Social welfare spending is improving quality of lives: Business Standard 10th July 2026

 

RBI, a stabilizing force in turbulent times: Business Line 6th July 2026

 

Addressing inequality in education: Financial Express 2nd July 2026

 

Redev projects in Mumbai need to tick several boxes: Free Press Journal 30th June 2026

 

India's credit policy provides boost to forex flows: Free Press Journal: June 21st 2026

 

Markets ride the Trump 'put' as TACO trade gains ground: Economic Times `9th june 2026

 Idiosyncrasy and vicissitude stamp Donald Trump as an exceptional president. Right from the time he imposed his tariff policy to the start, progress and possible end of the US war on Iran, his words have driven markets in all directions, though in a predictable manner. He has been the biggest market mover in recent times. But has there been any method to this from the markets' PoV?

The answer is yes. Let's go back to the tariffs imposed in April 2025. Game theory would have suggested that all other countries, at least the big ones, should have got together to announce similar tariffs to force some amount of backtracking. But the EU, Britain and Japan all went to the US and signed deals under which they had to open more of their markets besides promising to make more investments in the US. It was a win for the US, as the base tariff rate was 10%, up from an average of 3-4% earlier.

Other countries continued to try to work things out amid announcements of higher tariffs for dealing with Russia, among other things. Then there was backtracking as goalposts shifted. This then led to TACO - Trump Always Chickens Out. While dispensations to different countries kept changing and gave the impression of chickening out, anyone following the market would have observed a distinct pattern..

First, higher tariffs meant that stock indices went down. NYSE Composite had a low of 18,743 on April 5, 2025, and a high of 23,602 on February 12, 2026, before the US Supreme Court overruled Trump tariffs. Currencies would weaken, with dollar strengthening. But when the chickening out took place, there would be a reversal of fortunes. Hence, the derivative trader had a blast.

If one believed that higher tariffs would be followed by lower tariffs, then it made sense to buy during the falling phase and sell later at a higher price, that is, going long. This worked well in both stocks and currencies.

Now, in the case of the US-Israel vs Iran war, while March was a phase of tough talk, end of the war has been spoken of by Trump many times before a deal between Washington and Tehran was signed this week. Every announcement that the war is almost over raises stock prices, while any continuation leads to a fall.

Just before the war began on February 28, NYSE Composite was at 23,524. By March 30, it had touched a low of 21,506. Now it is at 23,470. Thus, this yo-yo movement means traders could keep buying as indices fell, knowing well that talk of the end of the war, or even a ceasefire, would lead to prices rising.

The dollar, too, gained. Just before the war, the dollar index was at 97.56, signifying a weak dollar. By March 30, when the US was on top, the index had crossed 100. It corrected subsequently, but crossed the 100-mark again when an agreement date was announced. Currency dealers have had a challenging time interpreting war gains and energy-price shocks throughout this period

Casualty in the war has been gold, which is no longer the preferred investment. During the tariff episode, it got a boost as a safe haven for investors. Silver and platinum enjoyed collateral benefits. But with the war now seemingly ending, upside for gold is limited, and highs of above $5,000 an ounce, observed in February, are no longer on the horizon. As dollar is stronger now, with the dollar ndex at 100, gold has lost its lustre.

Oil traders have been taking various bets on how prices would move. At one time, there was talk of oil reaching more than $150 a barrel. As signals were sent by Trump that the West Asian conflict was over - and that Iran's military had ceased to exist - prices came down to the $90s and remained there.

Now, with peace being restored and the Strait of Hormuz set to reopen, prices could go below the $80 mark. Traders and punters would never have bargained for this. This business has become more volatile than ever.

If one puts everything together, TACO has now been transformed, in derivative parlance, into the 'Trump put'. This gives him the right, but not the obligation, to go ahead with, or stop, the war. This outcome vindicates the view that options are risky.

Book review of Beyond Belief: The Science-Backed Way to Stop Limiting Yourself and Achieve Extraordinary Results: Financial Express 14th June 2026

 The Science of Mindset: How Nir Eyal’s ‘Beyond Belief’ Deconstructs the Power of Placebos

Consider these three situations. In Europe, several people go through surgical procedures without anaesthesia. There is a psychiatrist who talks to the patient and controls the mind so as not to feel pain. Recovery is fast. In a second situation a person who has been hurt is administered a balm, which reduces the pain immediately. Later it is revealed that it was not a balm but a plain cream that was applied. In the third situation a person volunteers to be part of an experiment for a pill. When he reads up on it after taking it he realises it is potent and has some negative effects. The blood pressure levels increase dramatically and the person is rushed to hospital. But all body parameters are normal. Then the person is told that he was not given any medicated tablet but just a placebo. The blood pressure stabilises.

What do these stories tell us? It is belief that drives our behaviour. The way the mind is conditioned by such beliefs can make one feel the way we do. This is the core of Nir Eyal’s book written with Julie Li, titled Beyond Belief. It is a book that uses scientific ways to stop limiting ourselves which will, in turn, help to achieve breakthrough results. By changing the way our mind works or thinks we can change our attitude to life.

Quite interestingly, he argues that placebos are useful as they serve the purpose of making us feeling better. The same phenomenon can be taken to the area of religion or belief in god, which works in an analogous manner. While praying and doing nothing will not get one far, belief and effort put together can deliver better results. Therefore, whether or not one prays, belief in an entity called god is useful. A far reaching extension of this discussion is that those who are spiritual but not religious often suffer the most and have higher levels of anxiety, phobias and depression.

Beliefs, according to the author, are the foundation of motivation in life. Efforts will matter only if we believe in what we are doing. Motivation includes three elements of ‘what to do’ to reach the ‘desired outcome’ with ‘conviction’. If any of these three links are missing or weak, it will not work. We also need to be open to feedback so that we can change our goals so that we are tuned into reality all the time. Hence everyone cannot hope to become a president or sport star just by believing that one is made for it.

Three-Part Framework

In this context the author talks of three powers of the belief framework, which is the crux of the book. The first is ‘attention’, which he describes as seeing things that help to shape possibilities.

This is important because if our mind starts seeing failure or threats, it becomes demotivating, and eventually nothing is achieved. Therefore, negative thoughts need to be kept away. This is something that one tends to be caught in and hence there is need to challenge such unhelpful beliefs. This comes from rumination which should ultimately lead to reshaping our perception, which, in turn, redirects our attention through the power of belief.

The second element is ‘anticipation’, where one should predict what to expect from any action. If we anticipate pain, then it just might come true. There is need, according to the author, to break the pain-fear-pain cycle. If we fear pain, we will experience more of it, which will confirm the danger which we anticipated. Therefore, how one conditions the mind is important whenever we form expectations.

This is why placebos work because the conscious mind understands the cure being taken and the body responds to the same as if it is curing the problem.

Here there is an interesting take on ageing which most people can relate to. The author argues that one’s belief in ageing and physical capability literally influences the biology of the being. People with positive ageing beliefs live 7.5 years longer than those with negative thoughts. Negative beliefs leads to physical de-conditioning and social isolation, which just accelerates the process.

The third element is called ‘agency’. To make positive thinking work we need to use evidence to change and make it happen. The difference between people who perform this function well will determine how one tackles challenging situations. It is not just anticipating problems but working to navigate them, which helps beliefs turn into reality. Hence there is need to focus on things which we can control. Agency, therefore, transforms uncertainty into a bridge towards concrete benefits through intentional practice. This is where prayer works through psychology and hence goes beyond plain theology.

Trap of Pure Optimism

Is all positive thinking very good and a panacea for our problems? This is a likely question to come up as the reader peruses these pages. Here the author raises a red flag and talks about how positive fantasies can backfire as they relax the body as if the goal has already been achieved. The circle of false promise traps people, leading to major disappointments. He hence prefers mental contrasting to plain positive thinking where we constantly pair future dreams with present obstacles. They hence engage with all the three powers of belief. They direct attention to realistic obstacles. They build anticipation for both success and challenges, and finally strengthen the agency trait to handle these challenges.

his book can come under the self-help category which uses psychological principles to enable empowerment of the individual. It does show that belief lies in the mind which can be made to work to take us in the right direction. But the three vital components of belief — attention, anticipation and agency are essential to make wishes come true. This is a book with a strong message to reinforce confidence in oneself and meeting challenges with a positive mind frame.

Beyond Belief: The Science-Backed Way to Stop Limiting Yourself and Achieve Extraordinary Results
Nir Eyal with Julie Li
Penguin Random House
Pp 304, Rs 999

RBI's plan to attract foreign currency : How much of it could FCNR deposits really expect to lure? Mint 12th June 2026

 https://www.livemint.com/opinion/online-views/rbi-plan-foreign-currency-fcnr-deposits-nri-dollars-yen-carry-central-bank-debt-yields-11781081669374.html

An apt policy: RBI may tighten credit later but its current focus is on attracting flows of foreign exchange: Mint 5th June 2026

 https://www.livemint.com/opinion/online-views/rbi-mpc-monetary-policy-committee-credit-foreign-exchange-forex-rupee-repo-rate/amp-11780638285109.html

Withdrawal of taxes on FPI investment in Gsec: The final frontier? Business Standard 5th June 2026

 The foreign portfolio investors (FPIs) have been in a withdrawal mode this year. One of the reasons which has been given is the system of taxation where returns become less competitive when compared with other markets.

 This has been addressed well by the government by exempting interest earned on GSecs holding from tax as well as removing any capital gains tax on GSecs. This is a big positive step that has been supplemented by the Reserve Bank of India (RBI), which now allows them to invest under the FAR regulation in securities of over 10 years duration. 

 

The important question is whether or not there will there be an about turn in the flow of funds in the debt segment? This is something which will be tested in the coming months. Prima facie, the tax rates of 20% on earnings in interest or capital gains meant erosion in real return. The prevailing thought process earlier was to have some kind of a level playing field for investors from both the domestic and foreign sections.

However, this could have militated against such investment, especially so considering that investors have been looking at other emerging markets and comparing returns. A declining rupee already lowered effective return that was compounded by the tax rate. This correction should make GSecs valuable again for investors. 

 

It must be pointed out that our GSecs are now part of global bond indices, which means that all such policies matter as investors keep rebalancing their portfolio depending on effective returns. Often investment in indices is complemented by separate investments in the Indian market to take advantage of any arbitrage opportunities. The nominal returns on bonds are fixed by the market over which no one has control. The same holds for currency movement that is determined outside the system. What we can control is the system of incentives available for investors. The government intervention here is hence pragmatic as it plugs a gap. 

With interest rates poised to rise across the world, the bond returns would be one of the clinching factors. The decision taken by the Fed in the upcoming meeting will hold the clue to the direction of interest rates in the US under the new Chairman. 

The next few months will test the efficacy of these measures as there has been a long standing demand for withdrawal of the withholding tax on FPI earnings in the debt segment. 

 

With the present measures being invoked all returns – interest and capital gains are not subjected to any tax. In parallel the RBI has also enabled them to invest in bonds of maturities higher than 10 years as well as in fresh issuances of paper.  All this should boost inflows. But ‘how much’ is the question? 

Why are FPIs exiting? Financial Express 5th June 2026

 Since the war began, global stock indices have behaved differentially. The Sensex surely has gone down from 81,287 to 75,415 between February 27 and May 22. This could give a signal that the Indian market has underperformed; however, US indices S&P 500 and DJI have gone up while the NYSE Composite is marginally down. Nikkei is up significantly while FTSE is down. German (DAX 40) and French (CAC 40) indices are down. So is the case with Brazil (IBOVESPA). But Korean KOSPI has done brilliantly while Singapore (STI) has trudged in the positive zone. Hang Seng of Hong Kong is down, as is the Shanghai Composite. Therefore, our market is not an outlier.

Yet it has been seen that foreign portfolio investors (FPIs) are in a withdrawal mode. Since March 1, they have pulled out $23.75 billion from the Indian market (equity and debt) while in the corresponding preceding 51 sessions, they withdrew $1.25 billion. The former included around $21 billion in equity and the balance in debt and hybrid. Interestingly, for the 51 days prior to the war, equity withdrawal was at $22.75 billion, with debt being positive.

Thus, the FPIs have been withdrawing funds from the equity segment even before the war began, which means it is a continuation of an earlier trend. The war has only maintained this tendency. However, in debt it was positive though marginal, which turned negative once the war began. An explanation can be conjectured here.

Decoding Herd Mentality

On the equity front, the FPIs have been bearish about Indian markets. It should be remembered that FPIs consists of myriad investors who are registered with Sebi and not a single entity. Therefore, the joint action can be taken to be some kind of group-think where decisions are taken based on a common line of thinking. One reason is the belief that some of the major stocks and sectors may be overvalued with very high private equity ratios. Generally, ratios above 30 denote overvaluation, less than 20 reflect opportunity, while the range of 20-30 could go either way.

The NIFTY pharma, FMCG, and consumption indices show ratios of ~35. It is 30 for auto, while it is less than 15 for banks, making them attractive. Here, the clue is corporate profitability. Growth in sales and profits has tended to be more in the single digit range, which indicates stability at best. This needs to change for the valuations to be justified or else, theoretically, the prices would have to correct over a time period.

The issue with stocks being considered to be overvalued is twofold. First, it makes sense for investors to exit as the upside seems limited. In fact, with the Sensex exhibiting higher volatility, it is a sign that the best is over for the time being until there is more buoyancy in the performance. The annualised daily volatility since the war began increased to 21.6% for these 50-odd sessions compared with 11.6% in the earlier period. Second, for new investment to flow, a wait and watch approach would be taken, following which a fresh round of investment would begin.

As mentioned earlier, some markets have shown remarkable resilience during these times, and investors would probably be moving their funds from markets like India, Brazil, etc. to the US, which has witnessed a general upward movement. It must be noted that ever since the central banks have been pursuing quantitative tightening, the quantum of investible funds has come down considerably. Hence, funds are being reallocated as investors search for opportunities in a wider set of markets.
Coming to the war, India’s market performance could be making FPIs cautious.

The high dependence on imported crude oil makes the trade balance jittery. While real growth is less of a concern, the issue with rupee depreciation is a consideration. The fact that the rupee is moving down lowers purchases and enhances sales, leading to net outflows. This in turn, feeds back to the currency strength as the rupee tends to be affected perversely, thus justifying the view that real returns would be weak. This is a tough nut to crack from the policy point of view.

How about debt? Ever since the war began, the bond markets have been in a different mood. Higher crude prices cause higher inflation across the world. This means that interest rates will no longer be lowered. Kevin Warsh’s appointment as chairman of the Federal Reserve was supposed to be associated with lowering of rates, which is what Donald Trump wanted. The last policy was cautious on rates. Now there is talk of rates being increased rather than lowered as inflation increases. This has pushed up bond yields. While Indian bond yields too have climbed up to cross 7% for 10 years’ maturity, there is a case of investors weighing the net return where the currency decline comes into play.

Therefore, FPIs will continue to be unpredictable in the next few months. They cannot be considered as a source of long-term capital when working out the options for closing the current account deficit gap. As long as they do not accelerate their withdrawal, it could be steady news. But the declining rupee is definitely a consideration for them as the real value gets affected.

What will the MPC do this time. BusinessLine 2nd June 2026

 

Business beyond profit and loss: Financial Express Book review 1st June 2026

 https://www.financialexpress.com/life/lifestyle/business-beyond-profit-amp-lossnbsp/4255152/lite/

Today businesses need to think beyond just making money. They need to be socially relevant as well. The government has come up with a mandatory amount to be spent by companies on corporate social responsibility, but that is just the monetary aspect, and money spent has often has been belittled as green-washing. All that is changing now, as companies and corporate heads work seriously to bring about changes in the way business is conducted.

Sutapa Banerjee captures this in her book, where her focus is on what companies should do to go beyond mere profit and loss. There is no better way to do it then get a mélange of experts to talk about the importance of three broad heads—sustainability, equity and breaking stereotypes. There are 24 essays in this book with 20 authors providing their views on various issues under these headings, besides the author who has her say on each of these subjects before having a round-up in terms of structuring a playbook.

There are some stellar names associated with this book, starting with a foreword by Nadir Godrej in a rather catchy poetic style. Others include Abheek Barua, Kiran Khalap, Sanjeev Bikhchandani, Manish Sabharwal, Deepinder Goyal and more.

Abheek Barua has an impressive piece on sustainability and inclusion, which is an economist’s view that talks about the importance of this issue and how corporates can work to make this world a better palace. This can be on projects taken up as well as environment-friendly ways of going about their business. Hence, what is important is doing the same business in a better manner. There is the case of ITC taking up projects to not just tackle waste but also new ways of greening land. Companies have now started projects to address issues concerning product disposal, which is very important.

Mukundan takes up the case of his domain, the chemicals industry, and flags three issues that have to be taken up by corporates. The first is to support bioethanol and biodiesel to ensure that coal boilers become more ecofriendly. The second is to set intermediate targets such as closure of old and inefficient power plants, vehicles, building, and improvement in logistics to enhance efficiency and lower costs. Third is to focus on goals such as providing green hydrogen at $1 per kg by developing smart grids, etc.

There are nine essays in this section with some foreign insights on sustainable agriculture in Africa being provided by MD Ramesh, which can hold clues for us within the country too.

Digital Equalizers

The section on equity and economic participation will appeal to every Indian reader. For instance, the essay on a digital job place by Bhikchandani takes us to how the concept of Naukri.com evolved, which has made searching for jobs easy for both prospective employers and employees. There is an extension now for blue collar workers too, called JobHai.com.

This concept was novel when it started and was an equalising tool for all segments of society. We have also seen the government launch a similar initiative at a different level for MSMEs where a virtual marketplace called GEMS has been launched.

Sabharwal’s name is synonymous with human resources and he has focused on reforms that are needed in the education space. He touches the right chord when he talks of reforms in the twins of education and skilling, which are both priorities of the government. The former is a challenge because it is quite diverse in the country and becomes the basis of fomenting inequality as access to quality education is not the same to all. A similar challenge is on the skills front where the youth do not have them to get meaningful jobs.

Preeti Reddy writes on the gender inequality pervading corporate India. She believes that things are changing as many companies are addressing this issue by making jobs more inclusive. Therefore, the DEI (diversity, equality and inclusion) formula is widely used by them. In USA, however, there has been a slowdown on this front, especially after Donald Trump has come to power, and there have been executive orders passed to restrict race and gender-based DEI programmes.

Reddy highlights the progress made in India and the fact that 97% of NSE-listed companies have one woman director and 48% have two or more than two, which is testament to this commitment. She highlights the need for political will to pursue this cause. She also believes that we need to have more women role models. Here an interesting observation is made that when the CEO is a woman, there tends to be more gender balanced boards.

At a different level, Deepinder Goyal talks about how his model of Zomato quite effectively fostered equality across three constituents in the value chain of food delivery. The customer, of course, is most empowered by getting access to not just knowledge but also to food from various outlets. Restaurants are the second group which are able to enlarge the universe of customers which was not possible in the pre-online model where they had to depend on the locality of their establishment for business. Last is the delivery partner model which has become a large industry given the proliferation in not just these delivery-app companies but also the physical area to be covered.

Pirojsha Godrej talks of the construction industry and the assimilation of migrant labour given that this industry employs 56 million workers, including 7 million women. The efficiency of starting projects and completing on time is contingent on delivery, and the seasonal labour shortage is a bane for the industry. The solution is to give primacy to the worker and ensure well-being as it is the only way to ensure there is limited reverse migration. Business hence has to be more responsible to remain viable and successful.

Banerjee has made this compilation well focused on three subjects which has several takeaways for both existing and prospective entrepreneurs.

Increasing impact of the west asia war: Chaos in prices: Free Press Journal 2nd June 2026

 

Shift in the economy’s tale: Goldilocks to Cinderella: Hindustan Times 29th May 2026

 The Indian economy in FY26 was termed a Goldilocks economy (borrowing from the popular fairytale), a bit of a cliché. But things looked just right and the cliché seemed apt: The growth rate was healthy, inflation stood at just 2.1%, and the external balance was marked by a low current account deficit. This was against the backdrop of the Trump tariff tantrums, making it all the more significant.

However, things have started to change. The picture today seems more like Cinderella’s tale, of having to retreat after a great evening. The West Asia crisis casts a shadow across the world. Many felt Iran would fold soon after the death of Ayatollah Ali Khamenei. But more than two months have passed; each side is claiming victory and the Strait of Hormuz remains shut, leaving economies vulnerable as global fuel and fertiliser markets reflect the pressure from a choked commerce route.

Let us look at what this means for us.

First, the growth rate is sure to be affected. The Reserve Bank of India (RBI) forecasts 6.8% for FY27 though talk elsewhere suggests even 6.5% — well below the 7.6% recorded in FY26. While the Purchasing Managers’ Index — an indicator of the health of the manufacturing and services sector — still looks encouraging, this may not translate to higher growth. There is a base effect at play here.

Second, RBI projects inflation to rise to 4.6% this year; though within the range of the monetary policy’s inflation target, it is higher than last year’s and closer to the long-run average (around 5%).

There are two other factors at play here. One is the retail prices of petrol and diesel. With the Brent benchmark now close to $100/barrel — up from $80-90/barrel assumed by most for the year — the government protected consumers until it had to hike prices. These hikes will impact transport costs as well as input costs for all producing enterprises.

The monsoon is the other factor. While the India Meteorological Department has indicated that it will arrive on time, the total rainfall for the year has been projected at 92% of normal, with El Niño effects in play in the second part of the season — not good augury for food inflation. Any shock here can have a sharp effect on the headline inflation number.

Third, with a high inflation threat in all countries, central banks everywhere have taken a cautious view on interest rates. This includes the Federal Reserve, notwithstanding the pressure from the US President to cut rates. The present outlook in India on inflation is hawkish as there can be an upside to the 4.6% expected. Therefore, it is reasonable to assume that the interest rate cut cycle is over and there will be a prolonged pause on the repo rate. More likely, at least one, if not two, hikes to repo rate towards the end of the year — depending on the data — may not be a far-fetched proposition. This is completely different from FY26’s aggressive rate cuts.

Fourth, there could be some discomfort on the budget numbers front, given the oil situation. The government had projected a fiscal deficit ratio of 4.3% for the year. The change in GDP methodology caused a slight increase — 4.4-4.5%. The issue is whether the projection will hold. The excise cut on petrol and diesel has led to a revenue loss, likely in the range of ₹1.2-1.4 lakh crore. The gas availability situation has led to an increase in fertiliser prices, and the subsidy bill can swell by over 20%. With oil companies probably not making significant profits — or more likely, registering losses — this year, the tax and dividend they pay to the Centre will likely fall, affecting the latter’s revenue. Hence, a deficit slippage looks likely if expenditure outlays remain unchanged. Fiscal management will have to be dexterous to balance these odds.

Fifth, the external account situation will no longer be comfortable. Presently, our reserves cover 11 months of imports — a good showing. But going ahead, there are challenges. The trade deficit could widen as import costs go up due to oil and exports can slow down because shipping routes to the Gulf Cooperation Council (GCC) countries are affected by the war. Remittances from the Gulf will slow down; given that roughly 35% of total remittances to India come from this region, there will be significant challenges from this front. On the c

apital account side, foreign portfolio investors (FPIs) continue to be bearish on India’s equity market. With foreign direct investment (FDI) also being cautious — investors are looking more at the developed world — the inflow could, at best, be stable. The high level of repatriation could continue, affecting net inflows to the country.

Two engines of growth need to be observed. The first is consumption. With all the incentives given by the government in 2025, it was expected that the momentum would be maintained. But oil has played spoilsport, with prices of several products (paints, pesticides, FMCG goods, electronics) and services (airfares, restaurants, etc) rising. With inflation risks, the direction of consumption, especially urban, needs to be watched. Rural consumption will largely be contingent on the monsoon prospects.

The other is private investment. Last year, companies were cautious as the American tariff tantrums cast a shadow. The war has exacerbated uncertainty for FY27 and will warrant a similar approach. With so many factors at play, the Goldilocks story seems set to change — and Cinderella’s midnight bells could chime at some point.

India's policy makers stare at a set of gloomy tradeoffs: Mint 22nd May 2026

 https://www.livemint.com/opinion/online-views/india-monetary-and-fiscal-policymakers-gulf-war-inflation-exchange-rate-budget-rbi/amp-11779308278027.html

A few suggestions to control the volume of gold imports : Free Press Journal 21st May 2026

 T he rupee has been under relentless pressure of late, and one of the factors contributing to the same is imports. Within imports, oil is the major component, which has been a challenge for the government as the price has been above $100/barrel with the closing of the Strait of Hormuz. The issue of gold imports has come to the discussion table again, with a call being made to lower the demand. Is this possible? And if so, what are the options?

The data on gold imports is interesting. They have peaked at $72.4 bn in FY26. Ten years back, they were at $31.7 bn, which means that they have more than doubled. However, when one looks at the quantity imported, the picture is very different. Imports in FY16 were at 968 tonnes, which was overtaken in FY19 at 982 tonnes. Subsequently, the trend has been downwards. It came down to 651 tonnes in FY21, which had one month of Covid-19. It increased to 879 tonnes in FY22, as gold became a safe haven for investors, and has trended downwards subsequently. It was at 795 tonnes in FY24, 757 tonnes in FY25, and 721 tonnes in FY26.

This has some interesting implications. The first is that imports have come down for sure in physical terms. However, with the price of gold rising sharply due to the tariff crisis followed by war, the imported value has gone up.

Second, the demand comes mainly from individuals, who invest in gold as a saving habit, and from ETFs, which buy in bulk. Now, the individual demand would have been affected by the higher price and their purchases affected. Typically people buy gold with a budget in mind.

For the better-off persons, the target would be in quantitative terms of 100 gm or 50 gm. For the lower income groups it would normally be a monetary limit of Rs 1000, 10,000, or 1 lakh. The former would not be affected for sure, as cost does not matter. But for the second category, a lower quantity would have been purchased.

Third, the investments of the ETFs would be high. The AMFI data shows that in FY21, the assets under the management of gold ETFs were around Rs 14,000 cr. which in five years has risen to Rs 1.7 lakh crore in FY26. Now typically, the ETFs keep a physical backing of 90-95% of the value of the commodity. Intuitively, it can be seen that this has contributed to the demand for physical gold, with the price being less relevant, as there is a natural hedge in the value of gold and the fund.

Are there ways to control this proliferation in gold imports?

There are options, and a call needs to be made. First, at the extreme, one can put quotas on the amount of gold that can come in. This is not feasible, as it will encourage smuggling and also create a black market for these licenses.

Second, a tax or duty can be imposed to push out some part of the demand. This is what has been done by the government by increasing the customs duty on both gold and silver by 9% from 6% to 15%. Here the lower income group, which buys based on a limited budget, will be affected. Higher income groups may not quite limit their purchases, as this may not matter. But a higher duty will push up the cost of gold, which will impact the CPI inflation numbers and, hence, have a bearing on the monetary policy. Therefore, this is not straightforward, and the trade-off has to be kept in mind.

The third option is to go back to the sovereign gold bonds, which worked well, as they did wean the investor away from the physical handling of gold. Here, there will be some serious discussion, as the government has been redeeming existing bonds prematurely, given the holding cost. Therefore, this will again be a tough call.

Fourth, gold deposits were also on the table, but this would mean parting with gold, which practically speaking may not be agreeable to those who like to keep it in lockers and remain anonymous. It will work if those holding the gold deposit it in banks, which, in turn, will sell it on the market. But such deposits have to be returned to the holder, which will mean taking a price risk. This may make it less feasible.

Fifth, another option is to push investors to future markets, where certain tax benefits can be given so that an avenue opens up which does not involve physical gold. In fact, non-deliverable contracts can be introduced by MCX and NCDEX to garner interest. The only cost for the government would be in the tax foregone, which would be much lower than the cost borne by the SGBs.

The last option is to do nothing and treat this as being transient. In fact, such issues have come up periodically, which has affected the import bill. The problem today is not so much the amount of gold being imported but the cost. This price is determined globally, and there is little that price takers can do about it.

In fact, curiously, central banks have been diversifying their forex assets by buying more gold. While these numbers do not enter the trade numbers, as they are dealt with independently by central banks, the international price has gone up due to this demand as the purchases tend to be of high value.

For example, the RBI held 653 tonnes of gold as reserves in March 2020. This rose to 880 tonnes in March 2026. A similar motivation of diversification, hence, also holds for households that buy and hold gold for similar reasons.

The government can consider all these options to control the volume of gold imports. This will become important if the West Asia crisis gets prolonged, putting the balance of payments under pressure.

The case for a bond issue to boost reserves : Businessline 20th May 2026

 The falling rupee is being watched closely with a clarion call being made to lower forex spending, which includes purchase of gold, foreign travel or use of petrol-diesel vehicles. There is also a discussion on the necessity of shoring up our forex reserves through either a bond issuance, or a swap that was done earlier. How serious is the issue today?

The declining rupee is a concern as the fundamentals of our balance of payments show that demand is higher than supply for forex. But is this leading to a crisis? The answer is ‘no’ because with reserves of around $690 billion, there is an import cover of 11 months. Anything above eight months is comfortable, and concerns can arise when it falls below this threshold.

The situation is not akin to 2013 when there was a sharp fall in reserves and the RBI came up with the swap plan. At that time India was part of what was called the ‘fragile five’ countries. In 1998, to deal with sanctions imposed due to Pokhran nuclear explosions, the RIBs (Resurgent India bonds) were issued. In 2000, India Millennium bonds were floated in the wake of an oil crisis. The present situation is not as alarming.

Petrol, gold and an Indian middle class that may get into debt to pay for it all: Indian Express 15th May 2026

 The principles of economics say that to reduce demand for any product, there can be quantitative or price actions. If there are restrictions on how much can be bought, demand will come down. Alternatively, the price can be increased to the extent that people buy less. Now, quantitative restrictions are difficult to administer in a large country and invariably lead to the creation of a black market. Therefore, price changes are preferred. Following the Prime Minister’s advice to consume less gold and petroleum products, the government has opted for price changes for both.

The duty on all precious metals has been increased from 6 per cent to 15 per cent. This makes gold and silver, which are big-ticket import items, more expensive. The idea is to make it more costly for consumers to buy. Now, there are basically three categories of consumers here.

The first is the affluent class, which is agnostic to price changes and will buy gold even if the price goes up.

The second is the non-affluent class, which is more price sensitive. In fact, the absolute quantity of gold imports has come down over the years from 795 tons in 2023-24 to 721 tons in 2025-26. But the value went up from $ 45.6 billion to $ 72.4 billion. Quite clearly, the bull run in gold due to global uncertainty, especially after tariffs were imposed by the US, led to higher imports. But demand came down.

On an annual basis, the price had increased by 30 per cent in FY25 and 52 per cent in FY26. Interestingly, the price of gold rose prodigiously on a monthly basis from $ 3,363/ounce in August 2025 to $ 5,019/ounce in February 2026, before coming down to an average of $4,723/ounce in April. Against this background, higher duties will further push back consumption for this class. However, when the demand is for traditional purposes like marriage, people tend to borrow money (unsecured personal loans) to buy gold, leading to unchanged demand but higher indebtedness. And ironically, the same gold can be used for further leverage under the category of gold loans!

The third category of demand is ETFs. Gold ETFs have become popular due to the bull run in prices. People invest in them, expecting the price of gold to rise, thus drawing the benefit without having to physically buy gold. However, the fund has to physically maintain 95 per cent of its value, which adds to demand. Now, these funds would not be sensitive to price, as this gets added to the value of gold and the NAVs.

It does look like the bull run in gold is over, and that the upside to price may be limited. If this view is held, then there would tend to be less interest in gold ETFs. Even so, the increase in duty of 9 per cent would translate into higher inflation as this segment has a weight of 1.2 per cent in CPI.

Similarly, the government has increased the price of petrol and diesel by about Rs 3 per litre. This comes on the back of an increase in the price of CNG by Rs 2, and that of LPG by Rs 60-Rs 993 depending on the category of consumers. Hotels and restaurants have had to cut back on their menus due to the cost of gas. Now, the higher prices for vehicle fuel may not have much impact on demand due to alternative modes of transport being available. But the OMCs will benefit, albeit partly, on this score, though there are still losses to be covered.

The impact on inflation will, however, be sharp. Petrol and diesel have a weight of around 4.9 per cent in CPI, which will react in the next inflation print and show an increase of 0.14-0.15 per cent. The second round would be on transport costs, and the tertiary impact will be determined by how other industries pass on this cost. The price of ATF was also increased earlier in April. Hence, the entire fuel basket will have a clear inflationary impact.

The entire response to these two moves needs to be watched. The price impact is easier to conjecture. However, on the side of physical demand, it can still be a shoulder shrug, or, as Bertie Wooster would ask: Has the bally thing worked?

Fuel price hike may push back the consumption story amid higher inflation: Business Standard May 15th 2026

 It was expected that the government would finally raise the prices of petrol and diesel. The questions were when and by how much. Now that there has been a Rs 3 per litre increase announced, the next question is whether this is the be all and end all, or will there be further hikes. On the face of it, there could be more coming as this will only partly address the under recovery challenge for oil marketing companies (OMCs). What does this mean for the economy?

 

The evident apprehension is on inflation, which will be impacted. LPG price were hiked to begin with after which came ATF. More recently the CNG price was increased, and now retail prices of petrol and diesel. The last two have a weight of nearly 5 per cent in the CPI and it is easy to gauge the initial impact.

But there would be secondary and tertiary effects. Transport costs such as taxi and auto fares as well as trucking would increase. This is something that needs to be watched as it has wider ramifications. The tertiary effects will be seen when transport costs go up as most commodities use these services. This will push up the input costs of production and possibly raise the question to corporates on whether there should be a fresh round of price increases.  

Companies in the chemicals sector, real estate, glass ceramics etc. have already announced increase in prices. This can become wider given the spike in fuel prices. We have already seen the WPI witnessing an increase of over 8 per cent in April, which reflected the impact of higher crude prices. Now it will manifest in retail prices too. 

Higher inflation can come in the way of the consumption story that was to play out this year. Lower inflation coupled with GST cuts and income tax rationalization helped to boost consumption in fiscal 2025-26 (FY26). Things will change this year and consumption can be pushed back with higher inflation. It looks likely that inflation will cross the 5 per cent mark for sure even if we disregard the El Nino effect. Therefore this will be a concern especially for consumer durables and FMCG companies. 

Slowdown in consumption will come in the way of private investment, which can now turn further cautious on taking such decisions. 

More importantly, the monetary policy committee (MPC) can no longer ignore the inflation impact, and hence it looks more or less certain that there cannot be any further rate cuts. There is only a case of rates going up and the future discussion will be on when and the quantum of rate hikes. 

 

Presently with inflation for April being benign at 3.5 per cent, the June policy can look through it. But the speed with which these numbers can rise will be important. WPI had leaped from 3.9 per cent to 8.3 per cent in a month’s time. While the quantum of increase may not be this sharp, the May number will reflect the primary effect  for sure (with even gold becoming dearer and getting reflected in the personal care group). 

Quite clearly the oil shock of 2026 will have a deeper impact on inflation across the world. We will not be insulated as higher inflation can finally also affect growth indirectly. This is something that requires closer monitoring.

Affluence creates jobs: the top of India's pyramid plays a vital role: MInt 11th May 2026

 https://www.livemint.com/opinion/online-views/indian-affluence-economy-wealthiest-billionaires-luxury-premium-market-job-creation-11778159088405.html#google_vignette

Banking likely to be steady in FY27 Financial Express May 7th 2026

 The banking sector fared quite creditably in FY26 notwithstanding tariff threats and war. Bank deposits grew by 13.5% and credit by 16.1%. The question now is, how will business be in FY27?

Several developments in March and April have a bearing on banking this year. The GDP growth number is the primary factor that will guide bank credit growth. While there are links with nominal GDP growth, it can be said with reasonable confidence that a double-digit growth rate looks likely more on account of a higher GDP deflator than a real GDP growth rate. The latter would slow down to 6.9%, according to the RBI. The Budget had spoken of a growth rate of 10% in nominal GDP, which could be exceeded given the higher inflation potential this year on account of both the war as well as possible monsoon effects with El Niño developments later in the year. Growth in credit could thus be more in the region of 12-14%, which is still impressive albeit lower than last year.

Growth across sectors is something to watch out for. It appears companies in the larger size bracket would come back to the investment board this year. War may create delays as there is just too much uncertainty. More important is the action that the government may take on petrol prices. Although there may not be any immediate price hike, budgetary concerns will cause a change in view at some point. This can upset the consumption story. Also, there is a possibility of rate hikes this year, which the OIS (overnight index swap) market indicates.These factors will play on the mind of companies which could be looking to invest in capital.

So, it looks like retail credit will be the driver once again, and housing and auto loans will be the focus. Gold loans may be less buoyant given that prices have come down and it is believed that the boom may be behind us. Unless there is a direct impact on job creation and therefore income, retail credit will be on the upward trajectory this year. Curiously, the threat to employment is linked more to AI and its proliferation than the war.

Other sectors like agriculture and micro, small, and medium enterprises would be on a steady path with their nature of mandated credit likely to help maintain momentum. The services segment typified by trade and non-banking financial companies would also continue to see traction. For the former, a growing economy augurs well while for the latter, funds from banks are like a raw material needed for business.

The fate of deposits is interesting. All this while, there has been considerable competition from the capital market. In a declining interest rate scenario, households in particular have tended to look for alternatives, especially in the capital market. Interestingly, while small savings offer higher returns than deposits, the shift has been marginal. It is the capital market that provides a viable alternative with returns of 10-14% depending on circumstances.

Is the capital market well-valued today? This is a call that investors have to take. The major correction seen due to the war has meant there can be a smart upside purely on the grounds of returning to a past equilibrium. That can mean Sensex crossing the 80,000-mark. This will be a consideration for those who weigh the two markets all the time. Bank deposits did gain substantially in March with an increase of Rs 10.39 lakh crore of the Rs 31.15 lakh crore witnessed during the year, which is almost a third of the incremental deposits. While a part of the increase was due to the year-end phenomenon, the war’s impact on stock markets also contributed to this migration. The Sensex fell by 11.5% in March.

It is believed that while a high deposit growth of 13.5% won’t be maintained, it would be in the region of a steady 10-12%. And if the repo rate is increased during the course of the year, it could touch the upper end of this estimate.

Therefore, banking business will be steady and should contribute well to GDP growth. Last year, growth for the component of GDP denoted under “financial, real estate, IT, dwelling” was 9.9%. It should be 9-10% if deposits and credit maintain the growth rates forecast for the year.

Banks will have two primary concerns. The first is the quality of assets. The present situation of stressed supply chains and higher cost of petro-based inputs could persist even if the war ends soon. This will impact profit and loss accounts of companies in sectors such as petrochemicals, fertilisers, paints, glass, ceramics, textiles, and auto. Smaller units are more vulnerable, so they will need close monitoring. The second is that new investment projects or expansion would be cautious in the first half of the year, which means the focus has to be on alternatives.

A related issue concerns the space of treasury income. Typically, higher interest rate regimes mean lower profits but higher margins on credit. This can be a likely scenario especially if the RBI increases rates (based on evolving conditions). At any rate, the regime of declining interest rates appears to have ended, so the possibilities of an upside in treasury income are limited. This is reflected in bond yields which have been intransigent for quite some time.

A look at how monsoon affects India's economic growth: Free Press Journal: 5th May 2026

 

West Asia war impact managed well, but some concerns remain:: Business Standard 29th April 2026

 The West Asia war has been on for two months and has caused considerable disruption across the world. The question is when will it end? There is no answer here as what was expected to end in no more than a month’s time has gotten prolonged with even more uncertainty.

 At the physical level, there has been disruption in supply of goods, primarily oil related, while transport services (both sea and air) have been affected. While alternatives for the latter have been gradually mediated, the shortages in supply of oil and gas is still a major challenge. 

 

In this situation how has India done? 

The short answer is that we have done rather well given the conditions. But there are two aspects here. The first is the real economy, which has been managed astutely by the government. The second is sentiment as reflected in the market. Here the regulator, Reserve Bank of India (RBI) has been monitoring the currency and bond markets and plugged all possible volatile elements. But beyond a point, the market rules have prevailed.

At the real economy level, while sectors would be affected which in turn will affect consumption and investment, the overall edifice is resilient as seen by the RBI forecast of 6.9 per cent in gross domestic product (GDP) growth. There have been supply disruptions in the form of gas supply, which has affected fertilizers' production. Efforts are on to increase imports so that the kharif crop is protected. In fact, the supply of LPG has been handled well with rationing being initially pursued as domestic production was also increased. While the restaurant business was affected to begin with, there are signs of things going back to normal very gradually though cost increase is unavoidable. Sectors such as paints, glass, ceramics, pesticides, fertilizers, automotive among others have faced supply side challenges that are being gradually addressed. They would remain vulnerable until such time that the war is on. 

More importantly, the inflation has been kept under control as of now with the government absorbing a large part of the crude oil cost increase and protecting the consumer. This will mean a hit to the fiscal numbers, and will hence be a challenge for the government going forward. RBI's forecast of 4.6 per cent for the year does indicate that inflation will be higher, though not going out of hand. 

But in this environment, private investment is bound to turn cautious which will be the second successive year where only some sectors will see an uptick. Last year, the tariffs imposed by the US did come in the way of investment. This time it is the war. 

Unpredictable markets On the markets side, things have been more explosive. The stock market has been extremely volatile with the Sensex declining from the 80,000-plus levels. The gyrations are in response to any news on the political front and hence makes things unpredictable. The 10-year bond yield has risen from the 6.60-70 per cent range prior to the commencement of the war to 6.80-7 per cent in April. While the RBI has ensured there is surplus and comfortable liquidity the market has priced in higher borrowings of the government due to slippages in revenue (excise cut, lower profits and tax payments from OMCs) and higher subsidy on fertilizers (possibly 20 per cent higher than budgeted).  Also with higher US treasury yields, the spread of 230-250 bps is being maintained. 

On the currency side, the RBI has been nimble footed in terms of operations in the spot, forward and NDF markets as well as with fine-tuned regulation to control speculative activity. While the rupee has remained range bound with the Rs 93-94.5/$ rate being maintained, the foreign currency reserves have come down by around $ 16 bn which can be taken as the cost of forex management. 

 

A prolonged war will mean a downside to GDP growth, an upside to inflation and extremely uncertain markets. This also means that the interest rate cut cycle could well be over.