📰"Dead Economy" | Daily India Briefing

Reserve Bank of India Governor Sanjay Malhotra pushed back against President Donald Trump’s “dead economy” jibe. The Reserve Bank of India kept its benchmark repo rate unchanged at 5.50 percent. And, we discuss how India’s bet on Washington backfired.

If you have any questions about India, fill out this form or reach out to Shreyas at [email protected]

Macro

• Indian households expect inflation to ease over the next year, with RBI surveys showing declines in both short- and long-term price expectations. The central bank cut its annual inflation forecast to 3.1 percent and reported improving urban consumer confidence.

• India’s fuel demand fell 4.3 percent month-on-month in July to 19.43 million tons, with diesel consumption down sharply. The drop comes despite higher LPG sales, reflecting softer overall oil demand in the world’s third-largest consumer.

• India, which gets 35 percent of its oil from Russia, may shift to Middle Eastern and African suppliers if U.S. penalties curb imports. Russian crude, bought at discounts since 2022 sanctions, has helped cut costs for India’s import-dependent refiners.

• Coal use in India’s power generation fell for a fourth month in July, prompting plants to tap stockpiles and cut Coal India purchases. Rising hydro and renewable output has reduced coal’s share in the power mix to a five-year low.

• India’s refined fuel exports face scrutiny after EU sanctions and Trump’s tariff threats over Russian oil imports. Private refiners Reliance Industries and Nayara remain the country’s biggest buyers of Russian seaborne crude since 2022.

• The rupee rose 0.1 percent after the RBI held rates steady, but looming U.S. tariffs and trade tensions with Washington threaten further weakness. Traders warn the currency could breach 88 per dollar next week without central bank support.

Equities

• Sify Technologies’ data-center arm plans a $500 million (₹43.9 billion) India IPO, valuing it around $3 billion (₹263.2 billion). The move comes amid surging AI-driven demand for data centers, with India’s capacity projected to grow 77 percent in four years.

• NSDL shares jumped 17 percent on their Mumbai debut after a $464 million (₹40.7 billion) IPO, reflecting strong demand amid India’s retail investing boom. The firm holds 87 percent of the depository market and saw bids over 40 times the shares on offer.

• Bajaj Auto expects to deliver only 50–60 percent of planned e-scooters in Q2 due to a rare earth magnet shortage. The shortfall follows China’s export ban, prompting the automaker to explore alternative motor designs.

• Hero MotoCorp posted a slight Q1 profit rise to 11.26 b rupees, defying expectations of a drop as export growth offset weak domestic sales. Overseas shipments surged 26 percent, outpacing the broader two-wheeler industry’s 23 percent export growth.

• BHEL’s Q1 net loss more than doubled to 4.55 b rupees on weak power demand and higher costs. Early monsoons cut electricity needs, slowing project orders, while expenses rose nearly 7 percent on pricier raw materials and services.

• Sula Vineyards’ quarterly profit plunged 87 percent as budget-conscious urban consumers cut back on affordable wines. Its wine tourism arm grew 22 percent, driven by affluent customers seeking premium experiences.

• Trent’s quarterly profit growth slowed to a two-year low of 9.5 percent as muted urban demand and early monsoons hit sales. The Zudio owner also saw its slowest revenue growth since 2021, with same-store sales up only in low single digits.

Alts

• Nayara Energy is seeking a smaller domestic lender like UCO Bank for oil trade financing after EU sanctions made larger banks wary. The Rosneft-backed refiner faces added pressure from Trump’s tariff threats over India’s Russian oil imports.

Policy

• An RBI panel has proposed replacing the 14-day liquidity window with a 7-day funding system to better align bank borrowing costs with policy rates. The move aims to improve monetary policy transmission amid economic and tariff pressures.

• PM Modi will visit China on Aug. 31 for the SCO summit, his first trip there in over seven years. The visit comes amid strained US-India ties following Trump’s steep tariffs and threats over Russian oil imports.

• Elon Musk’s X is suing India’s government over content takedown orders, arguing they curb free speech. The case challenges PM Modi’s widening online censorship system, which officials justify as tackling unlawful and inflammatory posts.

• An RBI panel recommended retaining the weighted average call rate as the key policy target and shifting to seven-day repo/reverse repo operations as the primary liquidity tool. It also advised discontinuing 14-day operations as the main instrument.

• India’s RBI issued final co-lending rules effective Jan. 2026, expanding partnerships beyond priority lending and tightening norms. Lenders must retain 10 percent of each loan, cap guarantees at 5 percent, and share borrower default status across partners.

Former Zillow exec targets $1.3T market

The wealthiest companies tend to target the biggest markets. For example, NVIDIA skyrocketed nearly 200% higher in the last year with the $214B AI market’s tailwind.

That’s why investors are so excited about Pacaso.

Created by a former Zillow exec, Pacaso brings co-ownership to a $1.3 trillion real estate market. And by handing keys to 2,000+ happy homeowners, they’ve made $110M+ in gross profit to date. They even reserved the Nasdaq ticker PCSO.

No wonder the same VCs behind Uber, Venmo, and eBay also invested in Pacaso. And for just $2.90/share, you can join them as an early-stage Pacaso investor today.

Invest for $2.90/Share

_{Paid advertisement for Pacaso’s Regulation A offering. Read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.}

Reach out to [email protected] to reach our audience and see your advertisement here.

1. “Dead Economy”

Reserve Bank of India Governor Sanjay Malhotra pushed back against President Donald Trump’s “dead economy” jibe, stating India now contributes more to global growth than the U.S., citing IMF data that pegs India’s share at about 18 percent versus America’s 11 percent.

Speaking after the RBI’s policy meeting on Wednesday, Malhotra emphasized India’s resilience amid tariff threats and trade uncertainty. The IMF projects India to grow 6.4 percent in 2025, over three times the 1.9 percent expansion forecast for the U.S. “We are doing very well and we will continue to further improve,” Malhotra said, reiterating confidence in the country’s growth trajectory.

His remarks came hours after Trump pledged to hike the current 25 percent tariff on Indian exports “substantially” within 24 hours, citing high trade barriers and India’s continued purchases of Russian oil. The move adds fresh strain to bilateral trade talks already hampered by disagreements over agriculture, market access, and strategic alignments.

While the RBI kept its policy rate steady at 5.50 percent, Malhotra signaled close monitoring of the tariff impact on growth and inflation. India’s macro fundamentals, supported by strong services activity, steady manufacturing momentum, and improving rural prospects, remain intact, but a prolonged tariff escalation could dent exports and business sentiment.

The rhetorical exchange underscores the widening rift between New Delhi and Washington, even as India seeks to maintain its position as the world’s fastest-growing major economy and a key driver of global demand.

2. RBI Holds Rates Steady Due to Tariff Uncertainty

The Reserve Bank of India kept its benchmark repo rate unchanged at 5.50 percent on Wednesday, opting for caution as tariff threats from the U.S. inject fresh uncertainty into the growth outlook. The decision was unanimous, with Governor Sanjay Malhotra citing the need to “maintain a close vigil” on incoming data before adjusting policy.

The pause comes despite inflation easing to a six-year low of 2.1 percent in June and the RBI lowering its FY26 inflation forecast to 3.1 percent from 3.7 percent. Policymakers left the growth projection unchanged at 6.5 percent, noting resilience in domestic demand but warning of “uncertain” external conditions as global trade tensions escalate.

Trump’s 25 percent tariff on Indian exports, higher than rates for Asian peers like Vietnam and Indonesia, takes effect Thursday, with the U.S. president also threatening further penalties over India’s purchases of Russian oil. A hawkish Fed, recent rupee weakness, and the risk of capital outflows are reinforcing the RBI’s preference for currency stability over immediate growth stimulus.

Markets reacted cautiously, with 10-year yields rising to 6.38 percent and equities extending losses. Analysts say the RBI is keeping its “powder dry” in case trade disruptions or tariffs begin to materially weaken activity. Any scope for further rate cuts will likely require a sharper slowdown in growth momentum, or a resolution to the U.S.-India trade standoff.

3. How India’s Trade Bet with Washington Backfired

India entered 2025’s trade talks with the U.S. convinced it could land a favourable deal. After five negotiation rounds, Delhi believed most differences were resolved, from cutting tariffs on U.S. industrial goods to gradual duty reductions on cars and alcohol, plus higher energy and defence imports from America. Officials were confident enough to hint publicly that final tariffs could be capped at 15 percent.

That optimism proved costly. President Trump wanted deeper concessions, particularly on agriculture and dairy, politically sensitive sectors for Modi’s government. While India resisted, the White House secured broader market access from Japan, the EU, and even Pakistan, leaving Delhi without the preferential rates it sought. By August 1, Trump imposed a 25 percent tariff instead, along with threats of further penalties over Russian oil purchases.

Insiders blame overconfidence, misjudgment, and poor timing. Negotiators scaled back offers after seeing others get deals, assuming India’s market size would secure favourable terms. But Trump demanded headline numbers and sweeping access, like South Korea’s $350 billion (₹30.7 trillion) investment pledge, which Delhi didn’t match.

A lack of direct Modi-Trump engagement also hurt, with Indian officials wary of an unpredictable conversation. Trump’s comments on mediating India-Pakistan disputes further soured the atmosphere.

Talks aren’t dead, but salvaging them may require concessions in agriculture, reduced Russian oil imports, and crucially, a leader-to-leader call. Until then, India faces steep tariffs and diminished leverage in Washington.

See you tomorrow.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

Sponsor the next newsletter to reach tens of thousands of U.S.-based business-savvy professionals. Reach out to [email protected].

Could your business use expert insights to power growth in India? Reach out to [email protected] for a free introductory call.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.