Comment by Riaz Haq on Tuesday

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.

Comment by Riaz Haq on Wednesday

India races to shield economy from Iran war-driven oil shock, capital stress | Reuters

https://www.reuters.com/business/energy/india-races-shield-economy-...

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.

Comment by Riaz Haq on Wednesday

Foreign investors’ exit from India at record high

https://www.ft.com/content/b64c331b-76f3-4326-807c-3513e6d862b6?syn...

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. 

Comment by Riaz Haq on Thursday

Too Little, Too Late? PM Modi's Austerity Plan Won't Stop The Crisis | T...

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.

Comment by Riaz Haq on Friday

OpenAI, Anthropic move into services: What this means for Indian IT | Industry News - Business Standard

https://www.business-standard.com/industry/news/openai-anthropic-ai...


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.

Comment by Riaz Haq 14 hours ago

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...

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... 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.  

Comment by Riaz Haq 1 hour ago

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

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