Few individuals in India could have heard the identify of George Friedman. No, we aren’t speaking in regards to the writer of the 2005 ebook on the Indian IT business ‘The World is Flat’—that was Thomas Friedman. The 2 Friedmans will not be associated however, like Thomas, George can be a best-selling writer and columnist. And this week, we’re a ebook George printed in February 2020, simply because the coronavirus pandemic was starting to wreak havoc the world over.
That ebook is The Storm Earlier than the Calm: America’s Discord, the Coming Disaster of the 2020s, and the Triumph Past. It’s a protracted title, we all know, however stick with us for a minute. Within the ebook, which got here out when Donald Trump was within the final yr of his first time period as US president, George analyses America’s often-turbulent historical past and talks about socioeconomic and institutional cycles going again over 300 years. He additionally makes a prediction—the turbulence that America goes via now will shift right into a interval of calm ranging from the presidential election of 2028. Or 2032 on the newest!
After all, like many predictions, this forecast may additionally show unfaithful. However for now, we have to maintain on to that hope and brace for the affect of the storm that reached Indian shores this week.
Beginning this Wednesday, the US doubled tariffs on Indian imports to as a lot as 50% and ratcheted up the rhetoric that India’s buy of crude oil from Russia was the principle cause why Vladimir Putin wasn’t halting the battle on Ukraine.
India has, certainly, ramped up Russian crude purchases since Putin invaded Ukraine in 2022. Russia now accounts for almost 40% of India’s crude imports, up from simply 2% earlier than the battle started, as Moscow provided a reduction to Indian refiners akin to Reliance Industries after it was hit by European and American sanctions.
The petroleum sector’s achieve is popping out to be a loss for a number of different industries. US tariffs will severely hit export-oriented corporations in sectors akin to textiles and clothes, leather-based and footwear, gems and jewelry, auto components, equipment, and shrimp. Nevertheless, smartphones, prescribed drugs and power are to this point exempt from tariffs.
The US accounted for $10.8 billion of Indian textile shipments final yr, or 35% of the whole. Equally, gems and jewelry exporters shipped merchandise value $10 billion final yr to the US, or virtually 30% of their international gross sales. Seafood exports to the US have been $2.6 billion final yr, with 40% coming from shrimps alone, and auto part exports have been $6.6 billion.
Extra essential than these income numbers are the hundreds of jobs that are actually in peril in these industries throughout cities just like the diamond hub Surat, textile hub Tirupur, the shrimp producing area of Andhra Pradesh, and auto components suppliers’ places round Pune or the Gurgaon-Manesar belt. These export-oriented corporations and their workers don’t have the posh of hoping for the calm which will come after 2028. They have to climate the storm now.
Forge New Ties
There’s little doubt that US tariffs will hit a number of sectors. However what can be their affect on the general Indian economic system?
The finance ministry stated this week that the fast affect of tariffs on exports appeared restricted however admitted that the ripple results on the economic system posed challenges that should be addressed.
In its July month-to-month financial assessment, the finance ministry stated India-US commerce negotiations “can be essential” and that India is pursuing a diversified commerce technique that features a current cope with Britain and a few European nations. Additionally it is participating in talks with New Zealand and the European Union to maintain its commerce efficiency.
Nevertheless, “these initiatives will take time to point out outcomes and should not totally handle the shortfall in exports to the USA which will come up if the present tariff charges on India persist,” the ministry acknowledged.
The ministry additionally expressed confidence {that a} current sovereign score improve by S&P would scale back borrowing prices for Indian corporations and entice larger international capital whereas the deliberate rationalisation in GST charges would raise consumption.
The GST reform isn’t the one effort the federal government is making to spice up the economic system. So, what else is it doing?
For starters, Prime Minister Narendra Modi is heading out to satisfy the leaders of China, Japan and Russia in an try and construct nearer diplomatic and industrial ties to cushion the affect of US tariffs.
Modi can be going to China after a seven-year hole. He’s more likely to meet each Chinese language President Xi Jinping and Russian President Vladimir Putin throughout his go to to attend a gathering of Shanghai Cooperation Organisation, a regional safety bloc. The go to is critical in mild of the tensions between the 2 international locations since a lethal border conflict in 2020.
In current months, nevertheless, each international locations have been attempting to bridge their variations in sure areas. The 2 international locations plan to renew direct flights after a niche of 5 years and raise commerce limitations. China not too long ago agreed to raise curbs on exports of fertilisers and uncommon earth minerals to India whereas India is seeking to ease scrutiny on Chinese language investments.
Modi can even head to Japan to satisfy Prime Minister Shigeru Ishiba and talk about increasing cooperation between the 2 international locations, notably in areas akin to essential minerals and high-value manufacturing.
Already, Japanese corporations have an enormous presence in India. From Suzuki, Honda and Toyota within the car sector to Sony, Panasonic and Daikin in shopper electronics, many Japanese corporations are family names in India. Massive conglomerates like Mitsui and Mitsubishi have additionally been rising their presence in India. And this week, the Reserve Financial institution of India allowed Sumitomo Mitsui Banking Corp to extend its stake in YES Financial institution to 24.99% from 20%.
Go Electrical
Speaking about Japanese corporations, Suzuki Motor is lastly becoming a member of the EV rush in India. Its native unit and India’s largest carmaker, Maruti Suzuki, this week began industrial manufacturing of its mid-sized “e Vitara” SUV at its Gujarat manufacturing unit.
Why is it essential? Effectively, till now, Maruti’s Japanese father or mother Suzuki Motor and its compatriots akin to Toyota and Honda have been reluctant to launch EVs in India. As a substitute, they’ve been specializing in hybrid automobiles.
This has allowed Indian and Chinese language automakers to get the first-mover’s benefit within the EV race. Tata Motors is up to now main this race, with EV variations of its Nexon, Punch, Harrier and Tiago automobiles and SUVs. Mahindra & Mahindra is catching up quick, with its XUV400, BE6 and XEV 9e fashions. China’s MG Motors sells ZS, Comet and Windsor EVs in India. Then there’s Hyundai, which has launched an EV model of its best-selling SUV Creta.
To make certain, Maruti hasn’t but introduced a timeline to launch the e Vitara in India, the place it holds a 40% market share general. It says the excessive price of batteries pushes up prices of EVs for price-conscious Indian shoppers.
Actually, Suzuki Motor earlier this yr reduce its India gross sales goal and scaled again its EV plans. This, regardless of EV gross sales progress in India outpacing the general auto market and the federal government aiming for a 30% EV share by 2030 from 4.5% at present.
Nonetheless, for now, Maruti will give attention to exports. Maruti chairman RC Bhargava stated the corporate will export between 50,000 and 100,000 of the EVs a yr to start with.
Maruti already makes 17 fashions for export to virtually 100 international locations, together with its father or mother’s dwelling Japan. It can now grow to be Suzuki’s international manufacturing hub for electrical automobiles and the Gujarat manufacturing unit will finally have a capability of 1 million items. Suzuki can even make investments Rs 70,000 crore in India over the following 5 to 6 years.
Clearly, Suzuki is eager to retain its dominance in India’s auto market. That may require it to roll out its EVs for Indian shoppers earlier than later.
Equities Vs Bond
Transferring on to developments on the earth of investing, the tariff tantrum has had a particular affect on inventory markets. India’s benchmark inventory indexes slipped this week, pulled down partly as a result of constant promoting by international institutional traders, however the fall wasn’t as steep as some might need anticipated. Right here’s the explanation why.
FIIs had bought Indian shares closely in early 2025, with their internet gross sales crossing $13 billion in January and February. This pushed benchmark indexes to one-year lows by early April. However then they resumed shopping for, with internet purchases totalling $4.5 billion through the April-June interval. After which modified course once more. In July and till August 28, internet gross sales by FIIs in Indian equities have totalled almost $5.4 billion, or about Rs 46,650 crore, in keeping with NSDL information.
These FIIs outflows have pushed inventory markets decrease, with benchmark indexes falling about 4% because the begin of July. Why hasn’t the market seen a deeper drop? That’s as a result of Indian institutional traders have been shopping for closely. Native mutual funds and insurance coverage corporations have been internet consumers in equities to the tune of about Rs 76,400 crore, due to regular inflows from retail traders such as you and I, each via SIPs and lumpsum investments.
To make certain, FIIs haven’t ditched India altogether. As a substitute, they’ve merely shifted their focus in the direction of one other asset class—debt. NSDL information exhibits FIIs have been internet consumers of Indian debt to the extent of $1.4 billion every in July and August.
However why are FIIs and native institutional traders transferring in reverse instructions?
Truly, home traders are extra excited than international traders in regards to the proposed GST reforms that the federal government unveiled on the Independence Day. The deliberate discount in GST charges is more likely to decrease costs for a lot of items and providers. This may raise consumption and enhance company earnings.
Overseas traders, then again, have been attracted by a rise in bond yields by about 30-50 foundation factors throughout the 10-30-year tenors since early Could, in keeping with a analysis report by HSBC.
Market Wrap
India’s inventory market benchmarks fell this week, stretching their losses for a second consecutive month in August as considerations associated to US tariffs weighed on investor sentiment.
Each the Sensex and the Nifty 50 misplaced about 1.8% through the week. For August, the Nifty fell 1.4% whereas the Sensex declined 1.7%. The indexes had slipped about 3% every in July.
As many as 12 of the 16 main sectoral indexes ended with losses through the month. Public-sector enterprises, pharma, financials and power shares have been the highest laggards in August.
Nevertheless, the auto index jumped 5.5% in August whereas the consumption index rose 2.7% on expectations {that a} proposed reduce within the Items and Providers Tax will increase demand. Hero MotoCorp soared 19.4% and Maruti Suzuki climbed 17.3% in August.
Maruti was additionally the highest performer this week, adopted by Royal Enfield bike maker Eicher Motors and Hero MotoCorp. ITC and Hindustan Unilever have been among the many different key gainers. Asian Paints, TCS and Wipro additionally ended within the inexperienced.
Mahindra & Mahindra was the highest laggard this week, dropping virtually 6%. Index heavyweights HDFC Financial institution and Reliance Industries in addition to Adani Enterprises and Apollo Hospitals fell 3-4% every. Shriram Finance, SBI Life, Solar Pharma and PSU shares NTPC and Energy Grid have been among the many different massive losers.
Different Headlines
- India’s industrial manufacturing rises 3.5% year-on-year in July versus 1.5% in June.
- Former RBI governor Urjit Patel appointed IMF government director.
- Samvardhana Motherson to amass Japanese auto components agency Yutaka Giken for $184 million.
- A23 challenges ban on on-line money-based video games, strikes Karnataka Excessive Courtroom.
- Former Axis Financial institution deputy MD Rajiv Anand takes cost as CEO of IndusInd Financial institution.
- Govt extends cotton import obligation exemption till December-end amid US tariff strain.
- TCS kinds new AI-focused unit, names insider Amit Kapur as head.
- Apple to carry annual fall occasion on September 9, more likely to launch new iPhones, watches.
- Nayara Vitality appoints Teymur Abasguliyev, ex-CFO at Azerbaijani oil agency SOCAR, as new CEO.
- Jakson Engineers to speculate over ₹8,000 crore in photo voltaic manufacturing plant in Madhya Pradesh.
- Fitch retains India score at ‘BBB-‘ citing excessive debt, US tariff dangers.
- On-line funding platform Groww will get SEBI approval for IPO.
That’s all for this week. Till subsequent week, joyful investing!
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