Best of BS Opinion: Will a 25% rate cut make any meaningful difference?

Today's Best of BS Opinion looks at India's real GDP growth contrasts with weak nominal growth, persistent air pollution, confusion over AI , and uncertain labour-code implementation and more

Hello and welcome to Best of BS Opinion, our daily wrap of the Opinion page.  The Indian economy’s performance has been exceptional, notes our first editorial. It clocked 8.2 per cent in the second quarter, taking first-half growth to 8 per cent, up from 6.1 per cent last year, despite an unfriendly external environment. The going may not be as easy in the second half, given that US tariffs are starting to kick in. The effect of lower GST rates and slabs, though, should help soften the blow. Nonetheless, the level of nominal growth is concerning. Corporate earnings and tax revenue depend on nominal expansion. Tax collection rates to meet the full-year gross tax revenue target currently look hard to achieve. Also, given the government's aim of targeting the debt-to-GDP ratio, sustained low nominal growth could be a dampener. In such a situation, the Reserve Bank of India's Monetary Policy Committee, which meets later this month, will look to both GDP and inflation numbers. A 25-bp rate cut at this point may not make any significant difference.  A recent study finds that no major Indian city, out of 11, has achieved a safe air quality index (AQI) level in the past decade. Even cities like Mumbai and Chennai, both coastal metropolises, have had to suffer. As our second editorial notes, the need for a more structured national level pollution plan is becoming more urgent by the day. The National Clean Air Programme's (NCAP) outcomes have been mixed and mostly sub-optimal, largely because of the absence of a legal mandate linking funding to performance. The absence of state capacity in terms of trained technical expertise and integrated data standards have also hurt the programme. A national air quality programme should be all-inclusive in nature and outcomes framed in terms of specific mandates if it is to avert a public health crisis.  Ajit Balakrishnan ventures down memory lane to dismiss some of the fears around artificial intelligence. Scare-mongering around computerisation of banks and polyester and nylon pushing out cotton have both seen those businesses grow. He notes that the term 'artificial intelligence' itself - which suggests that machines possess agency, intent, and reasoning as - might be a misnomer, recalling how a computer playing chess in the '70s and Optical Character Recognition (OCR) in the '90s were both was supposed to be AI. The term now seems to be more geared towards attracting investors, and allowing people to tack on an easy label; it might just as well be called 'High-Dimensional Pattern Matching'. Ironically, when he posed the question to both Gemini and ChatGPT, they agreed that AI was just that - an easy-to-remember yet evocative label.  India’s four new labour codes promise to simplify compliance, broaden social security, and grant firms the flexibility to hire, fire and grow. But then, writes Debashis Basu, India has a habit of announcing reforms that look great on paper but are bungled on execution. In this case, the first issue is that despite being a central legislation, it is up to the states to make their own rules and actually enforce them. Then there is the question of capacity and quality of governance. The labour codes rely heavily on digital compliance but millions of workers lack reliable connectivity. Populism also undermines reform, with politicians ready to dilute or delay implementation for multiple reasons. India’s new labour codes hold the promise of a more productive, formalised economy, but a law is only as good as state enforcement, and India is not known for rigorous, outcome-driven administrative discipline.  Harvard historian Sven Beckert's CAPITALISM: A Global History delivers an epic account of the global leviathan that created the world in which we live, writes Marcus Rediker. Previous histories have usually treated capitalism as a European invention, but Beckert shows how capitalism arose as a global phenomenon, the peculiar behaviour of a few merchants in places as far apart as Cairo and Changzhou. By mapping the diverse origins of capitalism, Beckert reveals its protean and resilient character. He also humanises his history by anchoring it in the lives of specific capitalists like the Godrej family in British India, who helped finance the Indian independence movement. At the same time, he also emphasizes how capitalism has depended on the military power of the modern state and often on practices of extreme violence. The book, notes Rediker, is a learned, formidable and vivid story, and a monumental work of history.