Is the India Growth Story Over?
In a television speech to the nation, Indian Prime Minister Narendra Modi urged his people to make sacrifices by spending less on fuel, fertilizer, and travel. He also asked them not to buy gold for a year. “To save foreign exchange, we must accept the challenge of patriotism,” he said. It appears that India's problems do not just stem from the effects of the US-Iran war; India's problems started well before that. Flight of foreign capital has put the Indian currency under tremendous pressure, with the Indian rupee falling nearly 10% in recent months. Many analysts believe that the Indian IT services exports could fall significantly as the artificial intelligence (AI) models begin to replace the IT workers. It could create a balance of payments crisis that could force India to seek the IMF bailout in the not too distant future. Already, the Indian economy has slipped to the sixth-largest economy by nominal GDP, dropping from previous projections that had it at fourth.
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| Indian Economy Drops From 4th to 6th Rank. Source: IndMoneyApp |
Energy Crisis:
India is facing a serious energy crisis driven by the closure of the Strait of Hormuz that has disrupted global oil and gas supplies. While the government has assured citizens that there are no immediate shortages of petroleum or natural gas, the escalating costs of imports are putting extreme pressure on the nation's foreign exchange reserves.
AI Challenge:
Indian IT firms are cutting staff to prepare for the expected disruption from the adoption of AI. For example, the IT services firm Cognizant is planning major workforce reductions that could impact between 12,000 and 15,000 employees globally, with India expected to account for the majority of the cuts, according to a report.
A US-based investment research firm Citrini Research is forecasting a significant disruption to India's traditional IT services sector by 2027-2028, driven by the collapsing cost of AI coding agents. Here's an excerpt of the Citrini research report:
"The country’s IT services sector exported over $200 billion annually, the single largest contributor to India’s current account surplus and the offset that financed its persistent goods trade deficit. The entire model was built on one value proposition: Indian developers cost a fraction of their American counterparts. But the marginal cost of an AI coding agent had collapsed to, essentially, the cost of electricity. TCS, Infosys and Wipro saw contract cancellations accelerate through 2027. The rupee fell 18% against the dollar in four months as the services surplus that had anchored India’s external accounts evaporated. By Q1 2028, the IMF had begun “preliminary discussions” with New Delhi".
Stocks Selloff:
Sensing the growing crisis, Indian stock market investors are selling off their holdings. IN particular, foreign investors have accelerated their exit from Indian equities in early 2026, selling over $20 Billion in the first four months, driving 14-year low ownership levels. Triggered by Middle East conflicts, rising oil prices, and rupee depreciation, this record exodus—marking the worst quarterly selloff in March—was driven by outflows in banking, financial services, and IT.
Investors see the writing on the wall. The Indian economy has already dropped from the 4th to the 6th rank in the world. The Indian currency is under a lot of pressure. India's current account deficit will worsen with the loss of IT services exports.
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Comments
the PM is wise and his advice is valid.
India's problems pre-date the US-Iran war and the Strait of Hormuz closure.
The Indian rupee has been falling for more than a year.
Foreign capital has been fleeing India since well before the current Hormuz crisis.
AI adoption has been cutting IT services jobs for a year and it will hurt India's services exports which help offset its large goods trade deficits.
https://www.reuters.com/business/energy/india-races-shield-economy-iran-war-driven-oil-shock-capital-stress-2026-05-13/
MUMBAI, May 13 (Reuters) - A sustained spike in energy prices triggered by the Iran war has clouded India's macroeconomic outlook, spurring crisis-era measures from policymakers to shield Asia's third-largest economy from external headwinds.
The most severe disruption of global energy supplies in history, which began in late February, is stressing India's external sector by making imports significantly more expensive while keeping overseas investors away from local assets.
Economists have marked down growth forecasts for the economy, lifted inflation projections and are forecasting persistent pressure on the rupee with India staring down the barrel of a third consecutive year of a balance of payments deficit.
India’s heavy reliance on oil imports leaves the currency particularly vulnerable among emerging markets if the Iran crisis drags on. The country imports about 90% of its oil needs and about 50% of its gas requirements.
Managing the current account credibly, financing it, and preventing further currency depreciation are big imperatives for India this year amid the Gulf crisis, Chief Economic Advisor V. Anantha Nageswaran said on Tuesday.
The energy shock from the U.S.-Iran conflict is forecast to widen India’s current account deficit to 2.5% of GDP in the fiscal year ending in March 2027 from 0.9% in the previous year.
Looking to manage the strain, policymakers have turned their attention to crisis-era measures including exhorting citizens to cut down on consumption that uses up foreign exchange.
Indian Prime Minister Narendra Modi on Sunday urged a range of measures to conserve foreign exchange reserves while late on Tuesday night the central government hiked tariffs on precious metal imports as a way to curb demand and cushion the rupee.
https://www.ft.com/content/b64c331b-76f3-4326-807c-3513e6d862b6?syn-25a6b1a6=1
Billions of dollars pulled from stocks
Portfolio investors have pulled out Rs2tn ($21bn) from Indian stocks in the last two months, making this the worst year thus far for foreign flows since the markets were opened to overseas investment in 1993. The Rs2.06tn sold this year builds on the Rs1.66tn offloaded during the last calendar year. A report by brokerage firm JM Financial shows that aggregate foreign holdings in Indian stocks have now fallen to a 14-year low of 14.7 per cent.
Is the worst over?
A Goldman Sachs report published on Saturday, titled Outflows Fade, But Re-entry Waits, suggests that the bulk of the selling may be behind us, and the downside risk from incremental foreign portfolio investor selling is probably capped at another $4bn-$5bn.
However, it also cautions that this does not imply the likelihood of a quick reversal. When oil prices corrected in early April following a US-Iran ceasefire agreement, foreign investors did not use the opportunity to re-enter India. Any hope that a broader de-escalation in the Middle East will trigger a resurgence of inflows is, therefore, misplaced.
Indian market valuations remain unattractive, and allocations to emerging markets are flowing predominantly into South Korea and Taiwan, where semiconductor giants are capitalising on the AI boom. Though concentrated in a handful of companies, their market weight and strategic influence in the AI industry are considerable. The Indian market is significantly stymied by the lack of any prospects of prominent AI plays at the moment.
The sell-off in stocks is not confined to foreigners. Retail ownership in Indian stocks has declined 9.2 per cent since March 2025. However, the one cohort that is holding steady is domestic mutual funds, which have hit record highs. As volatility has risen, retail investors have increasingly chosen to channel money into markets through systematic investment plans from mutual fund houses, which are monthly, fixed-sum contributions that function as a form of forced saving. Persuaded by the logic of paying an average price over a longer term, investors have stayed the course even as returns have languished. The benchmark Nifty 50 index is down 8.4 per cent this year.
The question now is where will Indian markets go from here. It looks like it will mostly be sideways. The floor may be in place, but the ceiling looks pretty fixed. The market will continue to be propped up by the quiet discipline of the domestic retail investor — people dutifully feeding their funds each month, largely indifferent to the mayhem unfolding around them. Unfortunately, that is not a foundation for a rally, it is just a holding pattern.
https://youtu.be/dTcGWYhFrn0?si=DOl1bCIXefHhORn5
Prime Minister Narendra Modi has urged the citizens of India to adopt some Covid era-like measures in light of the continuing West Asia crisis, including limiting the use of fuel and cooking oil, working from home, avoiding gold purchases and foreign travel, and reducing the usage of chemical fertilisers. Meanwhile across India’s industrial belt, reports of MSMEs freezing production and workers losing their jobs have been coming in. Jahnavi Sen is joined by Dr Himanshu, an economist at Jawaharlal Nehru University, and independent researcher and senior journalist Sukumar Muralidharan to discuss these issues.
https://www.business-standard.com/industry/news/openai-anthropic-ai-services-impact-tcs-infosys-india-126050600723_1.html
The new model: From manpower to machine-led execution
Traditional IT services relied heavily on large teams and long project cycles. The new AI-native model flips that equation.
Dhillon explains this stark contrast: “The second model costs the client less. It costs the vendor fewer people. And it leaves almost no room for the 180-person team that used to do this work.”
Instead of hundreds of engineers working over years, a small team can now deploy AI systems that automate a majority of tasks. This model is faster, cheaper, and outcome-driven rather than effort-driven.
Raghu Pareddy, CEO & founder of Bengaluru-based IT consulting and services firm Wissen Technology, notes, “This significantly compresses implementation timelines and begins to shift the value proposition from manpower-led delivery to outcome-led execution.”
However, this transition is not absolute. Enterprises still require governance, integration, and domain expertise, areas where traditional IT firms retain an edge.
What this means for Indian IT
First, the labour-arbitrage model, which relies on large offshore teams, is under pressure. As AI automates coding, testing, and support, the need for large entry-level teams reduces.
Dhillon adds that the traditional staffing pyramid is under strain, with automation hitting entry-level roles while AI-native firms move up the value chain into high-margin consulting and transformation work.
Second, pricing models are evolving. As Viswanathan explains, “The shift away from time and materials toward fixed-fee and subscription pricing is already underway.”
Third, the competitive landscape is becoming more complex. These AI firms are both partners and competitors. Infosys, for instance, has partnered with both Anthropic and OpenAI, even as it competes with them for enterprise budgets.
Pareddy highlights this dual dynamic. “We’ll see more co-opetition. Companies are already partnering with AI firms to accelerate adoption, even as they compete for enterprise budgets,” he said.
Core sector activity contracts 0.4% in March 2026 on West Asia impact, worst in 19 months - The Hindu
https://www.thehindu.com/business/core-sector-activity-contracts-04-in-march-2026-on-west-asia-impact-worst-in-19-months/article70884762.ece
The steel sector saw growth slump to an 18-month low of 2.2% in March 2026, while the cement sector slowed to a 17-month low of 4%. | Photo Credit: Getty Images/iStockphotos
Activity in India’s eight core industrial sectors contracted by 0.4% in March 2026, the first month after the war in West Asia broke out, according to data released by the government. This was the poorest performance for the sectors in 19-months
The data on the Index of Eight Core Industries released by the Ministry of Commerce and Industry on Monday (April 20, 2026) also showed that growth in the index stood at 2.6% for the full year 2025-26, the lowest since the COVID-19 pandemic in 2020-21.
In March 2026, the data showed that four out of the eight sectors measured in the index contracted over their levels in March last year.
“While an adverse base weighed on electricity generation, a shortage of inputs amidst the West Asia crisis curtailed the fertiliser output, which plunged by an unprecedented 24.6% year-on-year in the month,” Aditi Nayar, Chief Economist at ratings agency ICRA said.
The fertiliser sector ended the year 2025-26 with a contraction of 0.1% as compared to a growth of 2.9% in 2024-25, which itself was the lowest since 2021-22.
The electricity sector contracted 0.5% in March 2026 on a relatively high base of 7.5% growth in March 2025. Over the course of 2025-26, the sector grew 0.9%, down from 5.2% in 2024-25.
“Besides, the growth in steel and cement output also weakened in March 2026 relative to February 2026, suggesting that construction activity slowed in the month,” Ms. Nayar added.
The steel sector saw growth slump to an 18-month low of 2.2% in March 2026, while the cement sector slowed to a 17-month low of 4%.
The only sector to see relatively robust growth in March 2026 was the natural gas sector, which grew 6.4% as the government pushed oil marketing companies to increase their output in reaction to the constraints brought on by the West Asia crisis.
The crude oil sector, on the other hand, contracted by 5.7% in March 2026, the seventh consecutive month of contraction.
The coal sector contracted by 4% in March 2026, while the refinery products sector grew by 0.1% that month.
Keji Mao (毛克疾）
@kejimao
Many years ago, I gave two presentations on how China builds its industrial and technological ecosystem—one for an Indian audience and one for a Vietnamese audience. Although the content was largely the same and went into many details that were rarely mentioned in other settings, the feedback from the Vietnamese and Indian participants was strikingly different.
When I discussed the gaps between Vietnam and China, my Vietnamese friends listened very attentively to my analysis of Vietnam’s weaknesses. They even proactively acknowledged Vietnam’s deficiencies and asked me to analyze more specific issues in greater detail.
However, when I compared China and India, many Indian friends became quite argumentative. They tried to compete with or challenge the Chinese perspective on almost every point, to the point where I could barely develop my analysis. As a result, they might have won the debate, but missed a valuable opportunity to have a meaningful exchange.
So, I came to know which country would be the real winner for "China+1" many years beforehand.
https://x.com/kejimao/status/2055672429381615639?s=20
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Keji Mao (毛克疾）
@kejimao
India is already facing serious pressure on its balance of payment: Oil prices have risen recently, remittances from overseas Indians have fallen, and foreign capital has been fleeing the country. On top of that, as an emerging economy, capital is the scarcest resource it needs for its development anyway.
So why are Indian companies still committing to huge investments in the United States? It seems the US really treats India as its “blood bag”—a source to suck blood from and keep itself alive.
Through a series of geopolitical maneuvers that were not aimed at India but weakened India greatly anyway, Washington made it much easier to do three things: 1) sell high-priced oil and natural gas to India; 2) sell expensive weapons systems to India; and 3) squeeze out large investment commitments from Indian tycoons.
https://x.com/kejimao/status/2055589025218539568?s=20
@kejimao
The Japan Times writes, "India stands out as one of the biggest losers as the artificial intelligence trade reshapes global investment flows." It is quite surprising that even a major Japanese newspaper speaks out about this loudly. But the truth is Japan may well be in an even worse position when it comes to AI.
https://www.japantimes.co.jp/business/2026/05/17/india-missing-out-ai-boom/?utm_term=autofeed&utm_medium=social&utm_source=twitter#Echobox=1778988492
https://x.com/kejimao/status/2056269461955776653?s=20
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India missed out on AI and now its run as market darling may be over
https://www.japantimes.co.jp/business/2026/05/17/india-missing-out-ai-boom/?utm_term=autofeed&utm_medium=social&utm_source=twitter#Echobox=1778988492
In a stark shift, the country’s stock market is on the verge of dropping out of the world’s five biggest for the first time in three years. Without the AI-driven rallies powering Taiwan and South Korea, there’s a growing risk that India falls further behind rather than regaining lost ground.
The rationale goes far beyond Indian equities being relatively expensive or corporate earnings slowing. Global investors, who not long pushed India close to rivaling China in emerging-market portfolios, are now chasing themes the country’s market largely lacks: chip manufacturing, computing infrastructure and AI models. While India has talent, demand and digital scale, few of its corporate champions are directly linked to that buildout. That increasingly leaves the market tied to the domestic consumption story.
“This isn’t a dip you buy,” said Gary Dugan, chief executive of Global CIO Office. “What markets haven’t fully priced yet is that this isn’t an earnings miss story in India, it’s a terminal value story. The assumptions about where these businesses are in 10 years have to change.”
Underscoring the scope of the revaluation, India’s weight in the MSCI emerging markets index has fallen to about 12% from 19% last year. Roughly two-thirds of the reallocation from India over the past 12 to 18 months reflects AI positioning, according to M&G Investments.
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India Misses Out on AI: Stock Market Close to Falling From Top 5 as AI Trade Favors Taiwan, Korea - Bloomberg
https://www.bloomberg.com/news/articles/2026-05-17/india-missed-out-on-ai-and-now-its-run-as-market-darling-may-be-over
Takeaways by Bloomberg AI
India's stock market is on the verge of dropping out of the world's five biggest for the first time in three years due to the artificial intelligence trade reshaping global investment flows.
Global investors are chasing themes that India's market largely lacks, including chip manufacturing, computing infrastructure, and AI models, leaving the market tied to the domestic consumption story.
India's weight in the MSCI emerging markets index has fallen to about 12% from 19% last year, with foreign investors abandoning India at an accelerating pace and holding less than domestic institutions for the first time in more than 20 years.
India stands out as one of the biggest losers as the artificial intelligence trade reshapes global investment flows.
In a stark shift, the country’s stock market is on the verge of dropping out of the world’s five biggest for the first time in three years. Without the AI-driven rallies powering Taiwan and South Korea, there’s a growing risk that India falls further behind rather than regaining lost ground.
The rationale goes far beyond Indian equities being relatively expensive or corporate earnings slowing. Global investors, who not long pushed India close to rivaling China in emerging-market portfolios, are now chasing themes the country’s market largely lacks: chip manufacturing, computing infrastructure and AI models. While India has talent, demand and digital scale, few of its corporate champions are directly linked to that buildout. That increasingly leaves the market tied to the domestic consumption story.
@PankajPachauri
Rupee has now slipped to 96+ to a dollar.
Blame the rising crude, OK.
But why is it falling against Thai, Sri Lankan, Pakistani and Bangladeshi currencies.
https://x.com/PankajPachauri/status/2056221018747015471?s=20
https://www.reuters.com/business/world-at-work/global-centres-india-slow-hiring-ai-reshapes-work-ansr-ceo-says-2026-05-18/
BENGALURU, May 18 (Reuters) - Global capability centres in India are taking a measured approach to hiring as companies are wary about the impact of geopolitical uncertainties and growing AI adoption, the CEO of ANSR, which helps firms build and run global centres, said.
India is home to more than half of the world's global centres as companies prefer its large skilled workforce, lower operating costs and rising ability to support high-value jobs across technology, finance and engineering.
However, the rise of artificial intelligence could test that edge by reducing headcounts for some roles and reshaping the kind of work global centres do.
"There is a sense of cautiousness," Lalit Ahuja, also the founder of ANSR, told Reuters on Monday. "Companies are hiring fewer people, just as a matter of abundant caution."
🚨India loses all spots in world's top 100 companies as equity crash bites
For the first time in years, not a single Indian company figures among the world's top 100 listed firms by market capitalisation , a measure of how deeply and relentlessly the selloff in domestic equities has cut.
Reliance Industries, the country's most valued firm, has slipped to around 106th globally from 57th at the start of 2025 and 73rd at the start of 2026. HDFC Bank, India's most valued lender, now ranks 190th, down from 97th at the start of 2025.
Bharti Airtel stands at 202nd, falling from 164th at the start of 2026. ICICI Bank and State Bank of India have dropped to 274th and 276th respectively, from 215th and 231st at the start of 2026.
The decline has been sharpest among India's top technology stocks. TCS, the country's largest software exporter, has seen the steepest fall, with its global rank dropping to 314th from 84th at the start of 2025 and 171st at the start of 2026.
Infosys, India's second largest IT firm, now ranks 590th, down from 198th at the start of 2025 and 330th at the start of 2026. ITC has slipped to 702nd from 296th and 466th at the start of 2025 and 2026 respectively.
https://www.moneycontrol.com/europe/?url=https://www.moneycontrol.com/news/business/markets/india-loses-all-spots-in-world-s-top-100-companies-as-equity-crash-bites-13923210.html
https://x.com/chandrarsrikant/status/2056562183753105573?s=61&t=mgTxrmITUbpo9NntN5677Q
@Subhashgarg1960
Indian economy is falling apart. Everything is going wrong. India is at Big Risk: Fake growth, Falling Rupee, Energy, LPG shortage. Think of anything | Ex-Finance Secretary Explai... https://youtu.be/YwB_F_bRSD0?si=_f0yWT6RfzD0zv-u via
@YouTube
https://youtu.be/YwB_F_bRSD0?si=6OTDa8WyGdeXhTsT
https://x.com/Subhashgarg1960/status/2056617295494185377?s=20
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The Wire
@thewire_in
Indian Rupee Has Fallen by Nearly 12% Against Pakistani Rupee Since Operation Sindoor
https://x.com/thewire_in/status/2056630870572966216?s=20
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The comparison with Pakistan is instructive because it again entered an International Monetary Fund programme in 2025 and was forced to implement strict fiscal and monetary measures.
https://thewire.in/economy/indian-rupee-has-fallen-by-nearly-12-against-pakistani-rupee-since-operation-sindoor
New Delhi: The Indian currency (INR) has experienced a significant decline against the Pakistani rupee (PKR) over the past 12 months, a period that coincided with the announcement of ceasefire by US President Donald Trump after the 88-hour-long Operation Sindoor in May 2025. On May 15, 2025, the exchange rate stood at 3.2913 PKR per INR By May 18, 2026, the rate had fallen to 2.9010 PKR per INR This represents a depreciation of approximately 11.86%, with a 6.8% fall in the year 2026 alone.
https://timesofindia.indiatimes.com/business/india-business/cea-nageswaran-says-india-facing-live-balance-of-payments-stress-test-what-it-means/articleshow/131204150.cms
J.P. Morgan research led by Chief Asia Economist Sajjid Chinoy indicates that net capital inflows into India have dropped from an average of 2.6% of GDP between 2015 and 2019, to roughly 1.4% in 2024, and have nearly disappeared in recent years.
https://www.reuters.com/world/india/india-stocks-set-first-yearly-drop-over-decade-foreign-investors-leave-2026-05-27/
An exodus of foreign hashtag#investors and limited exposure to an artificial intelligence (hashtag#AI) boom batter what was once Asia’s most attractive hashtag#market.
Some analysts say India’s valuation premium, once justified by strong economic growth expectations, is becoming harder to defend. The Indian market trades at more than 20 times earnings, above most major European and emerging markets, but offers one of the world’s lowest dividend yields.
That has left Indian equities vulnerable as global investors look for cheaper markets and higher-return opportunities linked to the AI-led global equity rally, particularly in US technology stocks. South Korea’s AI-laden KOSPI index has surged more than 200% in a year.
Meanwhile, India’s heavyweight information technology stocks index has fallen by more than a third since December 2024.
Already down about 8.5% this year, the Nifty 50 was forecast to rise only around 8.7% to 26,000 at end-2026 from Tuesday’s close, a May 15-27 poll of 24 analysts showed. If realised, the annual decline of about 0.5% would be its first yearly loss since 2015.
It was then expected to bounce to 27,000 by mid-2027 and 29,000 by end-2027.
The BSE Sensex was projected to be 84,150 at end-2026 and 87,895 at mid-2027. The median forecasts for both indices were sharply downgraded from a February poll, conducted before the US-Israel war with Iran began.
”Everyone wants returns at the end of the day, whether it’s foreigners or domestic investors. Nobody wants to just park their money for fun … but the returns are not there, earnings growth is almost negligible to very low.
AI is where the flavour of the town is right now and this is where India, not just we lack it, we are actually on the wrong side,” said Rajat Agarwal, Asia equity strategist at Societe Generale.
Agarwal added domestic buyers who were keeping the market afloat through monthly systematic investment plans (SIPs) were also showing signs of strain.
SIPs, which are regular monthly mutual fund investments by retail shareholders, have grown nearly tenfold over the past decade. Domestic institutional investors (DIIs) now own a record share of Indian equities while foreign ownership is at an all-time low.
”It is thanks to local DIIs and liquidity from retail participants the market has held up,” said Aman Sethia, head of treasury at Groww. ”If this hadn’t been in place, we would have seen the Nifty at around 19,000 or 20,000 over the last year.”
A slim majority of analysts, 13 of 24, said a correction was likely over the coming three months.
They said India’s limited exposure to the global AI trade and its vulnerability to a widening current account deficit due to the Middle East war are discouraging foreign investors from committing capital.
”Our exports are not growing and we know import bills will swell now with high energy prices. Given corporate earnings have not been that strong … we are not that favourably placed,” said Kishan Gupta, director at CD Equisearch.
Gupta added India’s corporate sector had not done enough to build innovation-led cash flows, particularly in AI. ”A culture of innovation – that thing is absent in our country.”
@kejimao
India’s greatest weakness lies in having an overly advanced superstructure that is mismatched with its backward economic base and social realities. Put in simpler terms, India possesses first-world aspirations, values, and institutions, but operates with third-world economic resources, social conditions, and governance capabilities. That's why democracy as it stands now may well be a curse on India.
https://x.com/kejimao/status/2061107743013155046?s=20
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ThePrintIndia
@ThePrintIndia
'For China, India poses an ideological threat. It sees Indian democracy as a long-term ideological problem'-Former Foreign Secretary & ex-Ambassador to China, Vijay Gokhale
@VGokhale59
tells Swasti Rao
@swasrao
& Shekhar Gupta
@ShekharGupta
. Watch the full conversation tonight at 8 PM:
#ThePrintOTC
Partners:
@EdelweissFin
,
@NSEIndia
,
@TheQuorumClub
,
@VAHDAM_India
and Chivas Luxe Collective Perfumes
https://x.com/ThePrintIndia/status/2059597989166121002?s=20
Riaz HaqMay 31, 2026 at 10:50 AM
@kejimao
Obviously, Vijay Gokhale is ignorant about how Chinese people view Indian democracy and why they would never see it as an ideological threat. Here is the reasoning.
Even if democracy can be viewed as India’s foundational pillar, significantly preventing the worst outcomes, it has also brought about suffocating, if not deadly, costs.
India adopted universal suffrage democracy while still economically and socially underdeveloped, thereby legitimising many deeply entrenched pre-modern social structures, which have become institutionalised and integrated into India’s governance today.
Idealists like the first prime minister of India, Jawaharlal Nehru, and the early Congress party envisioned oppressed social groups utilising their numerical advantage through democratic elections to create pressure groups, driving gradual social reform and overcoming entrenched societal issues, thus paving the way for economic prosperity.
Unfortunately, this ideal scenario didn’t materialise. Instead, groups formed around identities such as religion, caste, sub-caste, and ethnic affiliations have engaged in “vertical mobilisation” through electoral mechanisms, reinforcing traditional social structures and preserving vested economic interests. This has resulted in an institutionalised system that further hinders social dynamism and reinforces social rigidity.
Consequently, vested interest groups representing antiquated social structures legitimately hijack democratic processes, obstructing reforms beneficial to the entire society, thus significantly hampering social progress and economic development over the long term. Nevertheless, most people have no better alternative than to tolerate this situation.
What type of mistakes are the most challenging to correct? Those that everyone perceives as “correct”. This encapsulates the most profound constraint that democracy imposes on India.
https://x.com/kejimao/status/2061103066133463133?s=46&t=Uy6jyUH6DlEyIPi6Mq6AGQ
https://www.bloomberg.com/news/articles/2026-06-02/s-korea-surpasses-india-as-world-s-sixth-largest-stock-market?embedded-checkout=true
South Korea’s equity market has overtaken India’s as the world’s sixth largest, driven by a relentless surge in chip heavyweights powering the global artificial intelligence buildout.
The total market capitalization of Korea-listed companies has soared 86% this year to $5 trillion, while India’s has declined to $4.8 trillion, data compiled by Bloomberg show. Samsung Electronics Co. and SK Hynix Inc., newly minted members of the $1 trillion valuation club, have powered Korea’s equity surge.
Korea’s latest milestone comes after it vaultedpast Canada and other European countries this year, underscoring how investors are concentrating their bets on AI and its critical suppliers. Together with Taiwan, the two Asian chipmaking hubs are rewriting global equity rankings in a way that captures investor fascination over their outsized influence in the AI economy, yet also stirs concern about the risks of an overheated market.
The rally “highlights the continued relevance of South Korean technology companies in the next wave of technological innovation,” said Gerald Gan, chief investment officer at Reed Capital Partners. “It also reflects a broader shift in global capital flows toward major Asian economies, which were once overshadowed by Western markets but are now playing an increasingly prominent role in shaping the future of technology and growth.”
The Korean stock market has benefitted a dual tailwind, as President Lee Jae Myung’s push for corporate reform coincided with the emergence of AI as a dominant investment theme. The Kospi Index has powered past Lee’s 5,000 goal earlier this year and Wall Street analysts are now calling for 10,000.
But given the heavy concentration of gains in a handful of stocks, Ross McGarry, senior investment analyst at Asset Value Investors, cautioned that Korea must follow through.
“This year’s rally has been heavily carried by the memory cycle — Samsung and SK Hynix have done the heavy lifting,” he said, calling the closing in on India “a remarkable milestone.” The real test, he added, is whether Korea can sustain this re-rating through genuine corporate governance reform.
India, meanwhile, has been dragged lower by a weakening rupee, record foreign outflows and a dearth of companies directly linked to the AI infrastructure.
Higher energy costs have also stoked inflation concerns and clouded growth prospects, prompting global funds to sell about $26 billion of local equities this year. India’s stock benchmark is down about 11% this year, heading for its first annual drop after a decade of gains.
“The India growth story has increasingly lost momentum in investors’ minds as the country contends with mounting domestic and external political challenges,” Gan said. “At the same time, longstanding infrastructure deficiencies continue to undermine its ambitions in advanced manufacturing.”
While Korea has overtaken in market value, India’s $4.15 trillion economy — among the fastest growing in the world — still trumps Korea’s $1.93 trillion gross domestic product, according to International Monetary Fund estimates.
One of the theses for investing in the Indian stock market was that the GDP per capita could see a “J-curve in rising domestic consumption at $4,000 or above,” said Stanley Tang, senior portfolio manager at Sumitomo Mitsui DS Asset Management. India’s GDP per capita reached $2,810 this year, according to IMF data.
“Long-term thesis still holds, but inflation is creating a near-term headwind,” Tang said.
@business
India’s ambition to build and export a sovereign AI template across the world is colliding with structural constraints: years of underinvestment in compute capacity, a late start in building the most advanced AI models, deep reliance on foreign cloud providers and a venture capital culture wary of the vast, risky bets that define the global AI race. https://bloomberg.com/news/features/2026-06-02/modi-wants-india-to-join-japan-uk-in-ai-superpower-race-to-rival-us-china
https://x.com/business/status/2062048540986126535?s=20
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Zhuo Chen | Katrina
@SouthernM46171
India wants sovereign AI. The gap between that ambition and reality showed up in three moments.
Last year, Microsoft blocked a Russian-backed Indian refiner from accessing data sitting on its own leased cloud servers. Not Chinese servers. Not American government servers. The company's own data, on infrastructure it was paying for — and someone else held the key. A third of Indian government systems are in the same position right now.
The structural picture makes it worse. India generates nearly 20% of the world's data and has less than 5% of its AI computing power. The US has roughly 100 times more high-end GPUs. India is feeding the machine; it just doesn't own one.
And the policy response? India's February budget handed foreign cloud providers a 20-year tax holiday before anyone thought to extend the same deal to Indian companies. The government building the case for AI independence wrote its first draft for the other side. It got fixed — but only after the domestic industry complained loudly enough.
#India #AI #SovereignAI #IndiaAI #Geopolitics #Tech
While external forces have hurt the economy, New Delhi’s troubles are also self-inflicted.
By Sadanand Dhume
https://www.wsj.com/opinion/india-is-losing-its-economic-edge-800c7dc2?st=EhRquz&reflink=article_copyURL_share
After more than 12 years in office, Prime Minister Narendra Modi faces a painful reality check: His promise to modernize India’s economy hasn’t panned out. Instead, the country faces a rapidly weakening rupee, dwindling net foreign investment, and worries that artificial intelligence will take a wrecking ball to the information technology industry.
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Recent weeks have brought a spate of bad news. The rupee, already among Asia’s worst-performing currencies in 2025, has lost 11% of its value against the dollar over the past 12 months. It may breach 100 to the dollar for the first time.
Just last year, Indian officials trumpeted an International Monetary Fund forecast that India was on the cusp of overtaking Japan as the world’s fourth-largest economy at market exchange rates. Instead, India has fallen to sixth place, behind the U.K.. Meanwhile, the IMF projects that India’s per capita income at market exchange rates ($2,812) will fall behind Bangladesh’s ($2,911) this year.
The slippage extends to the financial markets. In the past two weeks, powered by technology stocks, the South Korean and Taiwanese stock markets have overtaken India in market capitalization, pushing India to seventh place in global rankings. Foreign investors have pulled more than $23 billion from Indian equities since the start of the year. Net foreign direct investment in the fiscal year that ended March 31 was a paltry $7.7 billion, down from $28 billion three years earlier. This reflects both repatriations by foreign investors and outbound investments by Indian companies.
The corporate landscape also reflects investor hesitation. Tesla last month said it was abandoning plans to build a factory in India. The Modi government had publicly wooed the U.S. company, hoping to replicate some of the limited success it has had with giving Apple incentives to locate a chunk of iPhone production in India.
These setbacks have triggered criticism of the Modi government. The economist Surjit Bhalla, a former member of the prime minister’s Economic Advisory Council, recently wrote for the Indian Express that the ruling Bharatiya Janata Party’s “handling of the economy has hit a low with no guarantee that it cannot go lower.” Arvind Subramanian, a former chief economic adviser to the Indian government, called for a revamping of the prime minister’s economic team, warning that “sameness of personnel and staleness of ideas are fatal for all political systems.”
@sardesairajdeep
Rajesh Exports: the Rs 15.15 lakh crore story that needs to be told. LIC was a big investor. Qs: who dictates these high risk investments? Read here:
https://x.com/sardesairajdeep/status/2062583740073914530?s=20
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How Sebi uncovered a Rs 15 lakh crore revenue hole at Rajesh Exports
A shareholder complaint, a Swiss refinery and years of unexplained revenues have culminated in one of the most significant accounting investigations in India's corporate history.
https://www.indiatoday.in/amp/business/story/rajesh-exports-sebi-probe-rs-15-lakh-crore-revenue-overseas-units-gold-mine-2921730-2026-06-04
It began with a complaint that could easily have gone unnoticed. In March 2024, the Securities and Exchange Board of India (Sebi) received an email from a shareholder of Bengaluru-based Rajesh Exports alleging potential financial misrepresentation linked to large trade receivables that had remained outstanding for years.
Two years later, that complaint has snowballed into what could become one of the biggest accounting controversies India has seen since the Satyam scam, which occurred in 2009.
At the centre of Sebi's interim order is a startling allegation: Rajesh Exports may have misrepresented about Rs 15.15 lakh crore of revenue between FY21 and FY25 through its overseas subsidiaries and step-down subsidiaries.
The figure is so large that it almost obscures the more important story.
This is not a case about missing cash. Nor is it, at least for now, a case where regulators have accused the company of siphoning away Rs 15 lakh crore.
Instead, Sebi is asking a deceptively simple question: can the revenues that Rajesh Exports reported over the years actually be verified?
The answer to that question may ultimately determine whether this becomes an accounting dispute, a governance failure or something much bigger.
For years, Rajesh Exports occupied a curious position in India's corporate landscape.
The Bengaluru-based company routinely reported revenues that placed it among the country's biggest businesses by turnover. In FY25 alone, consolidated revenue stood at more than Rs 4.23 lakh crore. During the five years under scrutiny, the company reported cumulative consolidated revenue of nearly Rs 15.45 lakh crore.
Yet despite those enormous figures, Rajesh Exports rarely commanded the kind of valuation typically associated with companies of such scale.
Investors generally accepted the explanation. Gold refining and bullion trading are notoriously low-margin businesses. Huge volumes often translate into modest profits. The business model seemed unusual, but not necessarily implausible.
Sebi's investigation suggests the real story may have been elsewhere.
The regulator's first major observation was that the Indian business was not driving the numbers.
The $5 trillion GDP goal by 2025 was actively planned for in 2018. Today's data pegs India's FY26 GDP at ₹346.4 lakh crore
If exchange rates had stayed at 2018 levels, we would have hit $5 tn by now. But currently we're only at $3.6 tn.
Time to discard dollar-based targets?
https://x.com/sharadraghavan/status/2062904578262085833?s=61&t=mgTxrmITUbpo9NntN5677Q
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By late 2025, headlines celebrating India's ascent to the world's fourth-largest economy dominated Indian media coverage. Yet just months later, in April 2026, the Times of India reported that IMF data showed India's GDP, measured in US dollar terms, stood at approximately $3.92 trillion in 2025, making it the world's sixth-largest economy.
The IMF's latest World Economic Outlook showed that India's GDP growth still clocks in at 6.5 percent — an impressive-looking figure. However, the currency depreciation may weigh on real GDP growth.
Xinhua reported that the Indian rupee has continued to weaken against the US dollar, hitting a record low on May 20, when it briefly touched 96.9650 per dollar. More recently, the exchange rate stood at 94.80 at the time of writing. Industry insiders expect that if the rupee continues to depreciate rapidly, the Reserve Bank of India may be forced to intervene more actively, while Indian government agencies may already be preparing countermeasures. In addition, the government could also roll out measures aimed at attracting foreign capital inflows, said Xinhua.
https://www.globaltimes.cn/page/202606/1362523.shtml
Explainer: An Indian gold firm allegedly inflated revenue by $159 billion using its Swiss unit
https://www.reuters.com/world/india/an-indian-gold-firm-allegedly-inflated-revenue-by-159-billion-using-its-swiss-2026-06-05/
MUMBAI, June 5 - An official Indian investigation into gold company Rajesh Exports (REXP.NS) has alleged that the firm overstated revenue of its Swiss refining unit Valcambi to the tune of $159 billion - a figure unheard of in the country's accounting probes.
The scale of the alleged misreporting, released publicly by the markets regulator on Wednesday, has raised questions about how investors and analysts missed this, especially because India's state-run insurance giant LIC owns 11% of the company.
Rajesh Exports has denied wrongdoing. On Friday, in an exchange statement, the company said, "the major point mis-interpreted with regard to the revenues of the company is totally misplaced." LIC did not responded to Reuters queries.
Valcambi declined to comment, adding that it has no information about the issue, which concerns its controlling shareholder.
Here are some of the Securities and Exchange Board of India's (SEBI) preliminary findings.
REVENUE INFLATION AND VALCAMBI
Valcambi, one of the world’s largest refiners of precious metals, was owned by European Gold Refineries until a 2015 all-cash sale to Rajesh Exports.
SEBI said Rajesh Exports allegedly inflated its reported India revenue by 15.15 trillion rupees ($158.93 billion) between April 2020 and March 2025. Almost all of the company's revenue was attributed to Valcambi, the group’s main operating entity, though its standalone accounts showed revenue of $70 million to $100 million, SEBI sai
Rajesh Exports Chairman Rajesh Mehta did not comment on the difference between Valcambi's revenues and the Indian unit's financials on Thursday, but he told Reuters all disclosures were correct.
"There seems to be some miscommunication with SEBI and a gap of information. The financials are perfect," Mehta said, adding that the company "will continue to cooperate."
Rajesh Exports is listed in Mumbai and its shares have fallen 10% in the wake of SEBI's order.
WHAT DOES RAJESH EXPORTS DO?
Rajesh Mehta and his brother started Rajesh Exports in 1989 in Bengaluru.
It has since expanded to 12 countries and calls itself a "global leader in the gold business," spanning refining to retailing.
The company gained global prominence after its 2015 acquisition of Valcambi for $400 million.
MISSING MINES IN AFRICA
SEBI has alleged that Rajesh Exports disclosed to Indian exchanges that it invested 10.35 billion Indian rupees in gold mines in Africa.
But an examination of the financial statements of its subsidiaries did not find "supporting documentation demonstrating the existence of the alleged investment in gold mines in Africa," according to SEBI's order.
When asked, Rajesh Exports told SEBI that investments in gold mines existed through foreign subsidiaries and the investment figures were “tallying and correct,” the order showed.
FICTITIOUS TRADES
SEBI said Rajesh Exports recorded "fictitious revenue" in its dealings with a local broker. More than 114 billion rupees were booked as sales and purchases despite a lack of evidence of genuine transactions or banking links.
SEBI started its probe into the company in 2024 after a complaint cited large, outstanding trade receivables.
SEBI appointed a forensic auditor who could verify only a fraction of the company's reported numbers due to a lack of documentation, the regulator said.
India’s TCS chair says AI agents may equal headcount, dampen hiring | Reuters
https://www.reuters.com/world/india/indias-tcs-chairman-expects-ai-agents-equal-employee-count-2026-06-09/
BENGALURU, June 9 (Reuters) - India's largest software services exporter Tata Consultancy Services (TCS.NS), opens new tab expects IT companies to slow down hiring, as the company moves towards having an equal number of employees and AI agents in its workforce, Chairman N Chandrasekaran said at the company's annual general meeting on Tuesday.
India's $315-billion IT sector has been grappling with investor concerns that AI could disrupt its traditional, labour-intensive business model. The industry, one of India's largest private sector employers, has already slowed down hiring with geopolitical turmoil also denting client demand.
Mumbai-headquartered TCS does not plan to downsize staff, but will hire less, Chandrasekaran said. Last July, it cut more than 12,000 jobs, while headcount fell by more than 23,000 on a net basis in the fiscal year ended March 2026.
"If the company has half a million employees, the day is not far when the company will have half a million AI agents... The company's employees and AI agents will work together, and that will be the future."
TCS shares have fallen more than 32% so far in 2026, compared with a 25% drop in the Nifty IT (.NIFTYIT), opens new tab index.
Advanced AI tools have shaken up the way companies work across industries from Silicon Valley to media and IT in the last few years as businesses seek efficiencies while staying on top of rapid technological changes.
Chandrasekaran said increased usage of AI agents would curb the number of people hired by both TCS and the broader IT industry as tasks are automated. At the same time, he said new roles and opportunities would emerge as companies adapt to AI-driven ways of working.
"Some of the work being done will go to AI agents. That will be the nature of the transition that we have to go through not only as a company, as an industry, and as a country," he said.
Chandrasekaran's comments carry added weight as TCS is India's largest IT firm by both market cap and number of employees.
The company's annualised AI revenue crossed $2.3 billion in the quarter ended March 31. Chandrasekaran said 100% of TCS' revenue will have an AI component before the end of the decade.
https://www.cnbc.com/2026/06/09/indias-growth-toughest-test-modi-12-years.html
Foreign portfolio investors have sold Indian equities worth $29.5 billion so far this year, versus $18.9 billion over all of last year.
India’s growth remains strong, but the economy faces headwinds from weaker consumption, fragile investment sentiment, higher energy costs, and more selective global capital, an expert said.
The Modi government has finalized only 2 out of 30 reforms across two years, according to data from CSIS.
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Global equity research firm Bernstein, in an open letter to Modi in April, warned that AI advancements threaten the quality jobs in India’s information technology sector, which could impact domestic consumption. It added that the country also faces a risk of being a “permanent consumer in the AI economy,” as unlike China and the U.S., it does not own any AI models.
Venugopal Garre, managing director and head of India research at Bernstein, told CNBC last week that the country has missed the AI boat, and the only proxy AI play it can participate in is through data centers. But that will not replace the high-quality jobs lost in the IT sector, he said.