CAG’s Big Bet Under Scrutiny

DECODE THE NEWS

CAG To Hire Private Firms For Audits, Experts Warn of Conflicts And Risks

What?

India’s top auditor, the Comptroller and Auditor General (CAG), has opened the door for private chartered accountant (CA) firms to assist in auditing nearly 350 large central autonomous bodies. These include institutions such as the All India Institute Of Medical Sciences (AIIMS), public universities, and statutory boards.

The audits will still be supervised and signed off by the CAG, but for the first time, private auditors will be embedded directly into CAG-led teams.

Why?

The CAG says it’s a capacity issue. Auditing sprawling public bodies like AIIMS requires dozens of professionals and months of work. Deputy CAG Anand Mohan Bajaj said the move is intended to “augment audit efforts.”

The Institute of Chartered Accountants of India has backed the move, calling it a practical reform. Some CAs that The Core spoke with say it’s an overdue response to a talent crunch since the government struggles to attract and retain experienced auditors due to uncompetitive pay.

What Are The Implications?

Legal and constitutional experts are raising red flags. A member of parliament from Tamil Nādu has formally objected, warning this could “compromise sovereignty” and allow sensitive audit data to slip into private hands. Lawyers The Core interviewed also argue the Constitution neither clearly permits nor prohibits such delegation — placing this move in a grey zone. The biggest risks, say CAs with public audit experience, are conflicts of interest and lack of oversight.

A CA told The Core that firms can bypass ethics rules by using affiliates for consulting work — a practice difficult to track. Experts fear that, without safeguards, private firms could one day audit a regulator like the Telecom Regulatory Authority of India (TRAI) and then consult for its licensees — undermining trust in public institutions.

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CORE NUMBER

61.0

That’s the HSBC Flash India Composite Purchasing Managers’ Index (PMI) for June, a 14-month high. PMI measures business activity based on surveys from companies; a score above 50 signals expansion.

📈 What’s driving the surge?

• New orders rose at the fastest pace in 11 months.

• Export business hit its highest since 2014, led by manufacturers.

• Employment in manufacturing reached a two-decade high.

🧮 Sector snapshot:

• Services PMI: 60.7 (up from 58.8)

• Manufacturing PMI: 58.4 (up from 57.6)

📉 Outlook:
Despite the boom, business confidence dipped to a two-year low, according to the HSBC survey

Trump Claims Ceasefire. Amid escalating tensions, US president Trump claimed late on Monday that he had brokered a “complete and total” ceasefire between Iran and Israel. He said that the ceasefire will be phased over the next 24 hours. Reuters reported that while there was no confirmation on this from Israel, an Iranian official said that Tehran had agreed to the ceasfire.

Flashpoint: Trump's announcement came shortly after reports that Iran had targeted US military bases in Qatar in retaliation for its airstrikes in Iran.

What Next? The US president wrote on Truth social media on Monday that it will be rolled out in stages, with Israel starting a ceasefire six hours after the announcement, and Iran 12 hours from then. The ceasefire could ease fears of disruption in the Strait of Hormuz, a vital pass for global oil shipping. While oil prices crashed on Trump’s announcement, they could stabilise further if the ceasefire holds.

Rice Trade In Rough Waters: Around 1,00,000 tonnes of basmati rice exports to Iran are, meanwhile, stranded at Indian ports as the Israel–Iran conflict disrupts shipping routes and marine insurance, The Economic Times reported.

Catch Up Quick: Iran buys nearly 20% of India’s basmati exports. Haryana, which ships about one-third of that, is hit hardest. Exporters in Karnal, Kaithal, and Sonipat report stalled shipments and delayed payments worth up to Rs 2,000 crore.

The Impact: With no vessels and frozen payments, basmati prices have dropped Rs 4–5 per kg. Exporters are now lobbying the Centre for urgent relief measures.

India’s First Income Survey. India will finally conduct its first full-scale household income distribution survey in 2026. To oversee the landmark exercise, the Ministry of Statistics has set up a Technical Expert Group headed by economist Surjit S Bhalla.

Why It Matters: Despite decades of survey experience, the NSS has never produced comprehensive income data — an essential missing link in shaping welfare, taxation, and economic policy. The new survey aims to fill that critical gap.

What’s Next: The expert panel will finalise the survey’s design and methodology, benchmark it against global best practices, and assess the role of technology in capturing household income.

😒 UGHH

Asia Heats Up Like Anything. The year 2024 was Asia’s warmest or second warmest year on record, according to the World Meteorological Organisation’s latest report. The report also said that Asia is heating up at nearly double the rate of the global average, and that Asia’s warming trend in 1991-2024 was twice that of the previous three decades. 

Setup: Land temperatures were higher than ever on the continent, especially in Japan, South Korea, China and Myanmar. Even sea temperatures are rising at a higher rate in Asia (0.24 degrees Celsius), at about double the global rate. 

Impact: Extreme weather events like floods and droughts have become the new normal. In 2024, China experienced a drought that impacted 4.8 million people. India too saw its fair share of suffering – more than 350 people died in Kerala’s Wayanad landslides.

Heatwaves killed over 450 people; lightning strikes killed 3500 in the country. The report also stresses that the world desperately needs to move toward climate mitigation and adaptation. 

HOW INDIA’S ECONOMY WORKS

Why India's Employment Puzzle Resists Solutions

India’s unemployment rate has risen in the past month, putting focus back on a challenge that the country has been facing for a long time. As per the government, India's unemployment rate rose to 5.6% in May 2025, up from 5.1% in April.

Amit Basole, professor of economics and head of the Centre for Sustainable Employment and the lead author of the State of Working India report, told journalist Puja Mehra, “It's a legacy problem. In fact, youth unemployment is a relatively newer problem for us in terms of the quantity because of the explosion of higher education in the last 20 years, the number of younger workers or younger people with higher education looking for aspirational jobs and not finding those jobs. That phenomenon, I think, is relatively recent.”

Basole said that India also had a much longer-running problem of being a low-productivity country and a low-wage country, which was also a challenge.

In the latest episode of How India’s Economy Works, Basole also spoke about why fixing the employment crisis goes beyond grand economic reforms, touching on issues like local governance, municipal underfunding, and the lack of coordination between ministries and levels of government.

PODCAST

On Episode 614 of The Core Report, financial journalist Govindraj Ethiraj talks to Amit Tandon, Founder and Managing Director at IiAS.

• Stock Markets unmoved by the Middle east war, for now. Iran launches missiles at Qatar

• The rupee turns weak as the dollar strengthens

• Oil prices recover from a steep drop as traders look at supply impact

• Oman to become first Gulf country to charge Income Tax in sign of changing times

• India’s promoter led companies control their fate and fortune in more ways than one

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas