Macro and Trade Policy - Newspaper Summary

 The sources provide a detailed snapshot of India's Macro and Trade Policy landscape in October 2025, highlighting key government initiatives, major regulatory shifts, and India's response to an increasingly complex global economic environment.

Here is a comprehensive discussion of Macro & Trade Policy within the larger context of India's Economy, Business, and Policy Landscape:

---

I. Trade Policy and India's Global Positioning

India is actively addressing external trade challenges through new export support mechanisms and responding to geopolitical risks, particularly those related to tariffs and climate mandates.

A. Export Promotion and US Tariff Standoff

The government is moving forward with the Export Promotion Mission (EPM), which the Union Cabinet is expected to discuss for clearance next week.

• EPM Objectives: The EPM was announced in the Union Budget 2025-26 with an outlay of ₹2,250 crore. It aims to provide financial and logistical support to exporters who are struggling in the unpredictable global market and those severely impacted by US tariffs.
• Components: The EPM has two main components: Niryat Protsahan (export promotion), focusing on providing ample liquidity, including measures like the interest equalisation scheme and alternative financing; and Niryat Disha (export direction), supporting strategies for entering new overseas markets, facilitating logistics, and helping exporters comply with international quality standards and non-tariff barriers.
• Geopolitical Complications: Although the EPM was not initially planned specifically for US tariffs, it has been fine-tuned to aid labor-intensive sectors hit hardest by the 50% tariffs imposed by the US. The continuation of the popular interest equalisation scheme is one of the "sensitive matters" awaiting a Cabinet decision. The ongoing trade standoff, exacerbated by India's purchases of Russian oil, means that India figures in the highest tariff tier (mostly above 20%) in the US's emerging three-tier tariff regime. Analysts hope that external uncertainties will subside if India and the US agree on a bilateral trade agreement (BTA), negotiations for which are continuing.

B. Navigating Global Trade Blocs and Climate Mandates

The global trading system is currently being reshaped by geopolitics, with the US moving toward unilateralism and Europe adopting regulation-heavy policies.

• EU's Carbon Border Adjustment Mechanism (CBAM): The EU's CBAM, set for full rollout in January, acts as an extra tariff on imports from countries that do not meet EU emissions targets. In response, Indian companies like Jindal Stainless Ltd. are investing ₹700–800 crore from internal resources into renewable power and green hydrogen to cut embedded emissions and align with European sustainability norms. This is crucial as India’s power mix remains dominated by coal, unlike European grids which rely substantially on renewables.
• Trade Deficits: India maintains a trade surplus with the US and the EU, but faces a ballooning trade deficit with China of approximately $100 billion, which poses a strategic vulnerability.
• RBI Policy for Exporters: The Reserve Bank of India (RBI) amended Foreign Exchange Management regulations to provide flexibility for high-value exporters. They can now hold foreign exchange proceeds for three months in a Foreign Currency Account at an International Financial Services Centre (IFSC), compared to the one-month limit for accounts in other jurisdictions. This change is designed to enhance operational flexibility, allow for better hedging strategies, and mitigate currency fluctuation risks.

II. Macroeconomic Policy and Fiscal Strategy

The central government is focused on structural reforms and preparing the Union Budget for FY27, signaling a commitment to sustained, self-reliant growth.

A. Fiscal Framework Overhaul (Budget FY27)

The finance ministry has commenced budget discussions for FY27, which is expected to be presented at the end of January next year.

• Policy Priorities: The budget theme is likely to be next-generation reforms, focusing on technology sovereignty, self-reliance across sectors, and overall inclusive growth.
• Debt Anchor: A major structural change involves shifting from annual fiscal deficit targets to a new fiscal anchor: the debt-to-GDP ratio. The government aims to reduce central government debt from 57.1% of nominal GDP in FY25 to 50.1% by March 31, 2031.
• Expenditure Focus: Future expenditure is expected to center on accelerating domestic manufacturing (a push for 'Make in India'), sustaining the infrastructure investment drive (following the ₹11.21 lakh crore allocation), and supporting the MSME sector, which faces direct tariff impacts.
• Monetary Signals: The corporate bond market is experiencing a revival because yields are softening following dovish signals from the RBI. Additionally, GST rate reductions were recently implemented to support economic growth in the domestic market.

B. Access to Foreign Capital (ECB Relaxations)

The RBI has proposed significant relaxations in External Commercial Borrowing (ECB) rules for Indian corporations.

• Relaxations: Key proposals include doing away with the prescribed interest rate cap (all-in cost ceiling of 450 basis points over the benchmark rate) to allow borrowing at market-determined rates. The minimum maturity period for ECBs will also be shortened from five years to three years.
• Intent and Risks: These changes are intended to improve India Inc.'s access to foreign currency borrowings and encourage debt-based dollar flows into India. However, analysts caution that stringent safeguards are necessary to prevent lower-rated entities, particularly NBFCs, from leaving their currency exposure unhedged, a risk that previously led to defaults during the 2012-13 'taper tantrum'.

III. Major Regulatory and Sectoral Reforms

Several key policy domains are undergoing major regulatory revisions to improve efficiency, reduce losses, and increase private participation.

A. Power Sector Reform Push

The power ministry released draft amendments to the Electricity Bill, 2003, aiming to plug cumulative financial losses (which have crossed ₹6.9 trillion) and boost economic growth.

• Tariff and Subsidies: The proposed amendments give state electricity regulatory commissions (SERCs) the power to fix tariffs on a suo moto basis to ensure timely revisions and enhance accountability. A crucial proposal is the progressive reduction and eventual elimination of cross-subsidies within five years for entities like manufacturing enterprises, railways, and metro rail. Cross-subsidies currently harm industrial competitiveness by requiring industrial users to pay higher tariffs to subsidize power for groups like households and farmers.
• Private Competition: The government revived plans to open up the distribution sector, allowing multiple distribution licencees to cater to a single area using existing infrastructure, facilitating entry for private firms such as Tata Power and Adani Enterprises.

B. Financial Sector Governance and Streamlining

Regulatory bodies are focused on governance, compliance, and streamlining processes.

• RBI Regulatory Consolidation: The RBI is planning a massive exercise to consolidate existing regulatory instructions into 238 Master Directions while repealing approximately 9,000 circulars. This aims to significantly reduce the regulatory burden and compliance costs for regulated entities.
• SEBI Compliance Reform: SEBI implemented a rationalized penalty framework for stock brokers to ensure uniformity and fairness across exchanges and shift towards a more corrective approach.
• PSB Leadership Opening: The government approved changes opening top management positions, including one MD position in the State Bank of India (SBI), to candidates from the private sector. However, bank unions have opposed this unilateral policy shift, calling it a serious legal and constitutional transgression and amounting to the de facto privatization of leadership in statutory public institutions.

C. Industrial & Technology Policy Landscape

Policy focus is shifting towards fostering domestic industrial capabilities, especially in high-tech and green energy domains.

• Green Hydrogen Hubs: Indian ports (Deendayal, Paradip, and VOC Port) have been designated as green hydrogen hubs, leveraging proximity to industrial clusters and access to international markets. Industry leaders have committed investments exceeding ₹1.5 lakh crore in the ports-linked value chain, reinforcing India’s potential as a cost-competitive producer of green e-fuels.
• Semiconductors and Self-Reliance: India’s domestic chip manufacturing ecosystem is nascent, meeting only about 10% of total demand. While government incentives (PLI) are driving expansion, capacity estimates for upstream segments like wafers and polysilicon have been revised downwards due to technical and financial challenges. The immediate value addition is expected to come from chips assembled domestically.
• Industrial Safety: The government overhauled the four-decade-old safety codes governing the production, handling, and storage of hazardous chemicals, introducing new norms for substances like benzene, toluene, and xylene (BTX) to bolster industrial safety.
• AI Sovereignty: India is rapidly expanding its compute infrastructure, deploying 38,000 graphics processing units (GPUs) and focusing on developing its own foundational models. India's sovereign AI model is expected to be ready before the 'AI Impact Summit' in February 2026, trained entirely on Indian datasets and hosted on domestic servers.