The Hindu Editorial Analysis- 14th August 2025 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Limited Gains

Why is it in the News?

 A slight decrease in inflation provides minimal long-term advantage. 

Introduction

• India’s inflation situation has changed significantly in recent years, shifting from levels above the Reserve Bank of India’s (RBI) comfort zone to well below it.
• In July 2025, retail inflation fell to its lowest level since 2017, primarily due to a decline in food prices.
• However, despite this short-term relief, ongoing growth challenges and structural weaknesses indicate that the overall economic scenario remains mixed.

Shift in Inflation Dynamics

• Two years ago, inflation was above the RBI’s comfort band of 2%–6%.
• Currently, it is below the lower limit of this band.
• In July 2025, retail inflation was recorded at 1.55%, marking the lowest level since June 2017.
• This decline was primarily driven by a contraction in food prices and was not merely a statistical anomaly.

Significance of the Base Effect

• The base effect in July was low because food inflation in July 2024 was already at a 13-month low.
• The further contraction in food prices this year indicates a genuine price reduction rather than a result of high prices in the previous year.

Drivers of Continued Low Inflation

• Improved sowing conditions
• Good monsoon progress
• Favourable base effect from the late 2024 inflation surge
• Core inflation (excluding food and fuel) at 4.1%, aligning with the RBI’s target

External Risks to Price Stability

• There is a potential risk if India shifts from purchasing Russian crude oil to more expensive Gulf oil, although the government prioritises national interest.
• The upcoming meeting between Trump and Putin could alleviate some recent tariff-related pressures.

RBI’s Inflation Forecast

• The RBI expects inflation to begin rising again starting January 2026.
• While the short-term outlook is positive, it is important not to become complacent.

Signs of Economic Growth Slowdown

• The Index of Industrial Production has dropped to a 10-month low, with weak output in capital and consumer goods.
• GST revenue growth has slowed to single digits in June and July 2025.
• Gross direct tax collections have contracted this financial year.
• Car sales to dealers reached an 18-month low in June.
• UPI transactions have declined month-on-month three times in 2025, indicating weak demand.

Risks to GDP Outlook

• The RBI projects a GDP growth rate of 6.5% for FY2025–26, but this estimate may be overly optimistic.
• Even if the U.S. removes new 25% tariffs, the existing 25% duties could still reduce GDP by 0.2 percentage points.
• The growth outlook remains fragile, and such potential losses should not be overlooked.

Structural and Demand-Side Challenges

• There are ongoing structural issues within the economy that need to be addressed.
• Despite low inflation, demand remains subdued.
• Temporary relief in prices will not lead to long-term growth without implementing deeper reforms.

Conclusion

• India’s low inflation provides some relief for monetary policy and household budgets, but it does not conceal the underlying economic fragility.
• Weak demand, sluggish industrial output, and structural bottlenecks pose significant risks to sustained growth.
• If these challenges are not addressed, the current price stability may be short-lived, and the nation’s growth momentum could weaken despite favourable short-term economic conditions.

Aid and Advice

 Why in News? 

 L-G’s unchecked nominations could undermine J&K’s polls. 

 Introduction 

The Union Ministry of Home Affairs’ stand on the Lieutenant-Governor’s nomination powers in Jammu & Kashmir raises critical concerns about democratic accountability. Allowing five nominated members with voting rights without the aid and advice of the elected government risks undermining the Constitution’s basic structure by enabling administrative discretion to alter legislative majorities and potentially overturn the people’s mandate.

 Ministry’s Assertion and Democratic Concerns 

• MHA’s Stand: The Union Ministry of Home Affairs told the J&K High Court that the Lieutenant-Governor (L-G) can nominate five Assembly members without the “aid and advice” of the elected government.
• Accountability Question: Such nominations, especially when they carry voting rights, must be rooted in a democratic mandate, not administrative discretion.
• Core Constitutional Issue: The High Court is examining whether the 2023 amendments to the J&K Reorganisation Act—allowing the L-G to nominate five members—violate the Constitution’s basic structure by enabling shifts in legislative majority.
• Potential Impact: These powers could allow nominated members to convert a minority government into a majority or vice versa.

 Legal Arguments and Precedents Invoked 

• Ministry’s Approach: Focuses on technical legal points rather than the constitutional principle at stake.
• Scope of Authority: Argues nominations are outside the elected government’s remit.
• Puducherry Precedent: Cites K. Lakshminarayanan vs The Union of India case to support the L-G’s nomination powers.
• Statutory Justification: References Section 12 of the 1963 Union Territories Act (on voting procedures) to argue nominations can bypass democratic consultation.
• Sanctioned Strength Argument: Claims “sanctioned strength” includes both elected and nominated members—downplaying the risk of altering government stability in a 119-member Assembly. 

 Implications, Historical Context, and Contradictions 

• Amendment Details:Sections 15A and 15B of the 2019 Act permit the L-G to nominate:
  •  Two Kashmiri migrants (including one woman). 
  • One person from Pakistan-occupied J&K.
  •  Two women if underrepresented in the Assembly. 
• Historical Example: In Puducherry (2021), nominated members and defecting MLAs contributed to the fall of the Congress-led government.
• Democratic Fragility in J&K: Transition to Union Territory occurred without elected representatives’ consultation. Promise of Statehood restoration remains unfulfilled despite widespread support and Supreme Court acknowledgment.
• Supreme Court’s Position: In Delhi services cases (2018, 2023), SC held that the L-G should generally act on the elected government’s advice, with discretionary powers as rare exceptions.
• Contradiction: The Ministry’s argument undermines this jurisprudence, risking a subversion of electoral verdicts through appointed nominees. 

 Conclusion 

Empowering the Lieutenant-Governor to nominate members without democratic consultation risks weakening the representative nature of governance in Jammu & Kashmir. Given the region’s fragile political history, unresolved Statehood restoration, and Supreme Court’s guidance on limiting discretionary powers, any framework enabling appointed officials to alter legislative majorities directly challenges the democratic essence and constitutional integrity of India’s parliamentary system.