Expecting the unexpected.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept its policy rate unchanged at 5.25% at its latest meeting yesterday. The forecast for economic growth was raised from 7.3% to 7.4% and that for consumer price index (CPI) inflation was raised from 2.0% to 2.1%. Mint. Earlier, the US Federal Reserve had voted to hold its lending rate at 3.5% to 3.75%, "citing still-elevated inflation alongside solid economic growth, ad giving little indication in its latest policy statement of when borrowing costs may fall again." Reuters. The hawkish outlook from the Fed meant that "The US dollar hit a two-week high...as fresh volatility gripped stocks and the pound tumbled after the Bank of England voted by a razor-thin margin to leave UK rates unchanged." Reuters.The rupee has strengthened by almost Rs 2 against the dollar, from 92.043 on 28 January to 90.596 to one dollar yesterday. Investing.com. Perhaps the RBI does not want any pressure on the rupee as traders look for risk-off investments. In good news, India's foreign currency reserves jumped to $723.8 billion in the week ending 30 January, "providing a robust merchandise imports cover of more than 11 months." Foreign currency reserves fell by $493 million but the value of gold reserves jumped by $14.59 billion as the price of gold soared on the spot market. ET. Since then the price of gold has crashed from  a high of $5,400.25 per ounce to $4,961.15 yesterday. Investing,com. India and the RBI have not forgotten the crisis of 1991 when our forex reserves fell to just $1.2 billion, barely enough to cover 3 weeks of essential imports. India had to airlift 47 tons of gold to the Bank of England and another 20 tons to the Union Bank of Switzerland to raise $600 million and avert the crisis. wikipedia. When asked, former RBI Governor Prof Raghuram Rajan "reportedly said there was no point at which a country could feel safe, unless it had accumulated trillions of dollars like China." We gain foreign exchange from exports, foreign direct investment (FDI), overseas loans and remittances by Indian expatriates. "The Indian diaspora sent home $135.46 billion in the last fiscal year, the highest on record." And the highest in the world. ET. The concern is that remittances are much higher than FDI. Between 2014-15, FDI, which is expected to be long term has been steady at around $30 billion annually, while foreign portfolio investment (FPI), which is short term, has been volatile. However, repatriation of FDI "jumped from $18 billion pre-pandemic to $44 billion and $51 billion in 2023-24 and 2024-25 respectively." And, outward investment by Indian entities doubled from $13 billion in 2019-20 to $28 billion in 2024-25. Mint. The RBI has played safe. Which is good because the world seems unpredictable. We could face the unexpected. Suddenly.   

Don to the rescue.

"A robust economy forms the foundation of a strong foreign policy and India must grow faster and increase its share of global trade to gain respect on the world stage, economist and NITI Aayog's former vice-chairman Rajiv Kumar has said." "India's share of global merchandise has remained below 2% for the last three decades," and "In the services sector, India's global share stands at around 4%." ET. On Friday, 03 February, "Shares of Infosys, Tata Consultancy Services, HCL Tech, Tech Mahindra and Wipro dropped sharply, falling by as much as 6% by 9.30 am," US artificial intelligence firm (AI) Anthropic released new tools "designed to handle routine legal work such as contract checks, non-disclosure agreement reviews, legal summaries and standard drafting tasks." NDTV. It has been coming. "In the 12 months leading up to August 2025, Accenture pulled in $4.78 billion in new business - a figure that surpasses the combined incremental revenue ($3.92 billion) generated by India's 15 largest IT services firms in 2024-25." 'Over half ($2.7 billion) of Accenture's new revenue came from advanced AI solutions," wrote Jas Bardia & Varun Sood." "According to Stanford's AI Index Report 2025, in 2024 the US led with 40 notable AI models, followed by China with 15. With these regions controlling nearly all LLMs that have achieved a global footprint, India faces a formidable challenge." "Bain & Co (2025) warned that India could face a shortfall of over a million skilled professionals by 2027." "R&D spending is also low, at 0.6% of GDP in 2024, versus 2.68% in China and roughly 3.5% in the USA." ET. As per the IMF, projected nominal GDP of the US was $30.62 trillion, China's was $19.4 trillion and India's was $4.13 trillion in 2025. Worldometer. It means that, in absolute numbers, the US spent $1.07 trillion while India spent an almost negligible $24,7 billion on R&D in 2024. "Recently, India's most valuable company paused its lithium-ion battery plant because it could not get Chinese technology." "The company could have funded a big research project. Instead it waited for technology from China." Why try to innovate when you can buy, wrote Arindam Goswami. Indians are afraid of failure. "Only the USA stands out as a country that has socially accepted the idea of failure as a legitimate option, worthy of praise." ET. "Patent filings by DPIIT recognized startups have crossed 13,000, since 2021, trademark filings have exceeded 44,000." Filing a patent "can help a founder make a pitch to investors." But, once the funding round closes, no actual patent is achieved, wrote Pravin Kaushal. Similarly, patent filings by educational institutions have risen from 20% to 42% of all filings. But the lack of revenue from licensing patents show that they are merely to improve their rankings, wrote Mihir Mahajan & Arindam Goswami. Artificial intelligence is created by human intelligence. Over one hundred years ago, American Robber Barons established universities and encouraged innovation. Edsurge. Protected by high tariffs our lot has been filing fake patents and begging from China. Perhaps the zero tariff on US goods forced on Mr Modi by Donald Trump (HT) may force them to start investing in R&D, to survive. We may yet hail the Don as our savior. Don of all people! Who would have thought that?        

An oily conundrum.

"In early September, after meeting Vladimir Putin and Xi Jinping, Prime Minister Narendra Modi "dispatched his National Security Adviser (NSA) to Washington to help over fraying ties." Mr Ajit Doval told US Secretary of State Marco Rubio, "India wanted to put the acrimony between the two nations behind it and get back to negotiating a trade deal," and that "New Delhi wanted Trump and his aides to dial down their public criticism of India." HT. Or else what? Give more money to China? As per Chinese Customs, India's exports to China increased by $5.5 billion to $19.75 billion in 2025, while imports from China jumped 12.8% to $135.87 billion, giving us a record trade deficit of $116.12. TOI. "Russia faces a steep drop in oil income if Trump successfully pressures India to stop importing Russian crude," which has already "dropped 22% to 1.38 million barrels per day in December from November, their lowest since January 2023, reducing Russia's share in Indian imports to 27.4% while OPEC's share rose to 53.2%." Reuters. Seems unlikely that Rubio was quaking with fear at threats from Mr Doval. Meanwhile, "China's trade with Russia in 2025 pulled back from a record level in 2024," to 1.63 trillion yuan ($234 billion). Since February 2022, China has been "buying Russian oil, coal and gas and selling goods from cars to electronics to its northern neighbor." Reuters. However, oil could yet have an enormous influence on what happens to our economy, as "aircraft carrier USS Abraham Lincoln and several guided missile destroyers have crossed into the Middle East, which comes under the US Central Command." "Trump had repeatedly threatened to intervene if Iran continued to kill protesters, but the countrywide demonstrations have since abated." Reuters. "For nearly half a century, Iran has prepared for a war with the United States." "Iran is believed to have thousands of missiles and drones within range of US troops based in a number of countries in the Middle East and has threatened to strike them, as well as Israel." CNN. Obviously, the US will need to be guided by Israel, as Israel has repeatedly revealed its intelligence network in Iran. In June 2025, "Israeli Air Force jets, guided by precise intelligence, targeted nuclear facilities, military commanders and soldiers, destroying dozens of radars and surface-to-air missile launchers, according to a statement by the country's War Room." NDTV. Israel could have been supplying intelligence already as, "The top US and Israeli generals held talks at the Pentagon on Friday (30 January) amid soaring tensions with Iran." Reuters. "Iran will hold nuclear negotiations with the US on Friday (tomorrow) in Oman, Iranian media reported." ET. Iran's threat against the US and Israel could be a bluff because it knows that any attack will invite severe reprisals. Instead, it could choose to target oil installations just across the Gulf in Saudi Arabia and the UAE which would send the price of oil shooting up like a missile. What would India do if that happens? Scaring Rubio won't work. Go back to Russia? Trump notwithstanding.   

The budget may need some help.

"Indian stock markets witnessed a historic surge on Tuesday, 3 February," so that, "The combined market capitalisation of BSE-listed companies increased to Rs 467.35 trillion from Rs 455 trillion in the previous session, translating into a gain of more than Rs 12.5 trillion in a single day." The reason for the euphoria was that "After prolonged negotiations, US President Donald Trump confirmed that reciprocal tariffs on Indian goods would be reduced to 18%, a steep cut from the earlier 50%." Mint. The rupee which had sunk to a record low of 92.043 against the US dollar on 28 January, joined in the celebrations, appreciating over 1% to close at 90.423 on 03 February. Investing.com. "After months of tariff threats...New Delhi has finally sealed a trade deal with the United States - not by yielding early but by waiting out the noise." "Even as talks dragged on, New Delhi quietly accelerated trade engagement elsewhere, signing five trade agreements over the past year - including a landmark pact with the European Union." ET. On the other hand, White House Deputy Press Secretary Kush Desai hailed the deal as "Another historic victory for American workers, farmers and industries." ET. US Trade Representative Jamieson Greer claimed that Indian tariffs on US industrial goods will fall from 13.5% to zero and also tariffs "for a variety of things...tree nuts, wine, spirits, fruits, vegetables, etc, they're going down to zero." ET. After two decades of negotiations, India and the European Union clinched a free trade deal last month. In it, "Tariffs on premium European wines will also be cut in stages, falling from 150% to as low as 20% over seven years, while lower priced wines are excluded." TT. In the trade deal between India and the United Kingdom customs duty on Scotch whiskey will come down from 150% to 75% and thereafter gradually to 40% over the next decade. ET. If India is to cut duties on US wines and spirits to zero in one fell swoop, both the EU and the UK may demand the same concessions and, since both agreements are yet to be ratified by their respective parliaments, they could be sent back for re-negotiations. "Replacing Russian crude with market-priced oil could see India's import bill rise by as much as $4 billion (Rs 362 billion at today's exchange rate of 90.50) (MC) but a report by State Bank of India (SBI) Research claimed that switching to Venezuelan heavy crude could cut our impost bill by $3 billion. "It noted that a discount of USD 10-12 per barrel on Venezuelan crude would be sufficient to make the choice economically neutral for Indian importers." ANI. Why should Venezuela give a discount when we have already agreed to Trump's demand? Some sectors like leather and textiles may see some benefits but the nation could incur a large deficit. That brings us to the Budget. But, that's another story. 

18% + $500 billion to go, for zero return.

Celebrating an abject surrender, "US President Donald Trump announced that he agreed to a trade deal with India's Prime Minister Narendra Modi, where the US will lower tariffs on goods from India to 18% from 25%." The 25% penalty for buying Russian oil will also be dropped. Instead India will buy more US oil and $500 billion worth of American goods and possibly also more Venezuelan oil. BBC. In 2024, a full year of trade before 26% reciprocal tariffs were imposed in April 2025 (Reuters), "US goods and services trade with India totaled an estimated $212.3 in 2024." The US exported goods worth $41.5 billion to India and imported $87.3 billion worth of goods from India, incurring a trade deficit of $45.8 billion. In services, the US exported $41.8 billion and imported $41.6 billion for a surplus of $102 million. ustr.gov. "Russia has sharply increased the discount on its Urals crude oil sold to India. In several cases, the discount compared to global oil prices exceeded $25 per barrel. For some individual cargoes, discounts approached $40 per barrel." man.com. "India imported about 144 billion euros' ($170.09 billion) worth of crude oil from Russia since the start of the Ukraine war, a European think tank said." NDTV. Now we have to buy US oil at market prices. Seems that our losses will be far more than any potential gains. In another standoff with the US, in January 2026, "After India challenged its authority to issue summonses, the US Securities and Exchange Commission (SEC) has moved a federal court to bypass diplomatic channels and allow service on Gautam and Sagar Adani via their US counsel and email." "The move marks a shift in the agency's 14-month effort," following, "On December 14, 2025, the SEC received letters from the Indian Ministry of Law and Justice, date November 4, citing a new and unexpected objection." This was the second time, the first rejection was in April 2025. The Wire. In addition, "The US SEC has arranged to serve Gautam Adani with a civil fraud lawsuit, allowing the regulator's case against India's second-richest person to proceed." CNBC. On 01 February 2026, "Billionaire Gautam Adani and his nephew, Sagar Adani, have agreed to receive a legal notice from US SEC in a civil fraud lawsuit alleging they misled investors about a bribery scheme, according to the court filing." TOI. The civil case is in addition to a criminal charge of bribery by federal prosecutors in Brooklyn. Mr Adani's lawyers have not accepted the jurisdiction of the Eastern District of New York. The trade deal will be hailed as a huge achievement, but a group of more than 800 small businesses in the US noted that effective tariffs on Indian imports were 2-3% but are at 18% now (Reuters) and could rise any time if any Russian oil is imported. Trump also announced that India has agreed to reduce tariff and non-tariff barriers on American goods potentially to zero. India Today. We give away everything and get some small change in return. They said stand and deliver and we did. Why? 

Halwa for them.

The deed is done. The Budget 2026 was presented to Parliament on Sunday, 1 February, for the ninth straight time by Finance Minister Nirmala Sitharaman, the longest serving finance minister of India. At I hour 25 minutes her speech was middle of the range, the shortest lasting 1 hour 14 minutes in 2025, the longest lasting a weary 2 hours 39 minutes in 2020. TOI. To prevent profiteering from advanced knowledge of any tax changes, utmost secrecy is observed. "Fifteen days prior to the presentation of the budget, security at the finance ministry is tightened dramatically." "The full budget statement is printed just 24 hours" before presentation and "The printing process is conducted under extreme secrecy, with staff involved in production kept in isolation and the entire operation secured by heavy surveillance." India Today. In a droll ritual a "Halwa (semolina pudding) is held annually at North Block to mark the final stage of preparation before the budget is presented in Parliament." News 18. The budget is not meant to be a triumph for the finance minister or officials, but is an anxious document for citizens who have to bear the burden of tax changes. The stock markets slumped, reflecting the verdict of investors. "The Nifty fifty fell 1.96% to 24,825.45, while the BSE Sensex lost 1.88%to 80,772.94, marking their worst budget-day performance in six years." Reuters. As is usual, news channels are full of platitudes. "For one brief, glorious period every year, Indian business folks" who "otherwise outsource everything from tax planning to PPTs - suddenly become macroeconomists, fiscal theorists, deficit hawks and growth evangelists," wrote industrialist Harsh Goenka. Before the Budget they "submit wishlists that would make a genie nervous." While just after, "Phones vibrate, heads nod and messages fly: 'Very positive.' 'Strong signal.' 'Game changer.' " "Behind closed doors, of course, nuance returns." "But, publicly, the verdict is unanimous: 10 on 10. Standing ovation." ET. "Led by Thomas Piketty, leftist economists protest inequalities are getting intolerable, so the richest should be taxed severely." But, ""instead of excoriating the super rich, the middle class would rather join them, wrote Swaminathan Aiyar. India does levy a surcharge at a maximum rate of 25% on income above Rs 20 million. cleartax.in. "Originally conceived as a 'temporary' measure to boost revenue, India's tax surcharges have become a permanent and heavy fixture of the fiscal landscape." "As incomes rise nominally due to inflation, more taxpayers are pushed into higher surcharge brackets without a corresponding increase in real purchasing power." ET. In July last year, the Finance Ministry told Parliament that "it expects to collect Rs 5.91 trillion from cess and surcharge in the current financial year, which is 9.43% higher than the previous financial year." ET. The silly rituals and the knee-jerk, obsequious praise by wealthy businessmen show the inequality of power between the rulers and the ruled in India. They share halwa with broad smiles. We groan through gritted teeth. And pay for the halwa.       

It began in 2018.

"Marriages are increasing noticeably in China this year," because "Couples can now register their marriage in places which, until recently, would have seemed unimaginable as a site of official paperwork: nightclubs, beach resorts, even music festivals where civil servants sit at temporary registration desks." Young Chinese may again be warming to marriage, "But specialists caution that the surge may be more about convenience and novelty than a real change in attitude about family life." MC. But, marriage yes, babies no. "China's population fell for a fourth consecutive year in 2025, dropping by 3.39 million to 1.405 billion, a faster decline than 2024, official data showed." ET. Its "birthrate fell to 5.63 per 1,000 people - a record low since the Communist Party took power in 1049 - while its death rate rose to 8.04, the highest since 1968." Fertility rate has fallen to 1, so the government has offered parents 3,600 yuan ($500) per each of their children under the age of three," and "a new 13% tax on contraceptives - including condoms, birth control pills and devices - has sparked concern about unwanted pregnancies and HIV rates." BBC. Sticks and a carrot. "China has given its top AI startup DeepSeek approval to buy Nvidia's H200 artificial intelligence chips," and "a senior US lawmaker had alleged that Nvidia had helped DeepSeek hone artificial intelligence models that were later used by the Chinese military." Reuters. "Engineers at Beihang University, a military-linked school, created a system in which defensive drones mimic hawks by targeting the most vulnerable enemy drones, while attacking drones behave like doves to evade the hawks. In a five-on-five simulation, the hawks destroyed all the doves in just 5.3 seconds." TOI. Drones cannot command an army. "The senior ranks of the People's Liberation Army (PLA) are in tatters. The weekend purging of China's top general, Zhang Youxia, and another senior military officer, Gen Liu Zhenli, has left serious questions about what triggered the elite power struggles unfolding in the country - and what this means for China's war fighting capacity." BBC. "Chinese leader Xi Jinping's decision to place the country's top-ranking general under investigation is a stunning move that leaves Xi virtually alone at the top of the military hierarchy," "But the purge makes one thing clear: Xi sees no target too big to be taken down." Zhang was a close ally of Xi and "Their fathers had fought together in China's civil war." CNN. It seems that Xi has become paranoid like every dictator must become. It would have started in 2018 at the National People's Congress which "approved the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life." BBC. Xi must know how Liu Shaoqi' life ended, having delivered a speech about him in the Great Hall of the People on 23 November 2018. wikipedia. He cannot afford to be deposed. So his brutality will only increase. Unless someone stops him. Permanently.