Daily Insights December 29, 2025

Daily Insights December 29, 2025

1. RBI MONETARY POLICY DECEMBER 2025 – RATE CUT SIGNALS GROWTH SUPPORT

Context: The Reserve Bank of India’s Monetary Policy Committee unanimously cut the repo rate by 25 basis points to 5.25% on December 4, 2025, signaling intent to support economic growth while managing inflation within target bands.

Key Points:

• Decision: Repo rate reduced by 25 bps to 5.25% (effective December 2025)

• Other Policy Rates:

  • Standing Deposit Facility (SDF): 5.00%

  • Marginal Standing Facility (MSF): 5.50%

  • Bank Rate: 5.50%

• Policy Stance: Neutral maintained (5 MPC members voted for no change in stance; 1 member Prof. Ram Singh voted for shift to “accommodative”)

• Rationale for Cut:

  • Core inflation within RBI’s comfort zone despite temporary food inflation spikes

  • Robust economic growth backdrop (“goldilocks” scenario)

  • Need to ease borrowing costs and improve liquidity

  • Support credit demand in sectors facing global headwinds (IT, exports)

• Inflation Outlook:

  • Expected to moderate gradually, providing space for further adjustments

  • Food inflation remains volatile but core inflation controlled

• Impact on Borrowers:

  • Lower loan EMIs expected (transmission dependent on banks)

  • Improved credit availability; eased borrowing conditions

• Banking Sector Impact:

  • Better credit demand visibility

  • PSU banks with high deposit costs benefit from lower rate environment

• Market Implications:

  • Financial markets expected to react positively

  • Rate cut supports economic momentum heading into 2026

  • Future cuts dependent on inflation trajectory, crude oil prices, global conditions

• Transmission Challenge: Not all rate cuts immediately transmitted to borrowers due to deposit cost pressures and margin considerations

• Verdict: Balanced approach between growth support and inflation control; accommodative tone opens door for future cuts

2. SHIPBUILDING FINANCIAL ASSISTANCE SCHEME (SBFAS) & MARITIME SELF-RELIANCE

Context: India launched comprehensive shipbuilding support measures on December 27, 2025, aligned with Atmanirbhar Bharat and vision for 100 million GT ship ownership by 2047.

Key Points:

• Ministry: Ministry of Ports, Shipping & Waterways (MoPSW)

• Applicability: Contracts signed from September 24, 2025 to March 31, 2036 (in-principle extension to 2047)

• Budget Allocation: ₹20,416 crore for SBFAS; graded support for small, large, and specialized vessels

• Financial Assistance: 15-25% per vessel depending on category (small normal vessels ≤₹100 crore: 15%; large normal vessels >₹100 crore: 15% on first ₹100 crore + 20% on balance; specialized vessels: higher assistance)

• Defense Orders: Capped at ₹200 crore per vessel with ₹2,000 crore overall limit

• Complementary Scheme: Shipbuilding Development Scheme (SbDS) for infrastructure development

• Greenfield Support: 100% capital assistance for common maritime infrastructure through 50:50 Centre-State SPV

• Goal: Increase ship ownership 7x and shipbuilding output 40x by 2037

3. SUBANSIRI LOWER HYDROELECTRIC PROJECT – UNIT 2 COMMISSIONING

Context: NHPC commissioned Unit-2 of India’s largest hydropower project, reinforcing renewable energy commitment and regional development in North-East.

Key Points:

• Capacity: 2,000 MW total (8 units of 250 MW each)

• Unit 2 Status: 250 MW commissioned December 2025 (Virtual inauguration by Union Minister Manohar Lal)

• Location: Subansiri River, Arunachal Pradesh-Assam border

• Dam Features: 116m high concrete gravity structure (largest in North-East India); 284m long

• Annual Generation: 7,422 MU in 90% dependable year

• Next Phase: 3 more units (250 MW each) in near term; remaining 4 units in 2026-27

• Flood Management: Gross reservoir storage 1,365 MCM; 1/3 kept empty during monsoon (442 MCM flood cushion)

• Power Distribution: 16 beneficiary states; free power to Arunachal Pradesh & Assam; 1,000 MW to North-East

• Engineering Milestone: India’s heaviest hydro generator rotors; largest stators and inlet valves; first use of Rotec Tower Belt system

• Subansiri River: Trans-Himalayan river, largest Brahmaputra tributary; originates in Tibet, enters India near Taksing

4. OL CHIKI SCRIPT CENTENARY & TRIBAL CULTURAL RECOGNITION

Context: President Droupadi Murmu attended centenary celebrations of Ol Chiki script on December 29, marking 100 years since its creation by tribal activist Pandit Raghunath Murmu.

Key Points:

• Script Creation: 1925 by Pandit Raghunath Murmu (creator’s birth anniversary now public holiday in Odisha)

• Location of Centenary Closure: Jaher Sthan, Karandih, Jamshedpur (tribal place of worship)

• Organizing Bodies: All India Santhali Writers Association; Jaherthan Committee

• Presidential Recognition: President’s first visit to Jamshedpur; first ceremonial recognition of tribal script at presidential level

• Honorees: 10 eminent Santhali litterateurs felicitated; ~100 Santhali writers honored from Odisha, West Bengal, Assam, Jharkhand

• Odisha Package: Special ₹50 crore cultural package announced including Pandit Raghunath Murmu memorial, Ol Chiki library in Baripada, heritage centre

• Centenary Programs: Week-long seminar on Ol Chiki promotion; symposium on Shikar Parba and Sohrai Parba (tribal festivals); platform for emerging writers

• Cultural Significance: Ol Chiki recognized as vital medium for Santhali literature, education, and cultural expression; symbol of tribal identity

5. MYANMAR’S FIRST ELECTION POST-MILITARY TAKEOVER

Context: Myanmar held first round of general elections since 2021 military coup, with civil war ongoing and international legitimacy questions.

Key Points:

• Election Details: First elections in 5 years under military government supervision (Senior General Min Aung Hlaing’s junta ruling since 2021)

• Competing Parties: 57 parties contesting; Military-backed Union Solidarity and Development Party (USDP) considered strongest contender

• Final Results Timeline: After two more voting rounds in January 2025

• Expected Outcome: Senior General Min Aung Hlaing widely expected to assume presidency

• Voter Turnout: Extremely low – only ~37% at one Yangon polling station (~524 of 1,431 registered voters)

• Legitimacy Concerns:

  • Absence of formerly popular opposition parties

  • Reports of soldiers using threats to force voter participation

  • Civil war ongoing throughout much of the country

• Democratic Facade: Junta presenting vote as “return to democracy” despite widespread repression

6. HYDERABAD WATER CRISIS & RAINWATER HARVESTING IMPERATIVE

Context: Hyderabad faces acute water stress with tanker demands escalating 238% over four years, forcing massive rainwater harvesting initiative despite cultural and governance barriers.

Key Points:

• Tanker Demand Surge: 85,880 trips (April 2021) → 2,90,180 trips (April 2025) = 238% increase

• January Trends: 52,778 trips (2021) → 1,19,752 (2025) = 127% increase; Feb-Mar 2025 saw 58% jump vs 2024

• Groundwater Status: Hyderabad classified as “over-exploited and critical”; extraction exceeds 100% of recharge

• Geological Challenge: Granite, gneiss, compact basalt formations with very low permeability; groundwater depends on fractures and weathered zones

• Rainfall Pattern: 700-900mm annually; 2025 recorded 1,060mm (June-Dec) = 40% above normal, yet runoff flows to rivers

• HMWSSB Action Plan: 100-day initiative targeting 15,000 RWH pits across Greater Hyderabad (up to Outer Ring Road)

• Target: 50,000 RWH structures over 3 years could eliminate Krishna Phase IV requirement (₹3,000 crore project vs ₹100 crore in RWH)

• School Initiative: 1,200 government schools to construct RWH structures

• Compliance Gap: Only 42,784 households of 300+ sq.m regularly book tankers; 2024 survey found 17,382 lacked RWH pits or had dry borewells

• Implementation Challenges: Non-functional borewells (4,569 of 8,285), residential apathy (“I can pay for water”), lack of community ownership

• Schemes: Jal Sanchay Jan Bhagidari (Ministry of Jal Shakti) aiming 1 million recharge structures nationwide

7. INDIA-CHINA LAC AGREEMENT – PATROLLING PACT & NORMALIZATION DYNAMICS

Context: India and China reached landmark agreement on patrolling arrangements along the Line of Actual Control (LAC), enabling troop disengagement from last friction points and signaling renewed focus on border stabilization.

Key Points:

• Agreement Nature: Patrolling pact covering Depsang Plains and Demchok region (dispute areas predating 2020 incursions)

• Core Achievement: India allowed to restore patrols to Patrolling Points (PP) 10-13 in Depsang Plains and Charding Nullah in Demchok

• Timeline: Announced October 2024; negotiations ongoing; December 2025 reports confirm implementation discussions

• Historical Context:

  • 2020 Galwan Valley clash: 20 Indian soldiers, 4+ Chinese soldiers killed

  • May 2020-October 2024: Military standoff in eastern Ladakh

  • August 2024: Special Representatives’ talks (NSA Ajit Doval & Chinese FM Wang Yi) in New Delhi

• Current Deployment: Both sides maintain ~50,000-60,000 troops along LAC in eastern Ladakh; troops disengaged but frontline forces not yet de-escalated

• Dialogue Mechanisms Revived:

  • Corps Commander-level meetings (October 2025)

  • General Level Mechanism in Western Sector (first since August 2024)

  • Monthly high-level engagements initiated during Xi-Modi October 2024 meeting

• Broader Goals:

  • Joint maintenance of peace along frontier

  • Reopening border trade

  • Promoting investment flows

  • “Stable, cooperative and forward-looking” relationship

• Future Path: Special Representatives to seek “fair, reasonable, and mutually acceptable solution” to boundary question; multilevel diplomatic talks planned

• Strategic Assessment: China seeking to leverage easing tensions to stabilize bilateral relations while managing US concerns

• Risk Factors: Diverging interpretations on some clauses; future cooperation dependent on India-US dynamics and global geopolitics

8. BANGLADESH-INDIA BORDER DISPUTE & DIPLOMATIC TENSIONS

Context: Diplomatic row over death of Islamist youth leader Sharif Osman Hadi escalates, with Bangladesh alleging suspect entry into India while Indian officials deny claims.

Key Points:

• Incident Background: December 12 shooting death of Sharif Osman Hadi (“Hadi”), popular figure and July-August 2024 uprising mobilizer

• Bangladesh Police Claim: Two suspects (Faisal Karim Masud, Alamgir Sheikh) crossed into Meghalaya via Haluaghat border with local assistance

• Alleged Route: Suspects initially received by individual named Purti; taxi driver Sami transported them to Tura, Meghalaya; both detained by Indian authorities

• Diplomatic Response: Indian official sources denied inaccuracy of Bangladesh information; called claims “inaccurate”

• Communication Channel: Both nations maintaining formal and informal diplomatic channels; Bangladesh demanding extradition

• Context of Hadi’s Murder: Triggered law and order problems; heightened inter-community tension in Bangladesh following political upheaval

• Broader Issue: Reflects post-July 2024 instability in Bangladesh; minority-majority relations strained

9. INDIA’S RESEARCH & DEVELOPMENT DEFICIT – STRUCTURAL CRISIS

Context: Analysis exposes India’s chronic underinvestment in R&D relative to global competitors, threatening innovation-driven development goals.

Key Points:

• Global Share Disparity: India has 17.5% of world’s population but produces only 3% of global research output

• Patent Filing: India ranked 6th globally (64,480 applications in 2023) = 1.8% of global total; but per-capita ranking is 47th

• Patent Growth: 15.7% growth (fastest among top 20), but from low base

• GERD (Gross Expenditure on R&D): India at 0.6-0.7% of GDP (declining as GDP grows)

• Comparative Spending:

  • China: 2.4% of GDP

  • USA: 3.5% of GDP

  • Israel: 5.4% of GDP

• Corporate Comparison: Huawei (2023) invested ₹23.4 billion in R&D alone – exceeding ALL of India’s combined public and private R&D spend for 1.4 billion people

• Private Sector Role: India: government contributes 63.6%, private sector only 36.4% (inverse of developed nations where industry provides 2/3+)

• Industry Challenges:

  • Focus on incremental improvements over disruptive innovation

  • Preference for technology licensing over domestic development

  • Risk-averse culture

• Academia-Industry Gap: Research often theoretical and disconnected from market needs; weak technology transfer mechanisms

• Brain Drain: Talented PhDs and engineers seek better infrastructure and funding abroad; low salary benchmarks limit retention

• Bureaucratic Delays: Slow fund release; excessively long project approval times; unpredictable, staggered disbursement

• Path Forward:

  • Raise R&D expenditure to 2% of GDP within 5-7 years

  • Shift private sector contribution to 50% of total R&D spending

  • ₹1 lakh crore Research, Development and Innovation (RDI) Fund with efficient disbursement

  • National missions in strategic domains: semiconductors, AI, quantum computing, advanced materials, green energy

  • Mandatory industry-sponsored research chairs; joint incubation centers

10. TAMIL NADU URBAN MOBILITY – METRO VS. BUS-CENTRIC PARADIGM

Context: Analysis challenges elite fixation with metro rail systems in cities like Madurai and Coimbatore, arguing for alternative mobility models aligned with Indian urban realities.

Key Points:

• Political Context: CM M.K. Stalin criticized Union government for denying metro projects to Coimbatore and Madurai

• Data Reality:

  • Metros consume 40% of urban development funds over 15 years (largest budget item)

  • Yet metros carry only 5-12% of daily trips in most Indian metro cities

  • 90% of urban workforce is informal

  • Average commute: 4-5 km (short, dense journeys)

• Metros’ Limitation: High-speed, capital-intensive corridors designed for long-distance travel; mismatch with actual needs

• Financial Burden:

  • Metro cost: ₹300-900 crore per km

  • Operating costs are steep; almost no Indian metro recovers costs through fares

  • Requires massive public subsidies (₹20 crore annual maintenance)

• Opportunity Cost: Diverts funds from schools, water supply, local roads, housing, public health, neighborhood infrastructure

• Alternative Models (Successful Globally):

  • Curitiba, Bogotá, Copenhagen, Freiburg, Medellín: invested in Bus Rapid Transit (BRT), not metros

  • High-frequency electric buses with dedicated lanes

  • Cycling superhighways; walkable neighborhoods

  • Ropeways for hill connectivity

  • 15-minute community concept

• Tamil Nadu Advantages:

  • Madurai: radial street system (inherently walkable)

  • Coimbatore: industrial neighborhood clusters (compact)

  • Workers move within short loops

• Recommended Infrastructure:

  • Electric buses at frequent intervals

  • Pedestrian networks with shade

  • Protected cycle tracks

  • Better-integrated auto-rickshaws and shared mobility

  • Neighborhood-level last-mile systems

• Implementation Speed: Quick to build; cheaper; beneficial; modern mobility defined by access, affordability, quality—not infrastructure scale

11. VENEZUELA’S RESOURCE CURSE & ECONOMIC COLLAPSE

Context: Analysis of world’s largest proven oil reserves (303 billion barrels) yielding one of 2025’s worst economic collapses, illustrating resource curse dynamics and sanctions impact.

Key Points:

• Reserve Paradox: 303 billion barrels (2023) = world’s largest proven reserves, yet poorest oil-dependent economy

• Production Decline:

  • 1980s: peak production

  • 2024: 921,000 barrels/day = 56% below 1980s levels

  • (Historical context: 1970s Yom Kippur War oil boom lifted Venezuelan per capita income to Latin America’s highest)

• Structural Challenges:

  • Most reserves are extra-heavy crude requiring specialized extraction and refinery technology

  • PDVSA (state oil company) owns 5 refineries but suffers from decades of underinvestment, mismanagement, technical expertise shortage

  • Bureaucratization: Post-failed 2002 coup attempt, Hugo Chávez replaced PDVSA management; subsequent bureaucratization reduced efficiency

• GDP Per Capita Collapse:

  • 1970s: Latin America’s highest per capita income

  • 2025: Almost identical to 1990s levels (only country with such slide in this period)

  • Post-2014: Continuous decline following sanctions and oil downturn

• Debt Crisis:

  • Highest general government gross debt among OPEC members

  • Other OPEC nations navigated oil price crashes; Venezuela continues reeling

• Diversification Failure: Unlike other OPEC members, Venezuela failed to diversify into non-oil exports; mineral oil exports dominate

• Global Share Collapse:

  • 1990s: ~4% of global oil exports (2nd only to Saudi Arabia)

  • 2023: 0.35% of global oil exports

• Sanctions Impact:

  • August 2017: First Trump administration prohibited US financial market access

  • 2019: Sanctions on PDVSA; prevented US payment receipt; froze US assets; disallowed diluent supply

  • 2023: Some easing under Biden

  • Later: Reinstated; December 2024: Naval blockade imposed (Trump 2.0)

PIB

THE HINDU

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