📰Dragon-Elephant Tango, RBI Leans Dovish, Trump Pressures India Agriculture

Good afternoon, 

Welcome to the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• China has signaled its willingness to import more Indian products,

• RBI Governor Malhotra reaffirmed commitment to fostering economic growth,

• and the Trump administration has intensified pressure on India to lower its high tariffs.

Then, we close with Gupshup, a round-up of the most important headlines.

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—Shreyas, [email protected]

Market Update.

China Wants a “Dragon-Elephant Tango” With India.

China has signaled its willingness to import more Indian products in an effort to balance trade between the two nations, just as the US prepares to announce new reciprocal tariffs. President Xi described the countries’ relationship as a “Dragon-Elephant Tango,” as leaders of both countries congratulated each other for 75 years of diplomatic ties. China’s Ambassador to India, Xu Feihong, emphasized Beijing’s intent to expand practical trade cooperation and increase imports of Indian goods suited to the Chinese market. 

This announcement comes amid a significant trade imbalance, as bilateral trade between the two countries stood at $101.7 billion (₹8.7 trillion) last year, with India running a large deficit. India’s exports to China, totaling $16.6 billion (₹1.4 trillion), include petroleum oil, iron ore, marine products, and vegetable oil, while Chinese exports to India far exceed these figures.  

India-China relations have been strained since the deadly 2020 Himalayan border clashes, prompting India to impose economic countermeasures such as blocking Chinese investments, banning Chinese apps like TikTok and WeChat, and tightening scrutiny on Chinese companies. Although tensions have eased slightly, with recent developments like the resumption of direct flights and Xi-Modi meetings at BRICS summits, trade restrictions remain. Meanwhile, Modi has also engaged both with Washington and Beijing to position India with autonomy going forward. He praised Trump on the Lex Fridman Podcast and scrapped the Google Tax while working with China to restore border stability. 

India’s response to China will likely depend on whether China follows through with a substantial closure of the trade deficit and responses from Washington. While both countries benefit from a deepened economic relationship, Modi’s preference for aligning with the US has been clear.

The RBI’s Rhetoric Leans Dovish.

RBI Governor Malhotra reaffirmed commitment to fostering economic growth with a flexible and proactive policy approach. He wrote in The Times of India saying that policymaking must be both “pragmatic and visionary” to propel India’s economy forward. His remarks come just a week before the RBI’s April 9 rate decision.

Elsewhere, he spoke at a Mumbai event celebrating the RBI’s 90th anniversary. Malhotra pledged that the RBI will remain “vigilant, adaptive, and forward-looking” while optimizing regulatory frameworks to balance financial stability and economic efficiency. President Droupadi Murmu, who also addressed the gathering, reiterated the need for a strong and evolving financial system to support India’s ambitions of becoming a developed nation by 2047. While not promising a rate cut, Murmu clearly let the audience know his desire. 

India’s economic expansion has slowed, with growth likely falling to 6.5 percent in the last fiscal year — its weakest performance since the pandemic. While the government forecasts growth of 6.3 percent to 6.8 percent for the current fiscal year, this remains below the 8 percent benchmark necessary to achieve Modi’s long-term economic vision. In response, Malhotra has adopted a more growth-oriented approach since assuming office in December, cutting interest rates for the first time in five years and injecting nearly $60 billion (₹5.1 trillion) into the banking system to improve liquidity.  

Beyond rate cuts, the RBI plans to work closely with financial institutions to expand credit access and encourage banks to leverage data and advanced technology to improve lending capacity. This, Malhotra said, will accelerate credit supply and investment without compromising financial stability. Additionally, he reiterated the RBI’s commitment to internationalizing the rupee and expanding India’s global payments infrastructure.  

On inflation, Malhotra stated that the central bank will collaborate with the federal government to reassess India’s inflation-targeting framework, which is due for review in March 2026. He emphasized the need to achieve Goldilocks conditions where inflation is controlled while economic growth remains robust. 

Trump Puts Pressure on Indian Agriculture.

The Trump administration has intensified pressure on India to lower its high tariffs on American agricultural products just days before reciprocal US duties take effect on April 2. Press Secretary Karoline Leavitt criticized India’s steep levies, highlighting a 100 percent tariff on US farm goods, which she argued makes it nearly impossible for American products to compete in the Indian market. She also pointed to similar barriers in the EU, Japan, and Canada, signaling that these regions could also face Trump’s new trade measures.  

The impending US tariffs have heightened global trade tensions, given the deep concessions wanted in the agricultural sector. A US Trade Representative’s report on foreign trade barriers, released Monday, highlighted India’s average 39 percent tariff on agricultural products — eight times higher than the US rate. The report also cited steep levies on items such as vegetable oils, apples, corn, coffee, raisins, and walnuts, along with non-tariff barriers like import bans and licensing requirements in certain sectors.  

Protesting farmers have resisted trade liberalization in the past, but New Delhi is now considering adjustments to meet some US demands. Among the proposed measures, India may lower duties on pecans, pulses, non-genetically modified soybeans, and dried distilled grains soluble, a by-product of ethanol production used in animal feed.  

India has already made concessions in other areas, cutting import taxes on bourbon whiskey and luxury motorcycles, such as those manufactured by Harley-Davidson. The two nations are aiming to finalize a broader trade deal by October or November, but with Washington increasing its demands and Trump’s tariffs about to take effect, the negotiations are likely to remain contentious in the months ahead.

Gupshup.

Macro

• The RBI's cash injections have led to banking sector liquidity moving to a surplus at $8.4 billion (₹717 billion) for the first time since December. The large cash injections and repo measures have come right as India looks towards another central bank meeting with a cut expected. If rates are cut, more liquidity will force the ripple effect of lower rates to be larger since banks can immediately start lending at lower rates.  

• The Indian rupee is expected to erase recent gains and decline 2.6 percent to 87.80 per U.S. dollar by March 2026, according to a Reuters poll. Analysts cite slowing growth, potential U.S. tariffs, and an anticipated RBI rate cut as key factors behind the projected downturn.

• ​​Oil prices continue to inch down with demand slowdown and tariff threat. Some tariffs, like threats on buyers of Russian oil, actually led to prices going up due to supply limitations. Mostly, however, tariffs on large economies like India and China point more toward a global slowdown.  

• Gold retreated 0.3 percent to $3,113.43 per ounce after hitting a record $3,148.88, as investors took profits ahead of Trump’s planned tariff announcement. Despite the dip, gold remains near historic highs, buoyed by economic uncertainty, Fed rate cut expectations, and strong central bank demand.

• India’s finished steel imports rose 15.8 percent year-on-year to 8.98 million metric tons from April to February, making it a net importer for 2023/24. South Korea led with 2.6 million tons, while Japan’s shipments surged nearly 70 percent, even as India proposed a 12 percent safeguard duty to curb imports.

• India's GST collections rose 10 percent year-on-year in March to $22.91 billion (₹1.96 trillion), the finance ministry reported. Net GST revenue, excluding refunds, increased 7.3 percent to ₹1.77 trillion from the previous month.

Equities

• India’s AGS Transact announced the resignation of its CFO and two executive directors on Tuesday, weeks after all four independent directors quit amid financial strain and credit downgrades. The company, facing default allegations and insolvency proceedings, has seen its shares plummet 84 percent since February.

• Vodafone shares soar as its largest creditor, the government, converts its claims into equity. The stock jumped by 26 percent since the cash was not being paid out can now be used for growth. The government is trading $4.3 billion (₹369.5 billion) of claims into 26 percent equity, valuing the company at ₹10 per share. This is still a 25 percent premium over the current ₹8 price. 

• Foreign buyers of India are accelerating their purchases to $2.6 billion (₹222.6 billion) last week. JP Morgan sees a bottoming out of economic downturns this month with rate cuts and growing manufacturing in sight.  

Alts

• UBS has completed the merger of Credit Suisse’s service units in India, consolidating 24,000 employees under UBS Business Solutions as part of its ongoing integration efforts. The move strengthens UBS’s global operations following its 2023 takeover of Credit Suisse, the largest bank merger since the 2008 financial crisis.

• Indian refiners are looking at the North Sea for May oil stocks. Currently, 40 percent of oil comes from Russia, but the threat of secondary tariffs is forcing the country to look elsewhere for future oil deliveries. Refiners largely believe Trump is bluffing, but in case he isn’t, they are prepping for different sources.

Policy

• The United States has criticized India's growing import-quality requirements as overly burdensome and misaligned with global standards, just two days before U.S. reciprocal tariffs take effect. In its latest report, the U.S. Trade Representative highlighted India's customs barriers, import restrictions, and high tariffs as key obstacles in trade talks, while both nations continue negotiations for an early trade deal.

• India has launched an anti-dumping investigation into met coke imports from six countries after an industry body raised concerns over surging shipments harming local producers. The probe follows India's recent import quotas on the steelmaking ingredient, which have drawn legal challenges from major steelmakers.

See you Wednesday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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.