All about returns.

"The Indian Economy is 'somewhat insulated' from the impact of high US tariffs." "Fitch sees the Indian economy growing at 6.5% in the upcoming financial year, with a slight slowdown in the subsequent year." TOI. "Strong macroeconomic fundamentals are likely to help India sustain its growth momentum even as the global economy faces uncertainty amid the escalating trade tensions, the Reserve Bank of India (RBI) says." Reuters. "The finance ministry informed the Parliament that a shift in household deposits from banks to market-linked financial products in search of higher returns may expose the households to significant market risks and that they may face financial losses during market corrections." ET. Foreign investors "have taken out over $15 billion so far this year. Indian stock markets have lost Rs 1.3 trillion in value since last September." It would have been worse except that "domestic investors have been on the other side of the trade. They have been buying what foreigners sell." Because real estate is too expensive and "Bank deposits, thanks to an inefficient banking sector, often give you negative real rates on your money," wrote Mihir Sharma. The RBI is the regulator of banks and "Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India." rbi.org.in. Which means "the law empowers the government to give such directions to RBI 'as it may, after consultation with the Governor of the Bank, consider necessary in the public interest'. New Delhi may direct the central bank on questions of policy, management or its operations, without such directions being published," wrote Bhargavi Z Shah. Yesterday, the US Federal Reserve kept its Funds rate on hold at 4.25%-4.5% because President Donald Trump's tariffs may cause temporary inflation, even though tariffs may have a slowing effect on the economy. CNBC. The Fed kept its policy rate unchanged in its January meeting as well. CNBC. Meanwhile, the RBI cut its repo rate by 25 basis points (bps) to 6.25% in its February meeting  (BBC) and is expected to cut by another 25 bps in its meeting in April (BS). As the gap in returns on fixed income instruments in the US and Indian markets narrows and, the rupee has depreciated from 83.487 against one dollar on 21 September 2024 to 86.339 yesterday (exchangerates.org.uk), foreign funds would be inclined to shift funds from Indian markets to safer US instruments. In Budget 2025,the government wants the RBI to transfer Rs 2.56 trillion as dividend. TOI. All this is "against a backdrop of structural weakness." "Now things are falling apart, and incompetence and the absence of a coherent strategy have started to hurt." The RBI's analysis is baffling. "Jargon is substituted for analysis," and "the RBI has lost the limited autonomy it had in the previous decade," wrote Rathin Roy. If people are shifting from relatively safer bank deposits to risky investments in financial markets, it is only to protect themselves from negative returns and erosion of value because of uncontrolled inflation (RI). The government through the finance ministry and the controlled RBI are responsible. They can change only if they confess responsibility. Will they? We have no hope.