What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1: The Foreign capital question

Context:

India is the world’s fastest growing economy with its average GDP growth rate of 8.2% during 2021 to 2024. Despite being faster growing economy, the net foreign investment is declining. This declining in foreign investments may worsen the already-stressed Indian economy due to the US tariff imposition.

India’s economic growth and foreign capital flows:

• India has grown at the average rate of 8.2% from 2021-24. This is very high compared to other growing economies such as China (5.5%), U.K. (3.7%), and European Union (2.8%) as per World Bank data.
• This momentum has been maintained with year-on-year GDP growth rate of 7.4% and 7.8% respectively it the January-March and April-June quarters in 2025.
• This growth momentum does not match with the foreign capital flows in the corresponding time period. From 2021-2025, the Foreign Portfolio Investments (FPI) has seen the net outflows except during the year 2021-22 where it saw net inflows of $25.3 billion in Indian equity markets.

Foreign investment paradox:

• In Economics, as the country’s GDP grows at higher rates, foreign capital inflows increase due to the increased expected returns on the investments made. This is particularly true for capital-starved Indian economy, where foreign investments are needed to supplement the domestic savings. These investments are needed to finance the economic growth.
• Foreign investments in India comprise of foreign investments, commercial borrowings, external assistance, and non-resident deposits.
• Net capital inflows stand at $18.3 billion in 2024-25, lowest since the $7.8 billion during the global financial crisis year of 2008-09.
• During April-June 2025, the net foreign capital inflows are 40% lower than that for April-June 2024. The economic growth stood at 7.8% in the corresponding time period.
• Official Balance of Payments (BoP) shows that overtaking investors are not partaking in the growing Indian economy.
• Net foreign investments have peaked at $80.1 billion in 2020-21, and then it slowed down to $21.8 billion in 2021-22, and $22.8 billion in 2022-23. It increases to $54.2 billion in 2023-24.
• The 2024-25 fiscal year has recorded net flows of only $4.5 billion, comprising $ 959 million of Foreign Direct Investments (FDI) and $3.6 billion of Foreign Portfolio Investments (FPI).
• FPI includes net investments of $19 billion in government bonds and other debt instruments, offsetting the outflows off $15.7 billion through sale of their shares in equity markets.
• External commercial borrowinghas also increased with net inflow of $15.8 billion in 2024-25, compared to outflows of $86 million and $3.8 billion in the preceding two fiscals.

Reasons for decrease in foreign capital inflows:

• Much of the FDI flows into India from the middle of the last decade have been in the form of private equity (PE)and venture capital (VC). This capital has financed diverse sectors such as retail, e-commerce, green energy, health care and real state.
• These investors are now exiting the Indian markets by selling their shares to the firms engaged in the same business or via the initial public offerings by the investee company.
• These exits by investors who monetized their profitable “mature positions” were valued at $29 billion in 2023 and $33 billion in 2024.  These exits were majorly financed through public markets due the high valuations of these stocks in India.
• Similarly, the more bullish domestic investors have ensured the profitable exits of FPIs due to their attractive public market valuations.

Implications for Balance of Payments (BoP):

• India’s merchandise trade deficit has increased since 2007-08 which stand at $287.2 billion in 2024-25. This trade deficit is caused because India’s exports are vales less than its imports.
• This trade deficit has been counterbalanced by surpluses on the “invisibles” account of the BoP, mainly due to net services exports and private remittances sent by overseas investments.
• These invisible surpluses have kept the overall current account deficit below $50 billion in most years. These deficits have been financed through capital inflows, with excesses adding to forex reserves.
• The US tariffs of 50% on Indian exports to one of its major markets may further widen the merchandise trade deficit.
• The capital inflows depend on the perception of Indian market by the foreign investors. Their primary concerns are- headline GDP growth rate and corporate earnings.
• The favorable business climate and sustainable corporate earnings will attract foreign investors. If market valuations are very high, foreign investors may sell their stakes rather investing afresh.
• The rupee hit the record low of Rs.88.26 against the US dollars mainly due to capital outflows and worries over the trumps tariffs.

Way Forward:

Foreign outflows are expected to increase due to uncertain economic situations caused by US tariff imposition, opaque business laws, excess bureaucratic hurdles, low capital availability. India has taken policy reforms such as slashing of GST rate cuts. These tax rate reductions are expected to boost domestic consumption and company earnings.  To deal with uncertainty in global markets, India must negotiate a favorable deal with its major trade partners. Also, it must take the next-generation reforms to improve ease of doing business.

 

Editorial 2: Building a city of the future

Context:

India’s urban population account for about 37% of its total population in 2023. By 2050, it is expected to increase to more than 50% of its total population. Today, the urban areas are extremely vulnerable to floods, extreme heat, cyclones, landslides, and earthquakes. India must ensure that the new infrastructure build to accommodate this increased urban population should be resilient to climate change. It will have profound impact on cities and its inhabitants.

Increased urbanization in India:

• By 2030, Indian cities are expected to generate over 70% o new jobs. By 2050, the urban population in India is expected to increase to one billion. Some megacities are expected to exceed the individual countries in term of its population.
• In the backdrop of this increased pace of urbanization, India must draw the strategy for building a blueprint for future cities covering areas such as climate resilient infrastructure, modern municipal services.
• India needs to build new infrastructure for its expected increased urban population. It has very narrow window of opportunity to build this infrastructure. By 2070, India needs to build over 144 million new homes, more than double the existing stock. It also needs to improve transportation services, municipal services that cater to these unprecedented numbers.
• This infrastructure needs to withstand the growing impacts of climate change. Thus, it is essential to make early investments in climate resilient urban design and infrastructure. This will reduce the loss of lives and property in future calamities such as floods, extreme heat.

Floods in urban areas:

• Floods are becoming common in many cities including the cosmopolitans such as Delhi, Gurugram, Chennai, and Mumbai.
• More than two-third population in urban dwellers will face the risk of surface flooding, leading to the losses of $5 billion by 2030 and $30 billion by 2070.
• An integrated approach can prevent the hazard of floods in urban areas. It involves demarcation high-risk areas as no-built zones improve city-wide drainage, promote nature based solutions that can absorb excess rainwater, and install flood-warning systems.
• Brazil, which has the urban population of 80%, had moved beyond channelization and structural flood control towards this more integrated approach.
• Kolkata has a city-level early warning system and flood forecasting system Chennai is also taking similar steps such as improving flood preparations to support the most vulnerable position.
• India needs to adopt and follow these successful models of flood prevention and mitigation in urban areas.

Extreme temperatures in urban habitats:

• Due to the global warming and the urban heat island effects, temperature in urban areas during nighttimes increase by 3°C compared to surrounding areas year-round.
• Ahmadabad has successfully avert thousands of death, increased the economic productivity, even during peak summer months. It has adopted the Heat action plan, which focuses on increasing tree canopies, replacing heat intensifying roofs with easily doable roofs, and shifting the working hours of outdoor laborers.
• Today urban areas face calamities such as floods, extreme heat, cyclones, and earthquakes. Since half of the urban housing infrastructure required by 2070 is yet to be build, these housing units must be well planned, located, designed, constructed and maintained. This will have positive impact on cities and their inhabitants. It will also make these cities more prosperous, inclusive and climate-resilient.

Transport system in urban cities:

• The efficiency of transportation boosts the economic and overall productivity of city and its people. More than 35% of its urban roads are prone to floods. In some cities, more than 50% of traffic is disrupted if just 10% to 20% of roads are inundated.
• Mapping flood risks, improving drainage, investing in flood protection and road maintenance may avert climate induced-disruptions to economic activity.

Municipal services:

• Large investment is needed to modernize municipal services such as waste collection, improving the quality of air, water and soil enrichment. It will have positive impact on urban productivity and quality of life.

​​​​​​​​​​​​​​Way Forward:

India need to build its institutional capacity, promote collaborations and get the support of government, citizens and the private sector. It will bring efficiency, innovative financing and technical capacity to build the urban infrastructure. Investing in development of climate-resilient and low-carbon infrastructure and services has the potential to save billions of dollars and attract new investments, generating new jobs, fostering innovation, and unlocking to India’s potential for future economic growth.