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

Editorial 1 : Looking Again at EU

Context: In Trump’s world, India and Europe need each other

 

Introduction: European Commission President Ursula von der Leyen’s visit to India this week, accompanied by the entire College of Commissioners (the European Cabinet), marks a critical moment in the EU-India strategic partnership. Von der Leyen arrives in Delhi amid significant global political shifts triggered by Donald Trump’s return to the White House five weeks ago.

 

Urgency for Collaboration

• Both EU and India seek to reduce reliance on the U.S. while navigating Trump’s unpredictability.
• Europe’s status as the third-largest global economy (after U.S. and China) offers India access to technology, capital, and markets.

 

Implications of Trump’s Policies on Global Dynamics

• Withdrawal from Ukraine
• Trump ended U.S. support for Ukraine, shocking Europe and undermining collective security.
• Direct U.S.-Russia talks in Riyadh excluded European representatives, signalling marginalization.
  • NATO Recalibration
  • U.S. Defence Secretary urged Europe to assume primary responsibility for Ukraine’s security and boost defence spending.
  • Plans to reduce U.S. troop presence in Europe (currently ~100,000 soldiers).
• Undermining European Unity
  1. Trump allies like J.D. Vance criticized Europe’s immigration, climate policies, and liberal extremism at the Munich Security Conference.
  2. Support for right-wing parties (e.g. Germany’s AfD) to destabilize centrist governments.
• Impact on India
  1. Russia’s Shifting Priorities: Putin seeks a U.S. deal under Trump, threatening India’s reliance on Moscow (e.g. BRICS, defence ties).
  2. China’s Opportunism: Trump’s potential rapprochement with China could isolate India, which faces a $100Bn annual trade deficit with Beijing.

 

Historical Context of EU-India Relations

• Past Neglect: Stalled Progress
  1. Strategic partnership declared in 2004 but lost momentum by the 2010s.
  2. Trade talks stalled due to EU’s focus on China and lack of political will.
• Recent Revival Efforts
  1. Post-2016 Reengagement: Resumed summits, expanded security dialogues, and launched a Trade and Technology Council (2022).
  2. India-Middle East-Europe Economic Corridor (IMEC): Announced at G20 2023 to counter China’s Belt and Road.

 

Europe’s Strategic Recalibration

• Reducing Dependence on China: Shift from three-decade-long commercial focus on China to diversify partnerships (e.g. Indo-Pacific engagement).
• Internal Political Shifts
  1. CDU’s Pro-American Stance Erodes: Germany’s CDU (traditionally pro-U.S.) criticizes Trump’s Ukraine policy and vows to reduce dependence on Washington.
  2. Rise of Right-Wing Parties: AfD’s electoral gains (doubled support in 2024) fuelled by U.S.-backed ideological campaigns.

 

India’s Challenges and Opportunities

• Economic Vulnerabilities
  1. Trade Deficit with China: Nearing $100Bn annually, driven by surging Chinese exports.
  2. Need for Domestic Reforms: Decisive steps to reduce import reliance and boost manufacturing.
• Strategic Partnerships
  1. Balancing U.S. Ties: PM Modi’s recent White House visit secured commitments, but implementing a $500Bn trade target by 2030 faces hurdles (reciprocal tariffs).
  2. EU as a Critical Partner: Collaboration in tech, green energy, and defence could offset Chinese dominance.

 

Way Forward for India-EU Collaboration

• Accelerating Economic Integration
  1. Finalize long-pending Free Trade Agreement to unlock bilateral trade potential.
  2. Leverage IMEC to enhance supply chain resilience and connectivity.
• Technology and Security Synergies
  1. Expand the Trade and Technology Council to co-develop AI, semiconductors, and clean energy solutions.
  2. Strengthen defence-industrial cooperation to counter Russian/Chinese influence.
• Addressing Obstacles
  1. Bureaucratic Inertia: Overcome historical neglect with high-level political commitment.
  2. Diverging Priorities: Align EU’s climate goals with India’s developmental needs through equitable agreements.
• Strategic Autonomy: Both sides must balance U.S. ties with independent partnerships to navigate a multipolar world.

 

Conclusion: The synergies between India and Europe are real and the bilateral partnership remains underdeveloped. Von der Leyen’s visit provides an opportunity for India and Europe to make amends at this pivotal moment of accelerating history.

 

Editorial 2 : Overestimating the Bonanza

Context: Don’t overestimate benefits of Budget tax cuts.

 

Background: Overview of Tax Reforms

• Doubling of Exemption Limit: Increased personal income tax (PIT) exemption thresholds, leading to a revenue loss of ₹1 lakh crore.
• Triple Objective: Aimed at reducing fiscal deficit, maintaining public capital expenditure (capex), and boosting middle-class disposable income.

 

Debate Over Multiplier Effects

• Optimistic Projections (Krishnamurthy Subramanian’s View)
  1. Claim: Tax cuts will generate ₹5 lakh crore GDP growth via consumption multiplier.
  2. It assumes marginal propensity to consume (MPC) of 0.7–0.8.
  3. Projects 3.2% rise in consumption and 1.8% GDP growth from ₹1 lakh crore disposable income boost.
• Critical Counterarguments
  1. Flawed MPC Assumptions
     • Higher-income taxpayers have lower MPC (savings/imports/debt repayment reduce spending).
     • Realistic MPC closer to 0.5, leading to ₹2 lakh crore GDP growth (not ₹5 lakh crore).
  2. Nominal vs. Real GDP Calculation
     • Nominal GDP in FY26: ₹324 lakh crore.
     • With MPC 0.5, consumption rises by 1% (₹2 lakh crore) and GDP grows by 0.6% (not 1.8%).
• Realistic Outcome: Positive but Modest Impact
  1. GDP growth of 0.6% (double the 0.3% disposable income boost).
  2. Multiplier effect still exists but is weaker than claimed.

 

Fiscal and Growth Trade-offs

• Risks to Fiscal Consolidation: Revenue loss of ₹1 lakh crore shortfall may lead to…
  1. Capex Compression: Public capex stagnant at ₹11.2 lakh crore in FY26 (declines as % of GDP).
  2. Higher Borrowing: Threatens fiscal deficit targets.
• Weakened Growth Multipliers: Impact of lower public capex
  1. Reduced investment multiplier compared to previous years.
  2. Slower infrastructure development and job creation.

 

Stagnant Private Investment

• Despite tax cuts and RBI’s 0.25% repo rate cut, supply-side constraints persist.
• Risk of inflationary pressures if demand surges without supply response.

 

Way Forward: Strategic Recommendations

• Catalysing Private Investment
  1. Simplify regulations and improve ease of doing business.
  2. Strengthen investor confidence to unlock animal spirits.
• Balancing Fiscal Priorities
  1. Sustain Capex: Ensure public investment remains robust to complement private sector growth.
  2. Monitor Inflation: Pre-emptive measures to curb demand-supply mismatches.

 

Conclusion: The FY26 tax reforms reflect bold fiscal policymaking but face challenges in balancing growth and fiscal stability. While the consumption multiplier will drive modest GDP gains, reviving private investment remains pivotal to sustaining growth and avoiding inflation.