Arvind's Newsletter

1.The Indian government permits indexation for capital gains on real estate .

The government revised its indexation rules introduced in Budget 2024 on Tuesday, allowing taxpayers to choose between a 12.5% long-term capital gains tax rate without indexation or a 20% rate with indexation.

The changes now allow resident individuals and Hindu Undivided Family to choose the method of calculating LTCG tax on real estate. The option is applicable only where the property has been purchased before July 23, 2024. Taxpayers can opt for either of the below options, based on what is more beneficial to them: 

A tax rate of 12.5% without the indexation benefit, or A tax rate of 20% with the indexation benefit.

This change enables select taxpayers a choice to opt for the provision that minimises their tax liability. However, sellers of properties purchased on or after July 23, 2024, will have no option but to opt for the 12.5% tax rate and no indexation benefit will be available to them.

2.Sops for Phone Parts Production on Cards

The government plans to incentivise production of 12 of the 30 component sub-assemblies that go into making a mobile device, a senior official told ET. This is part of a big upcoming incentive scheme to develop a local ecosystem for electronic components.

Sops will be linked to a combination of production, capex and employment generation, given the government’s renewed focus on job creation. “This will set the new template for the manufacturing sector,” said the official.

China's value-add is currently in the range of 30%. India’s target is to have 25-30% value add in about seven years, the official added.

3.Govt planning to reduce its stake in LIC by nearly 5% this fiscal

The government might sell up to 5 per cent of its stake in Life Insurance Corporation (LIC) this fiscal year to comply with the minimum public shareholding (MPS) norm, according to a report by The Hindu Business Line.

Currently holding a 96.5 per cent stake in LIC, the government is considering options such as a follow-on public offer (FPO) and qualified institutions placement (QIP) to reduce its stake, the report claimed.

In May 2022, the government raised Rs 21,000 crore through LIC’s initial public offering (IPO), the largest in India’s primary markets history. This IPO was entirely an offer-for-sale by the government, involving 221,374,920 equity shares of Rs 10 each, priced at Rs 949 per share, representing 3.5 per cent of LIC’s paid-up capital. Given the current stock price, a higher valuation could be achieved compared to the IPO.

4.Bangladesh tapped Nobel Prize-winning economist Muhammad Yunus to head its interim government.

This fulfilled the demand of protesters who forced Prime Minister Sheikh Hasina to resign and flee the country.

Yunus lauded the student-led movement for helping Bangladesh “(earn) its independence” from autocracy in an Economist op-ed published before his appointment. He called for a “new generation of young leaders” to help him lead the country through its “second liberation.” But the interim government’s democratic ambitions will be tested by whether it can actually reform state institutions to ensure true public participation, a columnist for The Daily Star newspaper argued. Its failure to do so “will push us from the frying pan into the fire.”

The 84-year-old Yunus, who won the Nobel Peace Prize in 2006, is the founder of pioneering micro-lender Grameen Bank and one of the south Asian country’s most prominent figures.

5.Carbon credit prices are about to take off, Goldman Sachs analysts predicted. 

The European Union’s carbon market is the world’s largest, but the cost of carbon emissions has traditionally moved in tandem with gas prices. That is expected to de-couple: Gas prices are down, but the bloc will likely push carbon prices higher, knowing that cheaper gas will cushion inflationary pressures. The change may be enough to make carbon capture systems profitable, the report argued. The Intergovernmental Panel on Climate Change said last year that funding for climate solutions is way below the levels required to meet 2030 climate goals, so major upticks in decarbonisation markets are good news if realised.

6.Can India’s economy thrive without China’s help?The Financial Times argues that, India’s restrictions on technology and people from its rival risk stifling its ambitions to become a manufacturing superpower. (Long Read.)

After missing out on the export-led growth spurt that lifted China’s economy over the past three decades, India is determined to catch up with its neighbour and rival — but strictly on its own terms. That has translated to some of the harshest restrictions on Chinese inward investment of any major world economy.

Since 2020, companies with Chinese shareholders have needed to apply for permission from New Delhi to invest in India — and this has rarely been granted. BYD, the Chinese EV behemoth that increasingly dominates world markets, is among the companies the Modi government has refused permission to build a factory.

At the same time, India has outlawed dozens of Chinese apps, while launching a tax and legal crackdown on Chinese mobile phone producers. Indian officials boast of being the world’s first country to have banned the China-owned social media app TikTok. India has also cut back visas for Chinese nationals, making it one of Asia’s few countries where they are a rare sight.

But some critics are warning that India’s tough line on China could starve it of the capital, components and knowhow needed to realise its ambition of becoming a major manufacturing power.

A backlash is forming in the business community. Some argue the Modi administration’s Sinophobia is working at cross purposes with its industrial ambitions in sectors such as consumer electronics. They say tough rules are keeping out suppliers and technicians serving companies like Apple, who have faced long delays in obtaining visas.

Top conglomerates from Adani Group to Tata Sons are among those pushing for visa access for Chinese workers needed to install machinery or design plants. Read on (Gift copy)

7.How to free yourself from “hindsight bias”; Joseph Kaufman, Big Think

“Hindsight bias” is the tendency to judge ourselves (and others) for decisions that did not produce the outcomes we desire, based on information that wasn’t available at the time.
The primary danger of hindsight bias is that it imposes very real costs in the present.
To limit the harmful effects of hindsight bias, remember the wisdom of Ralph Waldo Emerson: “Finish each day and be done with it.”