to rise to 23.5-25 per cent by FY28, potentially overtaking China. It projects a total FPI and FDI inflow potential of $160-180 billion over FY27 and FY28.

The report concludes that while the bull case requires strong earnings growth, stable inflation, and supportive global liquidity, the path to 42,000 remains heavily dependent on global macro stability.

Puttaparthi to host major defence infra hub

By Our Bureau, Hyderabad

The laying of the foundation stone for the advanced medium combat aircraft (AMCA) programme infrastructure and the launch of multiple defence, aerospace and drone manufacturing projects will be held in Andhra Pradesh’s Puttaparthi on May 15. The event is a major milestone for the State to emerge as a hub for defence manufacturing, aerospace innovation and unmanned systems development.

Tesla opens experience centre in Bengaluru

Bengaluru: Tesla has opened its fourth experience centre in Bengaluru’s Whitefield. Since entering India in July 2025, Tesla has opened experience centres in Mumbai, Delhi, and Gurugram, with Bengaluru emerging as its fourth key market. It has sold over 340 vehicles in India so far, largely driven by the Model Y lineup, while also expanding charging and service infrastructure across major metros.

— OUR BUREAU

‘Air connectivity between India, Singapore adequate’

Our Bureau, Mumbai

Air connectivity between India and Singapore remains adequate with more than 250 weekly services, Singapore’s Changi Airport Group (CAG) has said.

The airport operator issued a statement after Air India announced a cut in its overseas flights, including to Singapore. While Air India has temporarily suspended its Chennai-Singapore flight till August, frequencies from Mumbai and Delhi have been reduced.

Adequately Served

“We understand that the current environment can be challenging for some of our airline partners. Even with the reduction of services by Air India, passengers who wish to travel between India and Singapore remain adequately served, with more than 250 weekly services across 15 Indian cities scheduled for June,” the CAG said.

Singapore Airlines is the largest carrier on India-Singapore routes, followed by IndiGo, Scoot, Air India and Air India Express. Bhutan’s Druk Air also connects Guwahati with Singapore.

“When the macro environment improves, CAG is committed to working closely with Air India to reinstate the suspended flights,” the group added.

India is the fifth largest source market for Singapore Tourism, with over 2.46 lakh visitors in the first three months of CY 2026. In 2025, the island state received over 1.2 million Indian tourists.

While outbound travel, especially to Gulf and long-haul markets, has been impacted by the West Asia conflict, travel companies are banking on short-haul segments to drive business growth. Corporate travel demand is also expected to hold steady.

Newspaper Summary 140526

 The article titled "Govt raises import duty on gold, silver, platinum to conserve forex" is reproduced below from the sources:

Days after Prime Minister Narendra Modi urged citizens to defer gold purchases for a year as part of a broader national effort to conserve foreign exchange, the government on Wednesday sharply increased the import duty on precious metals amid concerns over the external sector and the impact of the West Asia crisis on India’s import bill.

A Finance Ministry notification said the import duty on gold and silver had been increased to 15 per cent from 6 per cent, while the levy on platinum had been raised to 15.4 per cent from 6.4 per cent. Consequential changes had also been made to gold and silver dore, coins and related items, with the revised rates coming into effect from Wednesday.

“This has been done as a policy measure aimed at safeguarding macroeconomic stability, conserving foreign exchange and moderating non-essential imports during a period of heightened global uncertainty arising from the ongoing West Asia crisis,” an official said. Officials added that the import duty on precious metals had historically been adjusted in line with prevailing macroeconomic and external sector conditions. In the Union Budget 2024-25, import duties on gold and silver were cut from 15 per cent to 6 per cent and on platinum from 15.4 per cent to 6.4 per cent, reflecting what officials described as a more comfortable external sector position at the time.

UAE ROUTE

The government simultaneously tightened the concessional import route available under the India-UAE Comprehensive Economic Partnership Agreement (CEPA), raising the duty on gold imported under the tariff rate quota to 14 per cent from 5 per cent. The move preserves only the existing 1 percentage point preferential margin over the standard duty rate and is aimed at plugging a possible arbitrage route after the sharp increase in headline Customs duty.

The tightening comes amid growing concern over rising gold imports routed through Dubai. According to an analysis by the Global Trade Research Initiative (GTRI), gold bar imports from the UAE surged to $16.5 billion in 2025 from $2.9 billion in 2022, while the UAE’s share in India’s gold imports rose to 28 per cent from 7.9 per cent during the same period.

Officials said the latest duty hike is part of a broader strategy to conserve foreign exchange and prioritise essential imports such as crude oil, fertilizers, industrial raw materials, defence equipment and capital goods, amid global uncertainties and the risk of a widening current account deficit (CAD).

DEMAND IMPACT

Economists said the higher tariff could moderate gold demand and offer some relief to the CAD, though part of the gains may be offset by smuggling.

• Rajani Sinha, Chief Economist at CareEdge, said a cumulative 9 percentage point increase in duty could reduce gold demand by 50-60 tonnes annually, lowering imports worth $6-9 billion at current international prices.
• Debopam Chaudhuri, Chief Economist, Piramal Group, estimated that the move could save $2.5 billion, or about ₹23,750 crore, in FY27 if the tariff hike is fully passed on to consumers.

The article titled "Uber to set up first India data centre with Adani Group" is reproduced below from the sources:

Uber will set up its first data centre in India in partnership with the Adani Group, marking a significant expansion of its technology infrastructure in the country. Uber CEO Dara Khosrowshahi announced the move in a post on X.

“Great to meet @gautam_adani in Ahmedabad this morning and build on our existing partnership with the Adani group. As India fast emerges as a leading innovation hub for @Uber, we are setting up our first data center in the [country],” Khosrowshahi wrote.

In January 2026, Adani Enterprises Ltd stated that the company will invest over ₹5,000 crore in a 100 MW data centre powered by renewable energy, over the coming 5-7 years.

Adani will work closely with local MSMEs and start-ups to develop a globally competent supplier base and generate 600 jobs directly and indirectly.

The article titled "India, Chile review progress of free trade pact talks" is reproduced below as it appears in the source material:

India and Chile, a South American nation, on Wednesday reviewed the progress of negotiations for the proposed free trade agreement and discussed and Commerce Secretary Rajesh Agrawal here.

“Apart from discussing the modalities for early conclusion of Comprehensive Economic Partnership Agreement, the interactions also covered a broad range of issues relating to trade facilitation, market ac-

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Note: The text for this article in the provided source appears to be incomplete and ends abruptly.

The article titled "Banks’ credit offtake, deposit growth surged in second fortnight of April" is reproduced below from the sources:

After a substantial decline in the first fortnight of the current financial year (FY27), banks’ credit offtake and deposit accretion gathered pace in the second fortnight of April.

Credit growth of all scheduled banks jumped by ₹2,95,164 crore in the reporting fortnight ended April 30, compared to a decline of ₹4,56,208 crore in the preceding fortnight. Further, deposit accumulation was robust at ₹2,12,302 crore against a decline of ₹5,95,607 crore, according to RBI data.

Outstanding bank credit and deposits in the first fortnight typically tend to decline as short-term business contracted in the run-up to the financial year-end winds down. In fact, credit offtake and deposit accretion in the reporting quarter is higher than the year-ago fortnight’s ₹96,509 crore and ₹1,68,845 crore, respectively.

In a recent report, ICRA noted that with India’s real GDP growth expected to grow at a slower clip of 6.5 per cent in FY27 (against an estimated 7.5 per cent for FY26), it expects bank credit to moderate and the slippage rate to rise in the current financial year amid heightened geopolitical uncertainties and evolving interest rate dynamics.

The rating agency expects credit growth to moderate to sub-12 per cent in FY27 (at 11.0-11.7 per cent, surpassing the growth rate of 10.9 per cent in FY25) from the significantly high level of 15.9 per cent in FY26.

The article titled "AERA defers 15% revenue recovery to moderate Noida airport charges" is reproduced below from the sources:

The Airports Economic Regulatory Authority (AERA) has deferred 15.02 per cent of the aggregate revenue requirement (ARR) in the final tariff order for the first control period between 2026 and 2031 for Noida International Airport. On Monday, businessline, in a conversation with AERA Chairperson SKG Rahate, had reported that the authority had significantly rationalised the ARR proposed by the airport operator. Accordingly, the ARR has been deferred to the next tariff cycle to moderate airport charges during the initial years of operation.

The regulator said the move was aimed at reducing the tariff burden on passengers and airlines at the upcoming greenfield airport, which is scheduled to commence commercial operations from June 15.

TARIFF PROPOSAL

Notably, AERA said Yamuna International Airport Private Ltd (YIAPL), the airport operator, had submitted an ARR of around ₹6,847 crore for the first control period under its multi-year tariff proposal. However, after carrying out analysis, prudence checks and stakeholder consultations, AERA said it rationalised the proposed revenue requirement and allowed around ₹5,308 crore.

“Keeping in mind the fact that Noida Airport is a greenfield airport with significant upfront capital investment and a comparatively lower initial traffic base resulting in higher airport charges, AERA has deferred (carried forward) a substantial portion (15.02 per cent) of the ARR to the next tariff cycle (2nd control period) so as to moderate the airport charges in the interests of passengers and airlines,” the regulator said.

USER DEVELOPMENT FEE

Consequently, AERA fixed the user development fee (UDF) for departing domestic passengers at ₹490 per passenger for 2026-27 against ₹653 proposed by the airport operator. For departing international passengers, the regulator fixed a UDF rate of ₹980 against the proposed ₹1,200. These charges are unchanged from the ad hoc tariff order issued by the regulator in August 2025.

Besides, the domestic landing charge was fixed at ₹725 per tonne compared to the ₹760 proposed by the airport operator. Furthermore, AERA said the UDF approved for the airport remains comparable with the national average at major airports and within the range currently levied at non-major airports.

Similarly, the regulator pointed out that UDF has been determined for both embarking and disembarking passengers as airport infrastructure such as aero bridges, travelators, conveyor belts, and terminal facilities are utilised by both categories of passengers. Meanwhile, AERA said distributing the tariff burden between departing and arriving passengers would ensure a more equitable recovery of airport infrastructure costs.

VARIABLE TARIFF PLAN

The regulator further approved a Variable Tariff Plan for the airport in order to encourage airlines to start new routes, increase flight frequencies, and expand network operations during the initial years of traffic ramp-up. According to AERA, the variable tariff plan will primarily apply to landing and parking charges and is expected to support airlines in gradually building passenger traffic from the airport.

In addition, AERA reiterated that airport charges at Noida International Airport cannot be directly compared with those at Delhi airport due to structural differences between greenfield and brownfield airports. Speaking to businessline a day earlier, AERA Chairperson Rahate said Delhi airport is an established brownfield airport with depreciated assets and high passenger traffic, whereas Noida International Airport is a newly-operational greenfield airport built with substantial upfront investments and lower initial traffic volumes.

IDENTICAL FARES

Presently, Noida International Airport’s fares are nearly identical to those from Delhi airport on several domestic routes despite Uttar Pradesh levying only 1 per cent value added tax on ATF compared to nearly 25 per cent in Delhi. These fares have led some industry executives to state that higher aeronautical charges and UDF at the airport are offsetting gains arising from lower fuel taxation. Nonetheless, sectoral experts aware of the tariff structure said these charges account for only a small portion of airline operating costs, while airlines continue to derive significant benefits from lower ATF taxation in Uttar Pradesh.

By Rohit Vaid, New Delhi.

The article titled "Yellow metal holdings of gold ETFs soared 79% over the past year" is reproduced below from the sources:

While a large part of gold imports is led by jewellery consumers, demand from exchange-traded funds (ETFs) has also seen a surge over the past year. Data from the World Gold Council (WGC) show that assets under management of gold ETFs listed in India increased from $7.2 billion in April 2025 to $18.4 billion in May 2026. Given the mandate to back their investments with physical gold, ETFs have increased their holdings from 65.3 tonnes to 116.7 tonnes in the same period, registering an increase of 79 per cent.

WHY THE INCREASE

Gold prices have had a stellar run over the last two years, more than doubling from around $2,100 per ounce in April 2024. Heightened uncertainty caused by Trump’s reciprocal tariffs and the ongoing Iran war are the prime reasons cited for the increase in prices.

In times of sharp price increases, demand from jewellery buyers typically comes down while investment demand surges. According to the WGC, demand for jewellery dropped from 563 tonnes in 2024 to 440 tonnes in 2025. But in the same period, holdings of Indian gold ETFs recorded a sharp increase. Total demand from global gold exchange-traded funds amounted to 794 tonnes in 2025, driving prices higher.

Interestingly, WGC data show that investments in gold could be in the form of gold bars and coins, besides gold ETFs. Gold ETFs account for only 40 per cent of the gold investment demand.

INFLOWS CONTINUE

Inflows have continued into India’s top gold ETFs, resulting in continued demand.

• Nippon India Gold BeES, which holds 36.5 tonnes of gold, has witnessed inflows of $1.1 billion so far in 2026.
• ICICI Prudential Gold iWIN ETF (holding 17.3 tonnes) received $673 million this year.
• SBI ETF Gold (holding 16.1 tonnes) received $522 million.

By Lokeshwarri SK, Chennai.

The article titled "SEBI eases FPI tax liability concerns" is reproduced below from the sources:

The Securities and Exchange Board of India (SEBI) has clarified to banks, custodians and brokers that they will not be held liable for the tax dues of offshore funds in India, easing concerns that had delayed fresh foreign portfolio investor (FPI) registrations and PAN issuance since last month, according to people familiar with the matter.

A public clarification note on the issue is expected to be issued soon by depositories or the Income Tax Department, sources said. “This will be very helpful for foreign investors to find appropriate domestic representatives to complete the new RA or AR entry in the CAF form,” one person aware of the discussions said.

The issue arose after changes were introduced to the common application form (CAF) framework and PAN application process for FPIs from April 1. Under the revised framework, representatives of offshore funds, including custodians and intermediaries acting on behalf of FPIs, were required to furnish additional details while applying for PAN allotment for clients.

LIABILITY CONCERNS

This requirement raised concerns among banks, brokers and other intermediaries over whether they could face potential tax liability for the offshore funds they represented. As a result, FPIs found it difficult to identify domestic representative assessees willing to take up the role, which slowed onboarding and delayed fresh fund launches.

PAN issuance for new FPIs had been impacted over the past month, with at least 20 newly registered FPIs currently awaiting PAN allotment despite completing registration formalities, according to sources.

Following consultations with the Income Tax Department, SEBI is understood to have clarified via email on Wednesday that banks and brokers acting as representatives for offshore funds would not be exposed to tax liability on behalf of their clients. This clarification is expected to help ease the current bottleneck in FPI onboarding and PAN issuance, market participants said.

By Akshata Gorde, Mumbai.

Newspaper Summary 090526

 

US trade court junks 10% Trump tariff; India gets edge in BTA talks

NOT OUT OF WOODS. USTR’s Sec 301 probe still a worry for Delhi Amiti Sen — New Delhi

The US Court of International Trade has ruled against President Donald Trump’s 10 per cent global tariff imposed on all trade partners, including India.

The move, which will bring down import levies in the US to the basic MFN (most favoured nation) level, is expected to strengthen India’s hand in the ongoing bilateral trade agreement (BTA) negotiations with the US, a source tracking it told businessline.

LEGAL SETBACK

A three-judge panel of the specialised federal court in New York delivered a 2-1 ruling on Thursday against Trump’s February 20 announcement of a 10 per cent global tariff under Section 122 of a 1974 trade law.

The court said that the tariff, imposed for 150 days, was unlawful as it could be justified only in case of a large and serious balance of payment problem and not just a trade deficit.

“India continues to engage with the US on the BTA, the framework for which has already been agreed upon. But it has been delaying a final commitment as the tariff situation is still evolving after the US Supreme Court struck down reciprocal levies earlier this year. The new development further strengthens India’s hand in the negotiations,” the source said.

Both the reciprocal tariffs (fixed at 25 per cent for India) imposed under IEEPA and the 10 per cent Section 122 global tariffs were on a legally weak footing and have now been struck down by courts, pointed out Ajay Srivastava of the Global Trade and Research Initiative.

PENALTY THREAT

However, the ongoing Section 301 investigations against India and some other countries, launched by the US Trade Representative in March, continue to be worrying for New Delhi, as they could trigger significant trade penalties.

“India should wait until the US develops a stable and legally reliable trade system before concluding the BTA,” Srivastava said.

Per the preliminary India-US interim bilateral trade framework announced on February 2, India agreed to eliminate or lower tariffs on most industrial and agricultural products, while the US agreed to lower reciprocal tariffs to 18 per cent from 25 per cent (which were later struck down).

“No trade deal was signed between India and the US, so the framework has no legal tenability. India is well within its rights for a re-think based on the new tariff realities,” the source said.

India, Oman to discuss FTA implementation

New Delhi: Early implementation of the free trade agreement (FTA) signed in December 2025 is likely to figure in the meeting of India and Oman on May 11 here, an official said.

The agreement will provide duty-free access to 98 per cent of India’s exports, including textiles, agri and leather goods in Oman. On the other hand, India will reduce tariffs on Omanese products such as dates, marbles and petrochemical items. — PTI

India planning aircraft financing overhaul and framework for fractional ownership

Our Bureau — Ahmedabad

The Union Civil Aviation Ministry is working on a series of policy initiatives aimed at deepening India’s aircraft financing ecosystem, including a framework for fractional aircraft ownership and efforts to classify aircraft as an infrastructure asset, Union Civil Aviation Minister Ram Mohan Naidu said on Friday.

Speaking at the Aircraft Leasing and Financing Summit 2.0 in GIFT City, Naidu said the Ministry is in discussions with the Finance Ministry to create a regulatory framework that could allow fractional ownership models in aviation. “We are actively working on some forward-looking concepts including fractional ownership in aviation. We are trying to create a policy so that fractional ownership becomes a reality in our country,” Naidu said. He added the government is also examining ways to classify aircraft as infrastructure assets, a move that could potentially open up access to long-term institutional financing for the sector. “Fractional ownership and taking aircraft as an infrastructure asset are two things which are work in progress,” the Minister said.

SEAPLANE OPERATIONS

The comments come at a time when Indian airlines are in the midst of one of the world’s largest fleet expansion programmes, with carriers collectively ordering more than 1,600 aircraft and increasingly looking to route leasing and financing activity through Gujarat’s GIFT IFSC.

Naidu also said the government is preparing to restart seaplane operations in India, with services likely to begin between Kochi and Lakshadweep in two-weeks time. “Seaplane operations we are going to start in two weeks between Kochi and Lakshadweep. It was supposed to be quite an impossible task for quite some time. The Ministry has streamlined the guidelines and we are proud to say that very soon India is going to see seaplane operations back on its map,” he said. He added that the move could create new opportunities for aircraft and seaplane leasing companies.

AIR INDIA CRASH

The Civil Aviation Minister also said that investigation into the Air India airplane crash in Ahmedabad is underway in a “transparent” manner.

“It is our effort to see that the investigation concludes as soon as possible. The investigation process is in the final stages and is expected to take one more month. We are constantly monitoring the situation, and we have told the airline that they should interact (with the families), and clear the compensation. There is a cell in the Ministry that is monitoring the situation. If there are any other problems, the Ministry will try to facilitate talks through the airline,” Naidu said.

Is India’s agriculture resilient enough?

Dietary habits, rice-wheat fixation, irrigation and high input use have reshaped agroeconomy, with uncertain consequences PVS Suryakumar

For most Indians, the daily plate is reassuringly familiar: rice or wheat at the centre, a dal beside it, and a narrow band of vegetables — potato, onion, tomato, brinjal, okra and leafy greens like palak. That pattern, shaped in the decades after the Green Revolution, has done more than define consumption; it has also shaped what India grows. It helped push the country from a largely rain-fed farming system towards irrigated rice and wheat, steadily converting large tracts once sown to millets and other hardy crops.

But the same transition also narrowed crop diversity. The pressure of the rice–wheat model has not remained confined to irrigated belts; rainfed regions have increasingly been nudged to imitate this pattern, often at odds with their ecological realities. Today, rice and wheat overwhelmingly anchor the foodgrain economy, while traditional rain-fed crops such as millets, pulses, and oilseeds occupy a much smaller share of cultivated land. That change has altered the ecological balance of Indian agriculture.

IRRIGATION AND GROUNDWATER

The transformation of cropping patterns closely mirrors the expansion of irrigation. Net irrigated area in India has risen from about 21 million hectares in 1950-51 to 79.3 million hectares in 2022-23. Rice and wheat together covered about 40.6 million hectares in 1950-51 and about 78.0 million hectares in recent years, meaning their combined area has risen by roughly 38 million hectares.

Yet the irrigation system itself rests heavily on groundwater, which has increasingly extended into traditionally rainfed regions. Source-wise statistics show tubewells account for nearly half of the irrigated area, taking groundwater-based irrigation to over 60 per cent. India is also the world’s largest groundwater user, with an estimated annual withdrawal of about 251 km³ — more than a quarter of global groundwater withdrawals. Water-intensive crops have rendered surface irrigation inadequate.

SUSTAINABILITY CONCERNS

The question is whether this structure can endure when water itself becomes uncertain. Rice and wheat are largely anchored in irrigated ecosystems, while vegetables, increasingly cultivated in peri-urban belts, rely heavily on groundwater and intensive input use.

Fertilizer consumption in India has risen from less than one million tonnes in the early 1950s to nearly 30 million tonnes today — a near forty-fold increase. Pesticide use is also concentrated in certain systems, particularly vegetables. These inputs helped sustain productivity but have come at a cost to soil health, groundwater quality, and food safety.

SHOCKS AND RESILIENCE

Agriculture continues to sustain millions of smallholders, yet farm incomes remain uncertain with rising input costs and climate change. NSS data are sobering: 40 per cent of farmer households said that, given a choice, they would take up some other career, and 27 per cent said farming was not profitable.

India’s agricultural system works today, but it may not be resilient to shocks. With rising climate variability, erratic rainfall, and growing pressure on groundwater, even two weak monsoons could strain the cereal-centric systems that underpin food supply.

THE PATH FORWARD

The Supreme Court has recently urged the Union government to incentivise diversification away from paddy and wheat, while the Union Agriculture Minister last year announced expanded pulses procurement. These signals point to a pragmatic path forward: not to undo the gains of the Green Revolution, but to restore balance.

Expanding institutional demand for millets and pulses through public distribution systems and school meals can provide predictable markets for farmers. Reorienting fertilizer subsidies towards balanced nutrient use, along with stronger processing and value chains, can make diversification both viable and sustainable.

The writer is former Deputy Managing Director, Nabard. Views are personal.

Three out of 4 key reservoirs are half empty

PARCHED. Storage in the 166 dams was 66.830 billion cubic metres (BCM) of the 183.565 BCM capacity Our Bureau — Chennai

Three of four major reservoirs were half-empty this week in India, even as the overall storage dipped to 36 per cent of the capacity, data from the Central Water Commission (CWC) showed. According to the CWC’s weekly status of storage in the major reservoirs, storage in the 166 dams was 66.830 billion cubic metres (BCM) of the 183.565 BCM capacity.

The level was, however, 14 percentage points higher than a year ago and 25 per cent more than normal (the average of the past 10 years). According to the India Meteorological Department (IMD), 28 per cent of the 725 districts in the country received deficient or no rainfall between March 1 and May 7. This is in addition to over 70 per cent of the country receiving deficient rainfall during January-February. The level in at least 92 reservoirs, or a little over 55 per cent, was less than 40 per cent of the capacity.

Storage in all five regions dropped below 45 per cent of capacity this week, with storage being the lowest in the southern region. In the peninsular region’s 47 reservoirs, the level was 27 per cent of the 55.288 BCM capacity at 14.833 BCM. In Telangana, storage was 20 per cent and in Karnataka, it was 22 per cent. In Kerala, the level was 25 per cent, while in Andhra Pradesh and Tamil Nadu, it was 38 per cent and 35 per cent respectively.

BENGAL PRECARIOUS

The level in the 27 reservoirs of the eastern region was 33.5 per cent of the 7.307 BCM capacity. In West Bengal, the situation was precarious with storage at only 12 per cent.

Storage in the northern region’s 11 reservoirs was 42 per cent of the 19.836 BCM capacity at 8.353 BCM. The level was double that of a year ago. The 53 reservoirs in the western region were filled to 35 per cent of the 38.094 BCM capacity at 16.138 BCM. The level in the 28 reservoirs of the central region was 41.5 per cent or 20.199 BCM of the 48.588 BCM capacity.

The situation, particularly in the southern region, will likely improve with the IMD predicting heavy rain over the next week.

The article "How to modify your workout for summer," written by Shrenik Avlani and Jahnabee Borah, provides advice from doctors and fitness experts on adjusting exercise routines as temperatures exceed 40 degrees Celsius.

Key Risks of Summer Training

Exercising outdoors during peak summer carries several health risks, including:

• Dehydration
• Dizziness
• Fainting

When temperatures are extremely high, the body’s natural cooling process (sweating) can falter as internal body heat builds up faster than it can be managed.

Recommended Modifications

To stay safe while staying active, experts suggest the following changes to a standard regimen:

• Switch to Indoor Sessions: Move workouts inside to avoid direct exposure to extreme heat.
• Adopt Lighter Workouts: Reduce the intensity of exercises during the hottest months.
• Modify Regimens: Adjust the overall exercise plan to better suit the environmental conditions.

Note: While the introductory section of this article is available in the sources, the full text of the detailed tips from the experts was not included in the provided excerpts.

The article titled "Consistency is key to good sleep, health," written by Sheeba de Souza and Luke Coutinho, explores the essential relationship between rest, physical activity, and overall well-being.

Based on the available source material, here is the text of the article:

Consistency is key to good sleep, health

Sleep, movement and food cravings are deeply linked, as research has shown, but often rest is the thing we see as a luxury to cut when the to-do list grows longer. But sleep is when the body heals, repairs and resets. Without it, immunity declines, hormones become imbalanced, inflammation increases and even the best food or exercise plan won’t produce results.

It’s similar with movement too—we often think we have to have “enough time” for an intense workout but often just short breaks to move regularly have more benefits. Consistency matters more than perfection...

Note: The provided source material contains only the introductory portion of this article.

The article titled "Bollywood’s VFX dream runs into audience scrutiny," written by Lata Jha, examines the challenges Indian filmmakers face in delivering high-quality visual effects that meet global standards.

Bollywood’s VFX dream runs into audience scrutiny

Despite betting on VFX-driven, high-budget spectacles to lure audiences to cinemas, Bollywood has largely been unable to crack the visual effects game. This was particularly evident in the recent criticism of the trailer for the first instalment of the mega-budget, two-part Ramayana franchise. The major criticism was that despite a reported ₹4,000 crore production budget, the visual effects seemed artificial and video game-like, appearing ‘too digital’ and lacking soul.

Experts noted that while Indian movie budgets are significantly lower than those in Hollywood, studios and producers also often handle visual effects in a rushed manner during post-production. In addition to Ramayana, other big-ticket films like War 2 and Adipurush have drawn flak for their visual effects in recent years. “VFX-heavy films carry a certain promise of scale and if that isn’t delivered seamlessly, [the audience's immersion is broken],” according to Ashish Saksena, chief operating officer—cinemas at BookMyShow. Saksena emphasized that VFX works most effectively as an enabler that elevates storytelling rather than a replacement for it. “Such films also create opportunities to drive demand for premium formats and elevate the out-of-home viewing experience,” he added.

“The benchmark is no longer just Indian films; it’s the best of world cinema,” noted one industry source. Mendiratta added that VFX needs early integration into the filmmaking process, but projects often suffer from tight timelines and evolving budgets, which negatively impacts quality. He pointed out that the Indian ecosystem is still catching up to Hollywood, where projects are planned over longer cycles with integrated pipelines. Film producer Shariq Patel agreed that while VFX criticism is a constant lament, much of the work is outsourced at the last minute and expected to wrap up by the release date. He also noted that many makers are not sticklers for quality and frequently place VFX last in the budget.

“The biggest challenge today is to not get carried away with all the technology we have at our disposal and forget about organic storytelling,” said film producer Anand Pandit. He noted that the second challenge is living up to expectations, as today’s audience watches global content like Squid Game and Black Mirror and expects similar finesse in Indian stories. While Indian VFX artists are among the world's best and frequently work on top Hollywood movies, they require adequate time, budgets, and creatively challenging projects to perform their best. Pandit pointed out that missteps are noticed immediately because audiences can access global content on their phones.

Despite these hurdles, VFX-driven films continue to play a pivotal role as audiences gravitate toward large-scale, immersive experiences on the big screen. Anchored in strong storytelling, these films can transcend regional and language boundaries. Upcoming projects such as SS Rajamouli’s Varanasi, the Yash-starrer Toxic, and Allu Arjun’s Raaka are expected to further advance visual effects in Indian cinema. Saksena concluded that as benchmarks align with global standards, the combination of high-quality execution and emotional resonance is critical for success.

The article titled "Hyundai FY26 profit slips amid costs, competition," written by Ayaan Kartik, reports on the financial challenges faced by Hyundai Motor India during the 2025-26 fiscal year.

Based on the sources, here is the reproduced text of the article:

Hyundai FY26 profit slips amid costs, competition

By Ayaan Kartik, New Delhi

Hyundai Motor India Ltd’s net profit fell for a second straight year in fiscal year 2026 (FY26) after its October 2024 listing, as declining domestic sales amid intense competition and higher costs linked to the West Asia war weighed on performance. The Gurugram-based company saw its consolidated net profit slip 4% to ₹5,432 crore, as margins took a 50-basis-point hit to end FY26 at 7.6%. Rising commodity prices and higher discounts due to intense competition with domestic rivals like M&M and Tata Motors Passenger Vehicle Ltd hurt Hyundai’s profitability.

In the process, it also ceded its position as the country’s second-largest carmaker, a rank it had held since 2009, to Mahindra & Mahindra (M&M). Tata Motors Passenger Vehicle also overtook it in FY26, relegating the company to fourth place.

Hyundai announced a capital expenditure of ₹7,500 crore for the ongoing fiscal year to expand production capacity and support the launch of new models, as it vowed to reclaim the second spot quickly. “We have every intention to come back to the No. 2 position… We are very passionate about our position. And we will get it back, sooner than later,” Tarun Garg, managing director (MD) and chief executive officer (CEO), said at a press conference on Friday.

The company recorded a 2% growth in annual revenue to ₹70,763 crore, with overall sales rising 1.7% to 775,031 units during FY26. A large part of the growth came from exports, which rose 16% to 190,125 cars during the year, even as domestic sales declined by 2.3% to 584,906 units.

Hyundai’s performance lagged Maruti and Mahindra, which declared their results in the past fortnight. Maruti’s consolidated FY26 revenues rose 20% to ₹1.83 trillion, while net profit inched up 1% to ₹14,679 crore. Mahindra’s revenue surged 26% year-on-year to ₹1.98 trillion in FY26, while net profit jumped 32% to ₹18,621 crore.

The company now expects domestic sales to grow 8–10%, aided by last September’s GST cuts and the launch of two new models: one internal combustion engine and one electric vehicle. However, export growth is expected to decelerate to an 8-10% range.

“FY26 marked a year of two distinct phases for the automobile industry, driven by a shift in policy and demand dynamics. The first half remained largely underwhelming, primarily due to muted customer sentiments,” Garg said. “However, the landscape shifted meaningfully in the second half following the GST rate rationalization in September, which acted as a strong catalyst for recovery,” he added.

While sales recovered in the latter part of the year, a large hit to its profitability came during Q4, with net profit falling 22% to ₹1,256 crore. Profit margins fell by more than 2 percentage points during that quarter.

CA Journal May2026

 

Digital Transformation in Public Financial Management: A Report on Governance, Integrity, and Technology

CA. (Dr.) R. S. Murali

Introduction

Public Financial Management (PFM) serves as the engine room of the modern state. It is the essential operational framework for collecting, allocating, and accounting for public resources, sustaining the social contract between the state and its citizens. When PFM systems fail, the foundation of governance itself erodes. This article addresses the urgent need to transform PFM using information technology, focusing on the digitisation and digital transformation aspects rather than PFM in isolation.

Imperative for Digitisation

The global community currently faces a significant integrity crisis. International Monetary Fund (IMF) models estimate annual global losses of approximately US $4.5 trillion—nearly 5% of world GDP—due to the inefficient use of public funds within public financial systems. Roughly US $1.7 trillion of this loss occurs at the budgetary central government level. Traditional paper-based systems are structurally incapable of mitigating these risks as they lack immutable, verifiable audit trails. Digital PFM is no longer an optional upgrade but a structural requirement for fiscal stability and public trust.

The Landscape of Government Digital Maturity in 2025

As of 2025, digital maturity is defined by "meaningful participation"—the ability of a state to deliver essential services through sophisticated, integrated platforms. The World Bank’s GovTech Maturity Index (GTMI) 2025 shows a global average increase to 0.589, up from 0.552 in 2022. However, a widening gap exists between high-maturity (Group A) and low-maturity (Group D) economies. While advanced states integrate frontier indicators like AI Ethics and Green Tech, developing nations often struggle with legacy system inertia.

Table 1: Digital Maturity Indicators - 2025

Indicator	Strategic Focus	Global Status 2025
AI Ethics & Governance	Ethical utilization of automated decision-making and bias mitigation.	70% of government bodies are piloting or planning AI use.
Green Tech Policies	Integration of environmental sustainability into digital architecture.	High correlation with Group A maturity.
Digital Identity (ID)	Seamless authentication using National Digital IDs.	Fundamental to "whole-of-government" approaches.
Cloud-Based PFM	Secure cloud enclaves replacing fragmented legacy servers.	Essential for real-time monitoring and data integrity.

Key Issues in Digital Transformation

Technology is not an unbiased instrument; it engages directly with organizational law and social fairness. Several perspectives must be considered:

• Legal/Administrative Perspective: "Blackbox" algorithms challenge judicial review, which depends on understanding decision-making logic. To alleviate this, authorities should adopt a "duty of candour," elucidating system logic and potential prejudice before legal proceedings.
• Social Perspective: A technological gap leaves nearly 2.6 billion individuals offline, risking new types of alienation. Addressing this requires moving beyond traditional infrastructure to FinTech and Telecom collaborations (MNOs/MVNOs) to reach the underserved.
• Ethical Perspective: The rise of "dark patterns"—manipulative UI/UX designs—erodes trust. A study of 53 Indian applications found 52 used deceptive tactics like interface interference or drip pricing.

Case Studies: Triumphs and Challenges

Global Triumphs:

• Estonia: Uses KSI (Keyless Signature Infrastructure) Blockchain alongside its X-Road infrastructure to create tamper-proof government records for everything from tax filings to health data.
• Singapore: Employs a whole-of-government approach to AI for real-time anomaly detection to identify procurement irregularities.

Global Challenges:

• Moldova: A 2014 bank fraud siphoned 12% of GDP through shell companies, exposing weak digital oversight.
• Toronto (Sidewalk Labs): A smart city project was shelved due to concerns over privacy and the political legitimacy of a private company controlling public policy and data.

India Triumphs:

• UPI: A global leader, processing over 15 billion transactions monthly as of late 2024.
• Kanpur GIS Mapping: tripling annual house tax revenue by using geocoding to identify unrecorded properties.
• Aadhaar-Linked Payments: authenticating Direct Benefit Transfers (DBT), saving over US $1 billion in LPG subsidies alone.

India Challenges:

• Systemic Exclusion: Technical failures in Aadhaar biometric authentication have occasionally denied essential food rations to vulnerable populations.
• Cybersecurity: Aadhaar's centralized database has faced repeated security failures and data exposure risks.

Synthesis of Case Learnings: The 3PT Framework

Future reforms should be guided by a "3PT" framework: Policy, Process, People, and Technology.

• Policy Perspective: Transformation requires comprehensive legislation for e-signatures, data privacy, and blockchain records to eliminate manual loopholes.
• Process Perspective: Process Re-engineering (BPR) must occur before automation; automating manual inefficiencies is counterproductive. A phased, "test-and-learn" rollout using pilots is recommended.
• People Perspective: Success requires a shift toward a data-driven culture and strategies to hire and retain specialist functional and IT talent using market-based salary scales.
• Technology & AI Perspective: Governments should move from reactive monitoring to AI-driven predictive stewardship to detect fiscal stress and default patterns.

The Role of Accounting Professionals

In the era of AI, Human-in-the-Loop (HITL) is the final safeguard against judgmental atrophy. The accountant's role must evolve from bookkeeper to Digital Integrity Officer and Forensic AI Auditor. Professionals are critical for validating AI audit flags, ensuring the "auditability" of complex digital ledgers, and maintaining fiscal accuracy.

Conclusion

Digitisation is a structural necessity for modern governance. Success requires a balanced approach, pairing advanced technologies like Blockchain and AI Auditing with robust compliance mechanisms and predictive, data-driven stewardship.

The 16th Finance Commission and the Future of Local Self-Governments in India

V N Alok

Introduction

Local self-governments, both the Panchayats and the Municipalities, have a long history in India. While Panchayats have ancient roots, Municipalities have governed urban areas since the 17th century. Recognizing their primacy in providing basic services, the Constitution placed ‘local government’ in the State List of the Seventh Schedule. Until the 1993 Constitutional Amendments, the transfer of funds and functions to these bodies was largely ad hoc.

The 73rd and 74th Constitutional Amendments (1993) formally recognized Panchayats and Municipalities as institutions of self-government, inserting Parts IX and IX A into the Constitution. This mandated State Legislatures to devolve functions and finances, creating the need for structured fund transfers as local expenditure typically exceeds generated revenue. Articles 243 I & Y necessitate every State to constitute a State Finance Commission (SFC) every five years to review these financial positions. Furthermore, Article 280 was amended to mandate the Union Finance Commission (UFC) to suggest measures to augment State Consolidated Funds to supplement the resources of these local bodies.

Union Finance Commission and Local Governments in the Past

Since 1993, seven UFCs have provided grants-in-aid to local governments.

• 10th UFC: Recommended Rs. 100 per capita for the rural population (Rs. 4,381 crore) and Rs. 1,000 crore for Municipalities, totaling 1.38% of the Union divisible tax pool.
• 11th & 12th UFCs: Successively increased grants by approximately three times each.
• 13th UFC: Shifted from ad hoc grants to a percentage share of the divisible pool (1.42% for Panchayats; 0.51% for Municipalities).
• 14th UFC: Reverted to ad hoc grants, providing Rs. 2,00,292 crore for Panchayats and Rs. 87,149 crore for Municipalities.

Over time, the importance assigned to urban governance has grown. The share of Municipalities in total local government grants has risen from 19% in the 10th UFC to 45% in the 16th UFC.

Recent Background for the 16th UFC

The 15th UFC (2021-26) proposed Rs. 2.37 lakh crore for Panchayats and Rs. 1.21 lakh crore for Municipalities. It introduced special grants (Rs. 70,000 crore) for primary healthcare due to COVID-19 and performance-linked grants for million-plus cities via a Challenge Fund. Eligibility for these grants required states to set up SFCs, follow their recommendations, and ensure local bodies published audited accounts online.

Transfers to Local Government by the 16th UFC

Under Prof. Arvind Panagariya, the 16th UFC has scaled up allocations to Rs. 4.35 lakh crore for Panchayats and Rs. 3.56 lakh crore for Municipalities for the five-year period starting April 1, 2026.

Key Targeted Municipal Components:

• Urbanisation Premium (Rs. 10,000 crore): Supports planned rural-to-urban transitions by helping states build administrative structures in expanding areas.
• Special Infrastructure Component (Rs. 56.1 thousand crore): Boosts wastewater management systems in 22 cities with populations between 1-4 million.

Both rural and urban grants are split 80:20 (Basic:Performance). Of the basic grant, 50% is tied to sanitation, waste, and water management. The remaining 50% and the entire performance grant are untied, though they cannot be used for salaries or establishment expenses.

Focus of UFCs on Good Accounting Practices

Successive commissions have driven reforms in financial reporting. The 14th UFC made submission of audited accounts a condition for performance grants, and the 15th UFC introduced mandatory online publication of both provisional and audited accounts. The 16th UFC continues these requirements while noting that more work is needed to ensure timely, exact audits.

Implications and Revenue Mobilisation

The 16th UFC has rebalanced basic grants to a 50:50 tied-untied ratio (from the 15th UFC's 60:40), giving local bodies more flexibility to address community-specific needs.

A major shift in the 16th UFC is linking performance grants to growth in Own Source Revenue (OSR) for both Panchayats and Municipalities.

• Panchayats: Expected to increase OSR annually by a minimum of 2.5%.
• Municipalities: Requirement is a 5% annual growth, emphasizing revenue from rent, holdings, and service fees.

Institutional Reforms: SFCs and Census

While UFCs are constitutionally required to base transfers on SFC reports, only six states (Assam, Haryana, Himachal Pradesh, Kerala, Tamil Nadu, and Rajasthan) had constituted their seventh SFC by 2024. The 16th UFC mandates that the Action Taken Report (ATR) must be tabled in the State Legislature within six months of receiving an SFC report to improve compliance.

Additionally, the 16th Census (begun April 2026) has frozen all administrative units until March 31, 2027. The resulting delimitation of constituencies may affect grant disbursal, requiring new arrangements for smooth fund transfers.

Conclusion

The 16th Finance Commission continues the trend of increased allocations coupled with a stronger accountability framework. Success depends on states complying with conditions such as regular local elections, publishing annual accounts, and providing a 20% matching contribution.

Key Future Directions:

• Panchayats: Continuing advancement through the eGram Swaraj portal and the cash-based Model Accounting System (MAS).
• Municipalities: Standardizing practices through the National Municipal Accounts Manual (NMAM) 2.0 in consultation with ICAI.
• Legislative Needs: Successive UFCs have recommended raising the constitutional ceiling on professional tax (currently Rs. 2,500, last revised in 1988) and amending Article 285 to allow property tax on Union government properties.

When The Legislature Erases A Law - Do ‘Omissions’ Count as a ‘Repeal’ Under the General Clauses Act?

An Analysis Through the Lens of Proposed Omission of Section 13(8)(b) of the IGST Act, 2017 by the Finance Bill 2026 CA. Madhav Kumar Jha

Introduction

The Finance Act, 2026, has introduced a significant legal development under the Goods and Services Tax (GST) framework by omitting Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). This section previously governed the place of supply (POS) for intermediary services, setting it as the location of the supplier. This meant that Indian intermediaries serving foreign clients were often taxed domestically, excluding them from being considered an "export of services".

The omission of this provision causes the determination of POS to fall back upon the general provision in Section 13(2) of the IGST Act. Consequently, what was a taxable supply within India transforms into a zero-rated export of services, eligible for refunds of input tax credit or integrated tax paid. While this is a welcome liberalization, it triggers profound retrospective legal questions because the omission lacks a saving clause. This leaves the fate of eight years of pending proceedings, demands, and disputes uncertain.

Liberalisation Without a Safety Net: The Problem Section 13(8)(b) Leaves Behind

Intermediary classification has historically been complex and litigation-prone, depending entirely on the substance of the transaction. Tax authorities frequently applied the "intermediary" tag mechanically, shifting the POS to India and leading to the denial of GST refunds. While the 2026 amendment corrects this structural anomaly, the absence of a saving clause triggers a centuries-old common law doctrine regarding statutory erasure.

The Common Law Foundation and The General Clauses Act, 1897

Under common law, the Doctrine of Statutory Obliteration holds that when a provision is repealed or omitted, it is treated as if it had never been enacted. However, this does not disturb "transactions past and closed" that reached complete finality while the provision was in force.

For matters still in litigation, Section 6 of the General Clauses Act, 1897, provides a statutory saving mechanism. It stipulates that unless a "different intention" appears, a repeal shall not affect previous operations of the enactment, rights acquired, or legal proceedings already instituted. The critical debate is whether the word "omission" used in the Finance Act 2026 falls within the meaning of "repeal" as defined in Section 6.

The Four Pillars of the Debate: Journey Through Case Law

1. Rayala Corporation (P) Ltd. v. Director of Enforcement (1969): A Constitution Bench held that Section 6 did not apply to an "omission" effected by a Ministry notification, categorically stating that "repeal" does not encompass "omissions".
2. Kolhapur Canesugar Works Ltd. v. Union of India (2000): Another Constitution Bench affirmed that in the absence of a saving clause, all actions must stop where the repeal finds them, and that Section 6 does not automatically apply to the omission of a rule.
3. M/S Fibre Boards (P) Ltd. v. CIT Bangalore (2015): A two-judge bench challenged prior precedents, noting that Section 6A of the General Clauses Act uses "repeal" to describe acts accomplished through "express omission". They argued the prior benches were per incuriam for not noticing Section 6A and held that express omission does indeed qualify as a repeal.
4. Hikal Limited v. Union of India (Bombay High Court, 2025): This recent GST-related case held that Section 6 only responds to instruments carrying parliamentary authority (Acts or Regulations) and not to omissions made through subordinate legislation like Rules or notifications.

The Legal Landscape Today

The law currently operates on a bifurcation:

• Subordinate Legislation: Pending proceedings generally lapse upon omission unless a saving clause exists, as seen in the Rayala, Kolhapur, and Hikal cases.
• Central Acts: For provisions omitted through a Finance Act (like Section 13(8)(b)), the Fibre Boards analysis suggests Section 6 is attracted, meaning pending proceedings should survive.

However, a constitutional tension remains because the Fibre Boards decision was by a two-judge bench, whereas the cases it effectively overrides were decided by five-judge Constitution Benches.

The Second Side of the Coin

While the omission provides relief for service exporters, it creates new compliance consequences for Indian businesses receiving inbound intermediary services from abroad. Shifting the POS to the recipient’s location under Section 13(2) makes Reverse Charge Mechanism (RCM) liability unambiguous.

Conclusion

The implementation of this bare omission without a saving clause has opened a significant arena of legal uncertainty. Until a Constitution Bench of the Supreme Court definitively determines whether "repeal" includes "express omission" for the purposes of Section 6, stakeholders must navigate an unsettled landscape. A savings clause in the Finance Act 2026 could have resolved this five-decade-old debate and prevented unnecessary litigation.

Gist of Opinions

(Expert Advisory Committee)

The May 2026 issue of The Chartered Accountant features several opinions from the Expert Advisory Committee (EAC) regarding complex accounting treatments under the Indian Accounting Standards (Ind AS) framework.

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1. Accounting Treatment under Ind AS 37 for Extended Producer Responsibility (EPR) for End of Life of Vehicles

Facts of the Case: ABC Limited, a listed automotive manufacturer, prepares financial statements under Ind AS. The newly enacted Environment Protection (End-of-Life Vehicles) Rules, 2025 (ELV Rules) mandate that producers fulfill EPR obligations for vehicles introduced in the market by purchasing EPR certificates. This obligation continues even if the producer ceases operations and is linked to vehicles sold in the past 15 to 20 years. While related Environment Compensation (EC) Cess Rules and specific cost caps have not yet been notified, the querist argued that a present legal obligation exists as of April 1, 2025, due to past sales.

Queries:

• What is the "obligating event" under Ind AS 37?
• What is the correct accounting treatment for vehicle sales made from F.Y. 2005-06 (non-transport) and F.Y. 2010-11 (transport)?
• Should cumulative provisioning for past sales be charged to the statement of profit and loss or adjusted against retained earnings?

Committee's Opinion:

• Obligating Event: The Committee determined that the introduction of vehicles in earlier years becomes an obligating event only when the ELV Rules come into effect, creating a mandate for EPR targets on those past sales.
• Reliable Estimate: Per Ind AS 37, except in extremely rare cases, an entity can determine a range of possible outcomes to make a reliable estimate of the obligation, even if some specific Cess Rules are pending notification.
• Recognition: The company must recognize a provision as soon as the ELV Rules take effect for all already introduced vehicles.
• P&L Treatment: Under Ind AS 1 (Presentation of Financial Statements), this provision must be charged to the Statement of Profit and Loss. Adjustment to retained earnings is inappropriate as this does not constitute a change in accounting policy or the correction of a prior-period error.

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2. Change in Measurement Technique for Expected Credit Loss (ECL)

Facts and Query: The company proposed transitioning its ECL measurement model for financial assets/trade receivables from an "internal grid matrix" to a "scientific actuarial valuation". The querist viewed this as a fundamental shift in the measurement model and asked if it should be treated as a change in accounting policy requiring retrospective application.

Committee's Opinion: The Committee restricted its view to the transition itself rather than the specific calculations. It noted that for trade receivables, companies typically measure loss allowances at lifetime ECL under Ind AS 109. The Committee evaluated whether this shift qualifies as a change in accounting policy or a change in accounting estimate based on Ind AS 8 (Accounting Policies, Changes in Accounting Estimates and Errors).

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3. Classification of an Employee Family Benefit Scheme (EFBS)

Query: Whether a specific EFBS should be classified as a defined benefit scheme under Ind AS framework.

Committee's Opinion: Referring to Ind AS 19 and the Basis for Conclusions (BC 253) of IAS 19, the Committee noted that employee benefits encompass all forms of consideration given in exchange for service, including those provided to an employee's family members.

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4. Lease Assessment for Railway Quarters under Ind AS 116

Context and Opinion: The Committee assessed whether specific arrangements for railway quarters/units constitute a lease. It concluded that an identified asset exists since specific units are designated. Furthermore, the "right to substitute" held by the Railways was found to be non-substantive, as it was intended for mutual convenience rather than a practical ability to substitute assets throughout the period. Consequently, the arrangement was assessed as a lease under Ind AS 116.

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Notes on EAC Opinions:

• These opinions represent the view of the EAC and do not necessarily reflect the official opinion of the ICAI Council.
• Opinions are based on specific facts provided by the querist and current prevailing laws.
• The complete text of these and other opinions can be accessed at: https://eacopinion.icai.org/.

Bridging Compliance and Capital: Chartered Accountants as Catalysts for MSME Expansion

Dr. Kalpana Kataria & Dr. Abhishek Kumar Singh

Introduction

The Micro, Small and Medium Enterprises (MSME) sector contributes approximately one-third to India’s GDP and is a cornerstone of the “Make in India” initiative. Recognized as one of the four key engines of economic growth alongside Agriculture, Investment, and Exports, the sector has gained momentum through a sustained government focus on formalization. This policy thrust has significantly enhanced credit penetration, enabling enterprises to access formal financial systems. However, maintaining this growth is essential for the vision of Viksit Bharat by 2047, as the ecosystem remains vulnerable to macroeconomic disruptions, limited capital access, and inadequate technological infrastructure. Strengthening this sector is crucial for inclusive development and a self-reliant economy.

Micro, Small and Medium Enterprise (MSME) Overview

The Indian MSME sector is highly diverse, with approximately 94% of enterprises operating informally and remaining unregistered. Nationally, MSMEs produce around 6,000 products, predominantly in manufacturing sectors like food, textiles, chemicals, and machinery. Currently, the sector contributes approximately 30% to the national Gross Value Added (GVA) and accounts for about 35.4% of total manufacturing output. Globally, MSMEs represent 90% of all businesses and 50% of GDP. In India, over 63 million enterprises employ more than 110 million individuals and account for over 40-45% of exports.

Fig. 1: Key Characteristics of MSMEs

• Employment Generation: Second-largest job provider after agriculture, covering diverse demographics.
• Economic Contribution: Substantial contributions to GDP, exports, and industrial output.
• Diversity: Wide variation in size, technology adoption, and service offerings.

Challenges for MSMEs

MSMEs face numerous hurdles, including outdated technologies, difficulties in accessing formal finance, intense market competition, and supply chain inefficiencies. There is a noted mismatch between credit demand and supply due to collateral constraints. While credit guarantee schemes and invoice discounting platforms like TReDS (Trade Receivables Discounting System) have improved access, many enterprises still rely on informal lending. Furthermore, a study of four core functional areas (Marketing, ICT Adoption, Capacity Building, and Cost Optimization) revealed that advanced ICT tools remain underutilized due to high costs and a lack of skilled manpower.

Contributions of Chartered Accountants (CAs)

Chartered Accountants are pivotal as strategic enablers and resilience builders for MSMEs navigating tighter regulatory regimes and accelerated digitalization.

• Financial Stewardship and Access to Capital: CAs establish robust systems for bookkeeping, budget forecasting, and cash-flow management. They enhance creditworthiness by preparing auditable financial statements; notably, MSMEs supported by CAs are reportedly twice as likely to secure institutional loans. They also guide MSMEs in tapping equity markets, such as the NSE Emerge platform.
• Regulatory Compliance and Governance: CAs mitigate the heavy compliance burden (estimated at ₹13 lakh annually per unit) by managing GST filings, income tax, labor laws, and statutory audits. They ensure MSMEs adhere to global accounting standards like IFRS, which enhances investor confidence.
• Strategic Advisory and Value Creation: Beyond compliance, CAs identify cost efficiencies and investment opportunities. They drive digital transformation by facilitating the adoption of tools like the Udyam Portal and AI-enabled accounting.
• Policy Enablers & Collaborative Advocacy: CAs translate government schemes (e.g., Mudra, PMEGP) into practical business strategies. They also influence the ease of doing business by advocating for tax rationalization and simplified documentation.

Case Studies and Strategic Horizons

• Banking and MSME Sector Conclave 2025: Highlighted CAs' role in bridging information asymmetry between small businesses and banks.
• Boutique Firm Transformation: A firm in Ahmedabad moved from compliance provider to strategic partner by delivering interactive Power BI dashboards, resulting in a 40% rise in advisory fees.
• Small-Town Scaling: A two-partner firm in Nagpur used ICAI's alliance model to collaborate with a Mumbai firm, allowing them to service listed entities.

Fig. 3: Strategic Planning for CAs and MSMEs

1. Broaden Digital Advisory: Deepen competencies in AI, blockchain, and cybersecurity.
2. Facilitate Inclusive Financing: Catalyze access for underserved segments like women-led and rural enterprises.
3. Simplify Compliance Pathways: Advocate for regulatory simplification.
4. Drive Sustainable Innovation: Support green frameworks and ESG compliance.
5. Strengthen Professional Ecosystems: Utilize mentorship clinics and incubation centers.

Conclusion

In a post-pandemic landscape marked by rising competition and supply chain disruptions, MSMEs require a strategic, tech-savvy partnership rather than mere transactional support. CAs provide this through a multidimensional support system. As India aims to become a $35 trillion economy by 2047, the CA-MSME partnership will serve as a foundational pillar, ensuring financial discipline, transparency, and resilience in a competitive global environment.