A bagful of goodies.

The India-UK Comprehensive Economic and Trade Agreement (CETA) came into effect on 15 July. In 2025, India recorded a GDP of USD 3.96 trillion, while the UK economy stood at USD 3.84 trillion, reflecting the significance of both economies on global trade. pib.gov.in. To put it into perspective, the US GDP at current prices stood at $30.77 trillion in 2025, that of the European Union (EU) stood at $21.24 trillion, while that of China stood at $19.5 trillion. World Bank. At best this is an agreement of minnows. Still, "The real significance of the Britain-India CETA is not that tariffs are coming down. It is that two increasingly complementary economies are creating the certainty that businesses need to invest, expand and build for the long term," wrote PD Singh. "India's economy remains on a sustained growth path supported by strong macroeconomic fundamentals, government officials said." "The government has maintained its emphasis on capital expenditure," so that "In April and May 2026, capital expenditure stood at Rs 2.51 trillion compared to Rs 2.21 trillion during the same period last year, registering a 14% jump." "In June 2026, gross Goods and Services Tax (GST) collections rose 13.9% to Rs 1.95 trillion, compared to Rs 1.71 trillion in June 2025." HT. Since GST is a consumption tax, its rise hints at increasing consumer spending which could be a sign of increasing affluence. But it is causing financial problems for micro, small and medium enterprises (MSMEs). "Under Section 15 of the MSMED Act, 2006, buyers are legally obligated to settle vendor bills within 45 days if a written contract exists, or 15 days in its absence." Yet, "Large private entities and government bodies routinely stretch payment cycles to 90, 120 or 180 days." At the same time, "GST operates strictly on an accrual basis, not cash-flow basis. If an invoice is generated, the tax must be paid by the 20th of the next month," wrote Ajit Ranade. Naturally, this causes cash flow problems for MSMEs. Not surprising, "India has not featured among the world's 50 safest countries for investors in 2026, according to the Global Investment Risk and Resilience Score 2026 by Henley and Partners." BT. In 2025, India was ranked at an embarrassing 104th "showing moderate resilience but elevated risks. gktoday.in. The scary thing is that it is not just MSMEs that have cash problems, even the Reserve Bank of India (RBI) could get trapped in a problem of its own making. "Over the past two years, India's central bank built one of the world's largest bearish dollar bets to support a persistently weak rupee. It now faces the challenge of unwinding that position without destabilizing the currency market." "The book had ballooned to a record $106.7 billion in May, as per Bloomberg calculations based on RBI data." "To attract capital, the RBI has offered to fully cover hedging costs for banks raising three- to five-year foreign currency deposits from non-resident Indians (NRI)." ET. NRIs will have to be paid back in foreign currency. In 2013, the rupee fell from 55 to one dollar in May to near 69 in August. Known as the 'Taper Tantrum'. Then governor of the RBI Raghuram Rajan mobilized $30 billion through an FCNR scheme. ET.  According to veteran investor Shankar Sharma, "During FY2013-14, foreign portfolio investors bought nearly $14 billion worth of Indian equities despite the taper tantrum. In contrast, they have sold about $26.5 billion worth of Indian equities so far in FY2026-27." Today, the RBI's FCNR(B) scheme will only fund the exit of foreign investors. MC. Trade agreements are seductive, promising a wealth of goodies. But, what will we export if MSMEs are failing and if the RBI runs out of money? Risks are definitely elevated. Stratospheric.