GST on Cigarettes, Pan Masala & Gutkha: Rates, Impact & Tax Analysis (2024)

 GST on Cigarettes, Pan Masala & Gutkha: Rates, Impact & Tax Analysis (2024)

Table of Contents

1. Introduction
2. Historical Background of Tobacco Taxation in India
3. GST Rates on Cigarettes, Pan Masala, and Gutkha
4. Impact of GST on the Tobacco Industry
5. Duties and Cesses on Tobacco Products
6. Pros and Cons of GST on Tobacco Products
7. Recent Developments and Proposed Tax Changes
8. How to Calculate GST on Cigarettes?
9. Critical Analysis: Effectiveness of High Taxation
10. Way Forward: Policy Recommendations
11. FAQs on GST for Tobacco Products
12. Conclusion

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1. Introduction

Tobacco use remains a major public health crisis in India, with over 275 million users despite its severe health risks. The government imposes high taxes—28% GST plus excise duties and cesses—to curb consumption while boosting revenue. Yet, the tobacco industry thrives, adapting to regulations and maintaining profitability. The question remains: Are these taxes truly effective in reducing tobacco use, or do they merely shift consumer behavior? While higher prices deter some, addiction and social factors keep many hooked. To truly combat tobacco’s impact, taxation must be paired with stronger awareness campaigns, stricter enforcement, and better cessation support.

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2. Historical Background of Tobacco Taxation in India

Tobacco taxation in India has undergone significant changes over the years, reflecting both public health concerns and economic interests. Before the introduction of the Goods and Services Tax (GST) in July 2017, tobacco products were subject to a complex taxation system that included multiple levies at both the central and state levels:

• Excise Duty – Imposed by the Central Government, this was the primary tax on tobacco manufacturing.
• Value-Added Tax (VAT) – Varied across states, making tobacco prices inconsistent nationwide.
• Entry Tax & Octroi – Additional taxes levied by some states and local bodies on the movement of tobacco products.
• Other State Levies – Some states imposed additional charges, further complicating the taxation system.

With the implementation of GST, these taxes were consolidated, bringing uniformity. However, since tobacco is classified as a “sin good”, the government continued to impose extra levies:

• Compensation Cess – Aimed at compensating states for revenue loss post-GST.
• National Calamity Contingent Duty (NCCD) – Levied to fund disaster relief and public health programs.

While GST streamlined the system, the heavy taxation on tobacco aligns with India’s efforts to curb consumption and promote public health.

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3. GST Rates on Cigarettes, Pan Masala, and Gutkha

The government has raised GST rates on cigarettes, pan masala, and gutkha to curb consumption and boost revenue. While cigarettes now face a higher cess, pan masala and gutkha are taxed based on their retail selling price instead of MRP. This shift aims to prevent tax evasion and ensure fair taxation. For consumers, this means higher prices, discouraging tobacco use for better public health. For businesses, compliance costs may rise, but transparency improves. While the debate over taxation and personal choice continues, the government's stance is clear—higher taxes on harmful products serve both economic and social welfare goals.

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4. Impact of GST on the Tobacco Industry

• Impact of GST on the Tobacco Industry

  The implementation of the Goods and Services Tax (GST) has significantly reshaped the tobacco industry in India, influencing everything from revenue collection to consumer behavior.

  • Revenue Generation: Tobacco taxation remains a key contributor to government earnings, generating nearly ₹60,000 crore annually. This revenue is crucial for public health initiatives and infrastructure development.

  • Increase in Selling Price: GST led to a marginal rise in tobacco product prices. However, this increase hasn’t been drastic enough to deter consumption significantly. Addictive nature and brand loyalty keep demand relatively stable.

  • Reduced Profit Margins for Manufacturers: Higher tax rates, including compensation cess, have burdened manufacturers, especially smaller businesses. Compliance costs and reduced affordability have pushed many small-scale producers into financial distress.

  Despite these impacts, the industry continues to thrive due to the inelastic demand for tobacco. While GST has ensured better tax compliance, concerns remain about its effectiveness in reducing tobacco consumption and promoting public health.

 Revenue Collection from Tobacco Taxation (in ₹ crore)

(A graph showing the Tobacco Tax Revenue Collection (2015-2024) in India. It illustrates the steady increase in revenue from taxation on tobacco products over the years, reflecting the impact of higher GST rates and additional levies.)

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5. Duties and Cesses on Tobacco Products

(pie chart showing the Tax Distribution on Cigarettes in India. It highlights the proportion of tax components, including Excise Duty, GST (28%), NCCD, and Compensation Cess. The Compensation Cess forms the largest share, reflecting the government's efforts to discourage consumption while generating revenue.)

       In addition to GST, the government imposes several other taxes to regulate industries and generate revenue:

• Excise Duty – A flat-rate tax per unit of certain goods, such as alcohol, tobacco, and petroleum products.
• National Calamity Contingent Duty (NCCD) – Levied on specific goods like cigarettes and luxury items to fund disaster relief and recovery.
• Compensation Cess – Introduced post-GST to compensate states for potential revenue losses, primarily applied to luxury and sin goods.

These taxes ensure financial stability, fund essential services, and support economic balance, particularly in times of crisis.

  Example of Duty Calculation for a Pack of Cigarettes

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6. Pros and Cons of GST on Tobacco Products

✅ Pros

✔ Higher Tax Revenues – Helps fund healthcare and anti-tobacco programs.
✔ Simplification of Taxation – Replaces multiple indirect taxes.
✔ Potential Reduction in Consumption – Higher prices discourage new users.

❌ Cons

❌ Limited Impact on Consumption – Addicted users continue buying despite high prices.
❌ Rise of Illicit Trade – Smuggling and illegal cigarette production increase.
❌ Job Losses in Tobacco Industry – Higher taxation affects small producers.

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7. Recent Developments and Proposed Tax Changes

• The Changing Landscape of Tobacco Taxation

  The Indian government is making significant changes to tobacco taxation, impacting consumers and industries alike. Here’s what you need to know:

  • Budget 2023: NCCD Increase
    The National Calamity Contingent Duty (NCCD) on cigarettes was raised by 16%, leading to a noticeable price hike. This move aligns with public health goals, discouraging smoking while increasing revenue.

  • 55th GST Council Meeting: A Major Tax Hike?
    The upcoming GST Council meeting is expected to propose a 35% GST on over 148 items, including tobacco products. If passed, this will further drive up the cost of smoking, making it a luxury rather than a habit.

  • Exploring Alternative Revenue Models
    With traditional tobacco products facing higher taxes, the government is looking at new revenue sources. E-cigarettes and vaping products could soon be taxed, balancing health concerns with economic interests.

  These changes signal a strong regulatory shift, aiming to reduce tobacco consumption while boosting revenue. While smokers may feel the pinch, public health advocates see this as a win. Is this the beginning of a tobacco-free future? Only time will tell.

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8. How to Calculate GST on Cigarettes?

Calculating GST on cigarettes is simple if you follow these steps:

1. Know the GST Rate – In many countries, cigarettes attract a high GST rate (often 28%) plus a compensation cess.
2. Find the Base Price – This is the cost of cigarettes before tax.
3. Apply GST – Multiply the base price by the GST rate (e.g., 28%).
4. Add Compensation Cess – Cigarettes have an additional cess based on length and type.
5. Final Price – Add all taxes to the base price.

Always check the latest tax rates to ensure accurate calculations.

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9. Critical Analysis: Effectiveness of High Taxation

Taxation is a powerful policy tool, but its effectiveness depends on behavioral and economic factors. Let's analyze whether high taxes achieve their intended goals.

🔹 Do Higher Taxes Reduce Consumption?

• Research suggests that habitual smokers in India exhibit low price elasticity, meaning they continue to buy tobacco despite price hikes.
• However, youth and low-income groups are more price-sensitive. Increased taxes may deter them from initiating or continuing smoking, potentially reducing tobacco use in the long run.
• The challenge? Addiction weakens the impact of taxation, making demand relatively inelastic among long-term users.

🔹 Rise of Illicit Trade

• The unintended consequence of high tobacco taxes is a surge in smuggling and counterfeit products.
• Post-GST, the illegal cigarette market has expanded, allowing foreign brands and fake products to bypass taxation.
• India loses approximately ₹13,000 crore annually due to tax evasion in the tobacco sector.
• This black market poses health risks (due to unregulated ingredients) and undermines public health policies.

While high taxation can discourage new users, it fails to curb consumption among addicts and fuels an illicit market. A balanced approach—combining taxes with anti-smoking campaigns, rehabilitation programs, and strict enforcement against smuggling—may be more effective.

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10. Way Forward: Policy Recommendations

Strengthening Tobacco Control: Key Actions

1. Increase Tobacco Taxation – Raising taxes further can deter smoking, reduce health risks, and align with WHO’s 75% tax burden recommendation.

2. Crack Down on Illicit Trade – Stricter enforcement against smuggling prevents tax evasion and ensures regulations are effective.

3. Tax E-Cigarettes & Vaping – Expanding taxation to these products helps curb nicotine addiction, especially among youth.

4. Reinvest Tax Revenue in Public Health – Directing funds toward anti-tobacco campaigns, cessation programs, and healthcare can create a healthier future.

A higher tax isn’t just about revenue—it’s about saving lives.

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11. FAQs on GST for Tobacco Products

1. How to Calculate GST on Tobacco Products?

To determine the GST on tobacco products, multiple tax components must be considered:

• Base Price (Cost Price of the Product)
• Excise Duty (if applicable)
• National Calamity Contingent Duty (NCCD)
• GST @ 28%
• Compensation Cess (Varies by product type)

Example Calculation: For a pack of 10 cigarettes (up to 65mm in length), the total tax burden includes GST, cess, and other applicable duties.

2. What is the GST Rate and Compensation Cess on Tobacco Products in India?

The GST rate on all tobacco products is 28%. Additionally, a compensation cess is levied to offset revenue losses under the GST system. The cess rate varies by product type, such as cigarettes, chewing tobacco, and bidis.

3. What is the Higher GST Rate on Tobacco in India?

Currently, the GST rate is 28%, the highest slab. However, with compensation cess, the total tax burden is significantly higher.

• In the 55th GST Council Meeting (expected in 2024), discussions are ongoing to increase GST to 35% on tobacco and cigarettes to discourage consumption.

4. What is the GST Rate on Gold Flake Cigarettes in India?

Gold Flake Cigarettes fall under the 28% GST category. Additionally, a Compensation Cess is applied, which varies based on the cigarette length:

• Up to 65mm: ₹2,076 per 1,000 sticks
• 65-70mm: ₹2,747 per 1,000 sticks
• Above 70mm: Higher cess rates apply

5. What is the Total Tax on Cigarettes in India?

The total tax burden on cigarettes consists of:

• GST @ 28%
• Compensation Cess (Fixed per 1,000 sticks)
• National Calamity Contingent Duty (NCCD)
• Excise Duty (if applicable)

Due to these multiple layers of taxation, the effective tax on cigarettes can exceed 60% of the selling price.

6. What is the Excise Duty on Tobacco After GST Implementation?

Even after GST implementation, excise duty still applies to tobacco products since they are classified as "sin goods."

• Excise duty is calculated on the "abated value" (adjusted for tax deductions), while GST is applied on the final transaction value.
• No tax reduction or abatement is permitted for tobacco products under GST law.

These high tax rates aim to discourage tobacco consumption and generate revenue for public health initiatives.

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🔹 Have More Questions? Let us know in the comments!

📌 Stay Updated: The 55th GST Council Meeting is expected to discuss further tax hikes on tobacco and cigarettes. Stay tuned for updates!

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12. Conclusion

Higher GST on cigarettes and tobacco products has boosted government revenue but hasn’t significantly reduced consumption. While prices have risen, addiction keeps demand steady. Many users continue buying despite the cost, highlighting the limitations of taxation alone. To truly curb tobacco use, stricter regulations, better enforcement, and even higher taxes—aligned with global best practices—are needed. Public awareness campaigns and accessible cessation programs must also play a role. Without a comprehensive approach, higher taxes may only burden consumers without achieving the larger goal of reducing tobacco-related harm. The fight against tobacco requires stronger, multi-faceted efforts beyond just taxation.

 

$350 Million ADB-India Loan: Boosting Logistics, Manufacturing & Supply Chain Resilience

Table of Contents

1. Introduction
2. Historical Background
3. Key Highlights of the Loan Agreement
4. Relevance and Strategic Importance
5. Pros and Cons of the Initiative
6. Critical Analysis
7. Recent Developments in India's Logistics and Manufacturing Sectors
8. Way Forward: Future Roadmap
9. Conclusion
10. FAQs

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1. Introduction

On December 20, 2024, India took a significant step toward transforming its logistics and manufacturing sector by securing a $350 million loan from the Asian Development Bank (ADB) under the SMILE program. This initiative isn’t just about money—it’s about reshaping how goods move across India, making supply chains more efficient, resilient, and future-ready.

With a focus on infrastructure development, trade logistics, and smart systems, the loan will reduce costs, attract private investment, and create jobs. Imagine a future where businesses operate seamlessly, warehouses are tech-enabled, and exports move faster and cheaper—that’s the vision behind this funding.

By integrating sustainability and innovation, India is not only strengthening its logistics backbone but also positioning itself as a global manufacturing hub. This partnership with ADB signals a commitment to long-term economic growth, ensuring businesses, workers, and consumers all benefit.

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2. Historical Background

India’s economic growth depends heavily on an efficient logistics system, but outdated infrastructure, fragmented supply chains, and high logistics costs—hovering around 13–14% of GDP—have long been roadblocks. These inefficiencies make goods more expensive and businesses less competitive on the global stage.

Recognizing this, the National Logistics Policy (NLP) 2022 was introduced to bring costs down and streamline operations. The Asian Development Bank (ADB) has been a crucial partner, consistently supporting India’s infrastructure development in transport, energy, and trade.

To push reforms further, the SMILE program was launched. Its first phase set the stage for change, and now, with a $350 million loan under the second phase, India is doubling down on creating a modern, multimodal logistics ecosystem. This investment is expected to boost trade efficiency, attract private sector participation, and make Indian manufacturing more competitive on a global scale.

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3. Key Highlights of the Loan Agreement

India’s logistics sector has always been a backbone of economic growth, but it has faced persistent hurdles—fragmented supply chains, high costs (13–14% of GDP), outdated infrastructure, and inefficient trade logistics. These challenges have slowed India’s progress in becoming a global manufacturing and export powerhouse.

To tackle these issues, the National Logistics Policy (NLP) 2022 was introduced with a clear goal: reduce logistics costs, streamline supply chains, and enhance global competitiveness. A strong logistics network means smoother business operations, faster deliveries, and a more attractive environment for investors.

Recognizing the need for large-scale reforms, India partnered with the Asian Development Bank (ADB), a long-time ally in infrastructure development. ADB has previously funded critical projects in transportation, energy, and trade facilitation, helping modernize India’s economic landscape.

The Strengthening Multimodal and Integrated Logistics Ecosystem (SMILE) program was launched to create a comprehensive, multimodal logistics framework. The first phase established the groundwork, and now, a $350 million loan under the second subprogram will further drive reforms—focusing on modern infrastructure, digital logistics solutions, and private sector investment.

(The line graph above shows the projected improvement in India's logistics efficiency after implementing the SMILE program. By 2030, efficiency is expected to increase by 60%, reducing delays and costs in supply chains.)

With these initiatives, India is on the path to becoming a logistics powerhouse, reducing costs, improving trade efficiency, and fueling long-term economic growth.

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4. Relevance and Strategic Importance

India is on a mission to establish itself as a global manufacturing powerhouse, and at the heart of this transformation lies efficient logistics. The Make in India and Atmanirbhar Bharat initiatives focus on reducing costs, improving supply chain resilience, and enhancing competitiveness. But for India to truly compete on the world stage, it must streamline its logistics sector.

Why Logistics is Key to India's Manufacturing Growth

✅ Economic Growth: A well-integrated logistics network will reduce transportation delays, lower costs, and boost exports, making Indian products more competitive globally.

✅ Competitiveness: High logistics costs (13-14% of GDP) place India at a disadvantage compared to Germany (7-8%) and the US (8-9%). Improving logistics efficiency will enhance India's ease of doing business.

(The bar chart above compares India's logistics costs with global benchmarks. India's logistics costs (13.5% of GDP) are significantly higher than those of the USA, Germany, and China. The ADB loan aims to reduce these costs and improve India's supply chain efficiency.)

✅ Sustainability: India's commitment to low-emission logistics through electric vehicles, green warehouses, and AI-driven optimization will reduce carbon footprints and support climate goals.

✅ Job Creation: Strengthening logistics infrastructure will create millions of jobs across warehousing, transport, supply chain management, and technology-driven logistics.

A modern, cost-effective logistics ecosystem isn’t just an enabler—it’s a necessity for India’s manufacturing sector to thrive globally. Reforms must happen now!

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5. Pros and Cons of the Initiative

✅ Pros

✔ Lower Logistics Costs: The initiative aims to bring India closer to global standards.
✔ Boost to Manufacturing: A streamlined supply chain benefits industries like textiles, pharmaceuticals, and electronics.
✔ Increased Private Investment: Standardized infrastructure attracts businesses.
✔ Trade Efficiency: Improved logistics reduce export bottlenecks.
✔ Employment Growth: New job opportunities in warehousing, transport, and tech-enabled logistics.

❌ Cons

❌ Implementation Challenges: Effective coordination across national and state levels is required.
❌ Dependence on Private Investment: The success of the program hinges on private sector participation.
❌ Technological Adoption Barriers: Integrating digital logistics solutions may face resistance.

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6. Critical Analysis

While the $350 million SMILE initiative is a game-changer for India’s logistics sector, its true impact will depend on effective execution. India has faced policy implementation delays in infrastructure projects before, making efficient planning and execution crucial.

(The bar chart above illustrates the expected rise in private sector investment in India's logistics sector, from $5 billion in 2024 to $24 billion in 2030. This growth will be driven by policy reforms, improved infrastructure, and increased investor confidence due to the ADB-backed SMILE program.

These visualizations highlight how the $350 million loan will reduce logistics costs, enhance efficiency, and attract private investment, ultimately boosting India's manufacturing and trade competitiveness.)

Key Factors for Success

✅ Efficient Fund Utilization – Every dollar of this $350 million loan must be strategically allocated. Funds should go towards priority areas such as multimodal logistics hubs, smart warehousing, and digital trade facilitation to ensure maximum impact.

✅ Policy Synergy – The SMILE program must align seamlessly with existing national initiatives like the National Logistics Policy (NLP) and PM Gati Shakti. Overlapping policies often cause delays and inefficiencies—a cohesive approach is essential.

✅ Monitoring & Evaluation – Real-time tracking of progress will determine if the program is on track. Implementing data-driven assessment models will allow quick course corrections and ensure transparency in execution.

✅ Capacity Building – Infrastructure alone isn’t enough. India needs skilled logistics professionals trained in modern supply chain management and technology adoption to sustain long-term success.

By ensuring accountability, efficiency, and strategic execution, SMILE can revolutionize India's logistics and drive economic growth at an unprecedented scale.

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7. Recent Developments in India's Logistics and Manufacturing Sectors

• India’s Logistics Revolution: Key Policies and Innovations

  India is making bold moves to streamline logistics and boost trade efficiency. Here’s how:

  ✅ National Logistics Policy (NLP) 2022: Logistics costs in India stand at 13-14% of GDP, significantly higher than the global average of 8-9%. The NLP 2022 aims to bring this below 10%, making Indian exports more competitive and boosting manufacturing.

  ✅ PM Gati Shakti Initiative: Logistics is no longer just about roads and trucks—it’s about seamless connectivity. PM Gati Shakti integrates 16 ministries, ensuring synchronized infrastructure planning across rail, road, ports, and airways, reducing delays and costs.

  ✅ India’s Global Trade Position: Efficiency improvements are already showing results. India’s Logistics Performance Index (LPI) ranking improved from 44th in 2018 to 38th in 2023, making supply chains smoother and exports faster.

  ✅ Emerging Technologies: AI-powered tracking, IoT-enabled smart warehouses, and blockchain-based supply chains are transforming logistics. These innovations reduce delays, cut fraud, and optimize inventory, helping businesses scale faster.

  Together, these initiatives are reshaping India’s logistics landscape, making it more cost-effective, technology-driven, and globally competitive. The future of Indian trade is smarter, faster, and more efficient!

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8. Way Forward: Future Roadmap

 India’s logistics sector is on the brink of a major transformation, and five key areas will shape its future success:

🚀 Accelerated Digital Transformation

Investments in AI, blockchain, and IoT will revolutionize logistics by improving efficiency, reducing costs, and enhancing real-time tracking. AI-powered demand forecasting, blockchain-driven transparent supply chains, and IoT-enabled smart warehouses will make logistics faster, smarter, and more reliable.

🚛 Robust Policy Implementation

The success of SMILE reforms depends on their timely execution. Ensuring seamless coordination between the center, states, and private players will be key. A fast-tracked policy rollout will help create a standardized and efficient logistics framework nationwide.

💰 Incentives for Private Sector

Encouraging startups and big corporations to invest in logistics through tax benefits, grants, and PPP models can accelerate growth. Private players can drive tech innovation, warehouse automation, and last-mile connectivity, boosting India's global logistics ranking.

🌍 Global Partnerships

India must learn from Germany, Japan, and the US, which have set benchmarks in smart logistics. Collaborating on best practices in multimodal transport, automation, and AI integration will fast-track India’s modernization.

♻ Green Logistics

Expanding electric fleets, carbon-neutral warehouses, and green corridors is crucial for sustainable logistics. Incentivizing EV adoption and renewable energy in warehouses will help India meet its climate goals while improving logistics efficiency.

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9. Conclusion

The $350 million loan agreement between ADB and India is more than just numbers—it’s a bold step toward transforming India’s logistics sector. Lower costs, faster supply chains, and stronger private sector involvement will make Indian manufacturing more competitive globally. This means smoother exports, better trade efficiency, and more jobs. But the real challenge lies in execution—turning policy into action. Will infrastructure upgrades happen on time? Can businesses quickly adapt to smarter logistics? Success depends on seamless coordination, innovation, and commitment. If done right, this could redefine India’s role in global supply chains and drive long-term economic growth.

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10. FAQs

1. What is the SMILE program?

The Strengthening Multimodal and Integrated Logistics Ecosystem (SMILE) program is a policy-based initiative to enhance India’s logistics efficiency.

2. How will this loan benefit India’s economy?

The loan will support logistics infrastructure, trade facilitation, and private sector investment, leading to reduced costs, better supply chains, and economic growth.

3. What are the challenges in implementing this program?

Coordination across states, private sector participation, and technology adoption are key challenges.

4. How does this program align with India’s sustainability goals?

It promotes low-emission logistics, smart technologies, and green supply chains, aligning with India's climate commitments.

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This investment in logistics modernization will be a game-changer for India's economy, driving efficiency, growth, and global competitiveness.

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RBI MPC Meeting 2025: A Strategic 25 bps Rate Cut to 6.25% – Boosting Growth Amid Easing Inflation

Table of Contents

1. Introduction
2. Historical Background of RBI’s Monetary Policy
3. Key Announcements from the RBI MPC Meeting 2025
4. Relevance of the Rate Cut
5. Critical Analysis of the RBI’s Decision
6. Impact on Key Sectors
7. Pros and Cons of the Rate Cut
8. Recent Developments & Market Reactions
9. Way Forward – What’s Next for India’s Economy?
10. Conclusion
11. FAQs on RBI's Rate Cut

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1. Introduction

In After 57 months, the Reserve Bank of India (RBI) repo rate cut 2025 has finally arrived, reducing the rate by 25 basis points to 6.25% in its Monetary Policy Committee (MPC) decision on February 7, 2025. This shift in RBI monetary policy February 2025 comes amid easing inflation, projected at 4.4% in Q1 2025 and 4.2% for FY 2025-26. The move aims to boost economic growth in India 2025, making home loan interest rates in India more affordable and stimulating key sectors like housing, automobiles, and small businesses. This article explores the impact of the RBI rate cut and its broader implications.

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2. Historical Background of RBI’s Monetary Policy

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The RBI: Guardian of India’s Economy

Since its establishment in 1935, the Reserve Bank of India (RBI) has played a crucial role in monetary policy, ensuring inflation control, liquidity management, and economic growth. A key tool in this framework is the repo rate, the interest rate at which commercial banks borrow from the central bank.

Key Phases in India’s Monetary Policy History

• Pre-Liberalization (1935-1991): Focused on financial stability and controlled lending.
• Liberalization Era (1991-2008): Introduced inflation targeting and economic reforms.
• Post-2008 Financial Crisis: Adapted policies for market stability.
• Current Scenario (2024): The recent repo rate cut to 6.25% signals a shift toward monetary easing, following historical trends after tight fiscal policies.
  
  
  

By executing data-driven monetary strategies, the RBI continues to steer India’s economic resilience.

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3. Key Announcements from the RBI MPC Meeting 2025

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  RBI Cuts Repo Rate by 25 bps to 6.25% – What It Means for Your

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points (bps), bringing it down to 6.25%.

  ✅ Inflation Outlook: Expected to ease to 4.4% in Q1 2025 and 4.2% in FY 2025-26, improving price stability.

  ✅ Economic Growth: Lower rates aim to boost demand, especially in urban markets, benefiting businesses, homebuyers, and borrowers.

  ✅ Liquidity Management: RBI ensures adequate liquidity in the banking system, maintaining financial stability.

  A repo rate cut means cheaper loans, higher investments, and economic momentum. Will this monetary policy move drive sustained growth?.
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4. Relevance of the Rate Cut

The RBI’s decision is crucial for economic momentum:

• Boosting Consumption & Investment: Lower interest rates reduce borrowing costs, driving home purchases, vehicle sales, and business expansion.
• Supporting Fiscal Policy: Aligns with the Union Budget 2025-26, utilizing ₹1 lakh crore tax relief to stimulate demand and accelerate growth.
• Balancing Inflation & Growth: With inflation moderating, RBI can execute policies that foster economic expansion while maintaining financial stability.

A strategic monetary policy ensures sustained development, encouraging investments and job creation.

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5. Critical Analysis of the RBI’s Decision

Balancing Growth & Stability: The Impact of Lower Interest Rates

Lower interest rates play a crucial role in economic growth, influencing both businesses and consumers. While they encourage borrowing and spending, they also come with financial risks that require careful interest rate management.

Positive Impact

✅ Encourages Borrowing & Spending – Lower rates make loans cheaper, leading to increased investments and higher consumer spending, boosting overall demand.

✅ Supports Economic Growth – Businesses expand operations, creating jobs and strengthening the economy, aligning with fiscal stimulus measures.

✅ Inflation Control – Managed correctly, reduced rates prevent deflation, ensuring financial stability and sustainable price levels.

Challenges & Risks

⚠️ Rupee Depreciation – Lower interest rates can lead to reduced foreign investments, weakening the currency against the dollar.

⚠️ Consumer Debt – Easy credit access may result in excessive borrowing, increasing financial vulnerability for individuals and businesses.

⚠️ Global Uncertainty – Economic challenges worldwide can impact the effectiveness of monetary policies in maintaining sustainable growth.

A strategic monetary policy approach is essential to maximize benefits while mitigating risks, ensuring long-term financial stability.

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6. Impact on Key Sectors

🏡 Impact of Lower Interest Rates on Key Sectors

🏡 Housing & Real Estate

• Increased Demand: Lower home loan rates make borrowing more affordable, encouraging more people to buy homes.
• Higher Property Prices: With increased demand, property values may rise, benefiting homeowners and developers.
• Boost to Construction: Real estate developers can access cheaper loans, accelerating new projects.

🚗 Automobile Industry

• Affordable Car Loans: Lower EMIs make vehicle financing easier, attracting more buyers.
• Increased Auto Sales: With reduced costs, demand for cars, especially in mid-range and luxury segments, may rise.
• Growth in EV Market: Lower interest rates can support electric vehicle adoption by making financing more attractive.

🏢 MSMEs & Corporate Borrowing

• Easier Business Expansion: Businesses can borrow at lower costs to invest in growth and innovation.
• Improved Cash Flow: Reduced loan burdens free up capital for operations and expansion.
• Boost to Startups: Lower credit costs make it easier for new ventures to secure funding.

📊 Stock Market & Banking

• Stock Market Gains: Lower rates boost corporate earnings, leading to investor optimism.
• Pressure on Banks’ Profits: While loan demand rises, banks’ interest margins may shrink.
• Increased Market Liquidity: Cheaper credit fuels higher spending and investment.

Lower interest rates create a ripple effect, stimulating economic growth across multiple sectors.

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7. Pros and Cons of the Rate Cut

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8. Recent Developments & Market Reactions

• Sensex & Nifty Surge: Banking & Real Estate Lead Gains

  The Indian stock market rallied as Sensex and Nifty responded positively, driven by strong performance in banking and real estate stocks.

  • Investor Confidence: Global investors see this as a sign of economic stability.
  • Banking Boost: Banks have started reducing lending rates, making loans more affordable.
  • Real Estate Growth: Lower interest rates encourage homebuyers and developers, driving real estate stocks higher.
  • Market Outlook: Experts predict continued positive momentum, benefiting both investors and consumers.

  This trend signals a strengthening economy, fostering growth across sectors.

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9. Way Forward – What’s Next for India’s Economy?

India's economic trajectory hinges on key factors shaping its future:

🔹 Potential Further Rate Cuts: If inflation remains stable, the RBI may lower interest rates further to boost borrowing and investments.
🔹 Growth-Driven Policies: Increased government spending, tax relief, and infrastructure investments will complement monetary easing to drive economic growth.
🔹 Global Market Influence: US Federal Reserve policies will impact foreign capital inflows, influencing market liquidity and the rupee’s stability.

A balanced approach between fiscal policies and global economic trends will be essential for sustained growth in India’s economy.

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10. Conclusion

The RBI’s decision to cut the repo rate to 6.25% signals a strategic push for economic growth. Lower borrowing costs will boost businesses and consumer spending, stimulating demand. However, it also brings risks like potential currency depreciation and financial instability. The real impact depends on inflation trends and global market conditions. If inflation remains under control, this move could support sustainable growth. However, external factors like global interest rates and trade dynamics will play a key role. Balancing growth with financial stability is crucial, making this rate cut a calculated but cautious step in shaping India’s economic trajectory.

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11. FAQs on RBI's Rate Cut

1. What is the significance of the RBI’s repo rate cut?

It reduces borrowing costs, encouraging spending and investment, which boosts economic growth.

2. How does the rate cut impact home loans?

Home loan EMIs are expected to reduce, making real estate purchases more affordable.

3. Will there be more rate cuts in 2025?

If inflation remains under control, RBI may consider further rate reductions.

4. How does this decision affect the stock market?

Lower rates generally lead to higher stock market optimism, benefiting sectors like banking and real estate.

5. What are the risks of this rate cut?

A weaker rupee, potential inflationary pressures, and lower bank margins are some concerns.

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Final Thoughts

The RBI’s 25 bps rate cut to 6.25% is a well-calibrated step to support growth while keeping inflation in check. As India navigates through 2025, the balance between monetary policy, fiscal support, and global economic trends will determine the success of this strategic policy shift.

The Rupee's Decline: A Global Trend and India's Path to Economic Strengths

  

The Rupee's Decline: A Global Trend and India's Path to Economic Strengths

-Dr.Sanjaykumar Pawar 

Table of Contents

1. Introduction
2. Historical Background: The Rupee’s Journey
3. Why is the Rupee Falling?
   • Global Economic Pressures
   • India’s Trade Deficit and Crude Oil Dependency
   • Foreign Capital Outflows
   • U.S. Federal Reserve’s Interest Rate Hikes
   • Psychological and Speculative Factors
4. Impact of the Rupee’s Depreciation
   • On Inflation and Import Costs
   • On Exports and Trade Balance
   • On Foreign Investments and Markets
5. Critical Analysis: The RBI’s Role and Policy Dilemmas
6. The False National Pride in Rupee Value
7. Lessons from Other Countries: How They Handled Currency Depreciation
8. Way Forward: Strategies to Strengthen the Rupee
9. Recent Developments
10. Conclusion
11. FAQs

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1. Introduction

In relation to the US dollar, the Indian rupee has been slowly weakening, breaking through significant levels such as 79, 80, 81, and now 87. The rupee fell 49 paise on the first trading day following the imposition of high tariffs by former U.S. President Donald Trump on China, Canada, and Mexico. This illustrates how precarious emerging market currencies are. While some analysts fear long-term economic repercussions for India, others regard this as a transient worldwide trend. The rupee is still under pressure from factors like growing inflation, outflows of foreign money, and a high US currency, which raises questions about India's financial stability in the global economy.

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2. Historical Background: The Rupee’s Journey"

(Chart representing the historical trend of the Indian Rupee against the U.S. Dollar. It illustrates the significant depreciation over the past few decades, showing key milestones like 1991, 2000, 2010, and the current rupee values. This chart provides a clear visual context for understanding the currency's decline.)

Historically, the Indian rupee was much stronger. Before independence in 1947, ₹1 was equal to $1. However, after independence, India faced economic challenges, and the rupee gradually weakened. In 1966, due to a financial crisis, the rupee was devalued to ₹7 per dollar. In 1991, India faced a severe balance of payments crisis, leading to economic liberalization and another sharp devaluation, pushing the rupee to ₹17 per dollar. Since then, inflation, trade deficits, and global economic factors have contributed to its continuous decline. Today, as the rupee crosses ₹87 per dollar, its value reflects India's evolving economic journey.

• 1947: ₹1 = $1
• 1991: ₹17 = $1 (Economic crisis)
• 2000: ₹45 = $1
• 2013: ₹68 = $1 (Taper tantrum crisis)
• 2022: ₹80 = $1
• 2025: ₹87+ = $1

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3. Why is the Rupee Falling?

a) Global Economic Pressures

• The U.S. dollar is appreciating as investors move toward safer assets.Global inflation and economic uncertainties have reduced investor confidence in emerging markets.
• In times of economic uncertainty, investors seek stability. The U.S. dollar is considered a "safe-haven" currency, meaning that during financial crises, people prefer holding dollars over riskier assets. Inflation is rising worldwide, and fears of a global slowdown have made investors cautious. Instead of investing in emerging markets like India, Brazil, or South Africa, they are moving their money into U.S. assets, such as Treasury bonds, which are seen as low-risk. This increased demand for the dollar makes it stronger, while other currencies, including the rupee, become weaker in comparison.
• b) India’s Trade Deficit and Crude Oil Dependency

• India imports nearly 85% of its oil, and rising crude prices lead to more dollar outflows.India’s economy relies heavily on crude oil for industries, transportation, and energy production. Since most of this oil is imported, any price surge significantly impacts India’s foreign exchange reserves. When oil prices rise, Indian companies and the government must spend more dollars to purchase oil from global markets.
• A higher trade deficit means more demand for dollars to pay for imports.This increased demand for dollars creates an imbalance, making the rupee weaker in comparison. Additionally, a higher trade deficit—the gap between what India imports and exports—means more dollars flow out than come in. This further reduces the value of the rupee, contributing to its depreciation.

c) Foreign Capital Outflows

• Global investors are pulling money out of Indian markets due to higher U.S. interest rates.Global investors are withdrawing funds from Indian markets because the U.S. Federal Reserve has increased interest rates. Higher interest rates in the U.S. make American assets more attractive, offering better returns with lower risk. As a result, investors move their money to safer U.S. investments, weakening the Indian rupee and stock markets.
• Foreign Institutional Investors (FIIs) have been consistently withdrawing their investments from Indian markets for several months. This capital outflow is driven by rising U.S. interest rates, global economic uncertainty, and a stronger U.S. dollar. As FIIs pull money out, the demand for the rupee decreases, contributing to its depreciation against the dollar.

d) U.S. Federal Reserve’s Interest Rate Hikes

• The U.S. Federal Reserve has been significantly increasing interest rates as a measure to combat inflation within the country. These higher rates make investments in the U.S. more attractive to global investors, as they offer better returns. As a result, more capital flows into the U.S., strengthening the dollar against other currencies, including the Indian rupee. This increased demand for the dollar causes its value to rise, putting additional pressure on emerging market currencies.

e) Psychological and Speculative Factors

• When the rupee crosses significant psychological levels like 80, 85, or 87, it triggers panic among investors. This leads to a rush of selling in the foreign exchange market, further driving down its value. Speculators exploit this situation by betting against the rupee, which intensifies its depreciation and creates a negative feedback loop. As more traders expect the rupee to fall, they engage in selling, accelerating the downward movement and increasing market volatility. This speculative activity amplifies the rupee's weakness and heightens uncertainty in the forex market.

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4. Impact of the Rupee’s Depreciation

a) Inflation and Import Costs

• A weaker rupee makes imports more expensive, leading to higher inflation.
• Prices of crude oil, electronics, and medicines rise, affecting common people.

b) Exports and Trade Balance

• A weak rupee makes exports cheaper, helping sectors like IT and textiles.
• However, India's imports exceed exports, so the overall impact is negative.

c) Foreign Investments and Markets

• A falling rupee discourages foreign direct investment (FDI) and portfolio investments.
• Indian stock markets witness higher volatility as FIIs exit.

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5. Critical Analysis: The RBI’s Role and Policy Dilemmas

RBI’s Approach:

• RBI intervenes by selling dollars to slow down rupee depreciation.
• However, excessive intervention reduces forex reserves, limiting long-term stability.

Challenges:

• Intervening too much can drain reserves and limit flexibility.
• Not intervening enough can lead to sharp depreciation, affecting inflation.

RBI Deputy Governor Michael Patra emphasized that India does not manipulate exchange rates to boost exports but instead focuses on long-term competitiveness.

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6. The False National Pride in Rupee Value

Many people believe a strong rupee indicates a strong economy, but this is a misconception.

• China keeps its currency weak to boost exports.
• A weaker rupee helps India’s IT and outsourcing sectors by making their services more affordable globally.
• Rather than focusing on maintaining a specific exchange rate, India should prioritize improving productivity and innovation to drive sustainable economic growth.

A currency’s value should reflect economic fundamentals, not just national pride. Boosting key industries and competitiveness is more important than defending an arbitrary exchange rate.

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7. Lessons from Other Countries

• Japan, China, Turkey, and Argentina have taken different approaches to managing their currencies, with varied results.

  1. Japan: Japan has allowed the yen to depreciate over time, which has boosted its exports and manufacturing. A weaker yen makes Japanese products cheaper for international buyers, improving competitiveness.

  2. China: China actively manipulates its currency, the yuan, to maintain a competitive edge in global trade. By keeping the yuan undervalued, China makes its exports more affordable, driving economic growth.

  3. Turkey & Argentina: Both countries faced high inflation and economic instability, leading to a collapse of their currencies. Their failure to manage inflation and external debt created a loss of confidence in their currencies.

  For India, the lesson is clear: the country must strike a balance between allowing the market to adjust the rupee’s value and maintaining economic stability. Excessive depreciation can lead to inflation and reduced investor confidence, while over-intervention can deplete reserves. India needs a balanced approach that promotes long-term growth, trade, and financial stability without relying too heavily on currency manipulation. 

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8. Way Forward: Strategies to Strengthen the Rupee

To stabilize the rupee and boost economic growth, India should focus on the following strategies:

✔️ Boost Exports: India needs to focus on expanding its manufacturing base and export-oriented industries. Strengthening sectors like textiles, IT, and pharmaceuticals will increase foreign exchange earnings and improve the trade balance.

✔️ Reduce Import Dependency: By investing in renewable energy, India can reduce its dependency on imported oil. This will help save foreign currency and reduce the strain on the rupee from higher oil prices.

✔️ Attract Foreign Investment: Creating a business-friendly environment and improving investor confidence is essential. Simplifying regulations, providing tax incentives, and strengthening infrastructure will attract more foreign direct investment (FDI) into India.

✔️ Maintain Forex Reserves: The Reserve Bank of India (RBI) should carefully manage foreign exchange reserves to prevent excessive depletion. While it’s important to stabilize the rupee, over-intervening in the currency markets can deplete reserves and hurt long-term stability.

These strategies will not only strengthen the rupee but also contribute to India’s economic resilience in the long run.

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9. Recent Developments

• The recent surge in the Dollar Index to 109.7 has created significant challenges for many global currencies, including the Indian rupee. The stronger dollar is not just affecting the rupee but also putting pressure on emerging market currencies and economies worldwide.

  Here’s how it’s impacting India:

  1. Dollar Index Surge: The Dollar Index, which measures the strength of the U.S. dollar against other currencies, has surged to 109.7. This means the dollar is becoming more expensive, weakening currencies like the rupee.

  2. Stock Market Volatility: The Indian stock market experienced sharp sell-offs as foreign investors pulled out their funds. This capital outflow worsens market conditions, contributing to economic uncertainty.

  3. Government's Stand: The Indian Finance Ministry has remained unfazed by the rupee’s decline. Officials view it as a short-term global uncertainty linked to external factors, such as U.S. tariffs and the strong dollar. They maintain that this is not a cause for concern and that India is not reliant on manipulating currency rates for growth.

  In essence, while the dollar’s strength and stock market volatility pose challenges, the Indian government remains focused on managing the situation through strategic economic policies.

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10. Conclusion

The fall of the Indian rupee is a result of global economic trends rather than only India's economic fragility. Although short-term currency value changes are to be expected, India must prioritize long-term stability. Implementing extensive economic changes, lowering reliance on imports, and giving priority to investments in high-value sectors like manufacturing, technology, and renewable energy are all necessary to accomplish this. India needs to focus on developing structural economic strength rather than using fabricated measures to protect the rupee. The country will develop into a strong, competitive global economic force as a result.

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11. FAQs

Q1: Will the rupee continue to fall?

• It depends on global economic conditions, U.S. interest rates, and India’s trade balance.

Q2: Is a weaker rupee bad for India?

• It increases import costs but makes exports competitive. The net impact depends on India’s trade policies.

Q3: Can RBI stop the rupee from falling?

• RBI intervenes to prevent extreme volatility but cannot permanently halt depreciation without damaging forex reserves.

Q4: What can individuals do to protect themselves?

• Invest in diverse assets, hedge forex risks if involved in international trade, and focus on long-term financial planning.

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Economic Survey 2024-25: Weighing Growth Against Worker Rights – Is Dismantling Labour Laws the Right Path for India?

 

 Economic Survey 2024-25: Weighing Growth Against Worker Rights – Is Dismantling Labour Laws the Right Path for India?

-Dr.Sanjaykumar Pawar

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Table of Contents:

1. Introduction
2. Theme & Relevance
3. Historical Background
4. Key Points of the Economic Survey
5. Critical Analysis
6. Pros and Cons
7. Recent Developments
8. Way Forward
9. Conclusion
10. FAQs

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1. Introductions

The Indian Economic Survey 2024-25, recently unveiled, presents a significant policy shift aimed at transforming India into a "developed nation" by 2047. At the heart of this vision is the proposal to dismantle existing labour laws in order to drive economic growth. The survey advocates for extended workweeks, the relaxation of worker protections, and a reduction in regulatory oversight, echoing the sentiments of influential business figures like Narayana Murthy. While these suggestions have been lauded by corporate leaders, who argue that deregulation will spur productivity and job creation, many experts and critics are sounding alarms. They warn that this growth-focused strategy could exacerbate inequality, undermine social welfare, and ultimately derail the broader purpose of development. In this blog, we will explore the core arguments presented in the Economic Survey, providing a historical backdrop to the labour laws in question and examining the potential implications of such reforms on India’s socio-economic structure. 

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2. Theme & Relevance

The proposal put forward in the Economic Survey to dismantle the current labour protections, framing it as a move toward greater "economic freedom," is closely tied to India's overarching ambition of achieving an 8% annual growth rate in GDP. The central argument is that by removing regulatory burdens, businesses will be empowered to hire more workers, enhance productivity, and create a more competitive environment that will drive India toward its lofty development goals. This vision is rooted in the idea that deregulation will unlock greater economic potential. However, the consequences of these policy changes on workers' rights and social welfare are a point of intense debate. Critics argue that while the focus is on stimulating economic growth, the potential erosion of protections could leave workers vulnerable to exploitation, undermining the broader goals of equity and justice in the development process.

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3. Historical Background

Labour laws in India, especially the Factories Act of 1948, emerged as a direct response to decades of worker protests against the exploitative and hazardous conditions prevalent in factories during the colonial period. These protests highlighted the severe abuse of workers, including long working hours, poor safety standards, and lack of basic rights. The Factories Act, which capped the workweek at 48 hours, was a significant step towards protecting workers’ welfare. It was introduced shortly after India’s independence, symbolizing the country’s commitment to ensuring both social justice and the safeguarding of workers' rights, marking a clear shift from colonial-era exploitation to a more humane and worker-centric approach.

This Act was not only about regulating working hours but also reflected a broader vision of social justice that intertwined workers' rights with India's industrial and economic development. It was founded on the belief that the protection of workers’ rights was a crucial element for the nation’s progress, ensuring fair treatment for all citizens while fostering industrial growth. However, the recent proposals in the Economic Survey to dismantle these historic labour protections challenge this legacy. The survey advocates for relaxing or even removing many of these safeguards, signaling a shift away from the welfare-oriented development model that India embraced post-independence. Instead, it promotes a growth-centric approach, where the emphasis is placed more on achieving economic targets and increasing productivity, often at the expense of worker protections.

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4. Key Points of the Economic Survey

• Dismantling Labour Protections: The survey argues that regulations, such as the 48-hour workweek, hinder global competitiveness and demand surges, suggesting these laws as "gold-plated" constraints.
• Increased Work Hours: A potential shift toward longer workweeks is suggested to enhance productivity, with figures like Narayana Murthy advocating for up to 70-hour workweeks.
• Focus on MSMEs: Emphasizing the need for deregulation in micro, small, and medium enterprises (MSMEs) to drive economic growth, particularly in job creation.
• Weakening of Worker Rights: The policy envisions reducing legal protections in a bid to ease the establishment of businesses and attract investment.

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5. Critical Analysis

The Economic Survey’s focus on achieving high economic growth is appealing, but it brings up important concerns. Prioritizing growth without considering worker rights, safety, and welfare could lead to negative consequences. The idea of easing regulations assumes that businesses will thrive without strict oversight, but this overlooks the need for strong labour protections that ensure fair wealth distribution and social stability.

Additionally, deregulation in MSMEs might push more workers into informal, low-paying jobs without benefits, potentially increasing income inequality instead of fostering sustainable development.

The proposal to extend work hours also ignores research showing that longer hours don’t necessarily result in higher productivity. It fails to consider the mental and physical strain on workers, which could reduce their effectiveness in the long run.

 

6. Pros and Cons

(The Pros and Cons of dismantling labour laws in India, showing the potential positive and negative impacts of such policies.

Green bars represent the Pros, such as increased investment, job creation, and global competitiveness.

Red bars represent the Cons, including exploitation of workers, rising inequality, and erosion of worker rights.

This chart helps highlight the contrasting perspectives in the debate over labour law reforms in India.)

Pros:

• Increased Investment: Deregulation may attract foreign and domestic investments, boosting economic growth.
• Job Creation: Easing labour laws might result in the creation of more job opportunities, particularly in small enterprises.
• Global Competitiveness: Reduced regulations could allow Indian companies to compete better in international markets, especially during demand surges.

Cons:

• Exploitation of Workers: Longer workweeks and weakened labour laws may lead to exploitation, with workers enduring poor working conditions.
• Rising Inequality: The focus on growth over welfare could widen the gap between the rich and poor, exacerbating social inequality.
• Erosion of Worker Rights: Dismantling protections may undermine decades of progress in improving working conditions and rights.

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7. Recent Developments

Recent debates on labour law reforms have gained momentum, with influential business leaders such as Narayana Murthy and SN Subrahmanyan pushing for longer workweeks. Meanwhile, states like Haryana and Tamil Nadu have taken steps to relax labour regulations. However, this push for deregulation has faced opposition from labour unions, human rights advocates, and economic experts, who warn that it could have negative long-term consequences for India's workforce. 

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8. Way Forward

To strike a balance between economic growth and social justice, India must adopt a more nuanced approach to labour reforms. A robust system of worker protections should coexist with measures to enhance economic competitiveness. Some potential steps include:

• Building State Capacity: Rather than dismantling regulations, India could invest in building state capacity to enforce worker protections effectively.
• Promoting Fair Growth: Efforts should be made to ensure that growth benefits all sections of society, with a focus on reducing inequality.
• Global Best Practices: Learning from countries that have successfully balanced growth with worker welfare, like Nordic nations, could help shape a more sustainable approach to labour law reform.

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9. Conclusion

The Economic Survey's suggestion to remove labour laws for faster growth outlines a bold future for India. While the goal is to increase economic productivity, it could negatively affect the welfare and rights of many workers. As India works towards becoming a developed nation by 2047, it’s important to ensure this growth is balanced with fairness, social security, and worker protections. To achieve a sustainable and fair future, India must focus on inclusive growth.

Key Points:

• The Economic Survey proposes removing labour laws to promote growth.
• This could harm workers' welfare and rights.
• India must balance growth with fairness and protection of workers.
• Inclusive growth is essential for a sustainable, equitable future.

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10. FAQs

Q1: Why does the Economic Survey want to weaken labour laws? A1: The Economic Survey argues that labour laws, like the 48-hour workweek, hinder economic growth by making businesses less flexible and competitive in the global market.

Q2: What impact could these changes have on workers? A2: Workers may face longer hours, lower wages, and deteriorating working conditions as essential protections are dismantled.

Q3: How can India balance economic growth with worker protection? A3: By investing in state capacity to enforce protections, promoting fair growth, and learning from successful global examples of balanced economic models.

Q4: What are the global examples cited by the Survey? A4: The Survey cites the UK’s "one-in, two-out" rule and the US’s efficiency reforms but fails to account for the strong labour protections in these countries.