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đź“°Finally: India's Inflation Falls Below 4 Percent

Three stories on Indian markets that you can't miss.

March 12, 2025

Good evening, 

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

  • February CPI is now at 3.61 percent year over year, compared to 4.3 percent in the month prior,

  • Mukesh Ambani’s Jio Platforms struck deals with Elon Musk’s SpaceX to distribute Starlink’s satellite Internet services in India,

  • and a recent study has ignited controversy by exposing that Indian-made generic drugs are far riskier than their U.S. counterparts.

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

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—Shreyas, [email protected]

Market Update.

Inflation Drops Rapidly, Paving Way for Rate Cuts.

Key inflation data: The February CPI is now at 3.61 percent year over year, compared to 4.3 percent in the month prior. This is meaningfully below the 4 percent CPI target, paving the way for future rate cuts.

Economists had forecasted 3.98 percent showing a meaningful decline in inflation. Most importantly, food inflation was only 3.75 percent y-o-y compared to 6 percent back in January. Vegetable prices also actually fell by 1.07 percent as compared to a precipitous 11.35 percent increase in January. 

Rate cut expectations change: Economists now expect the RBI to cut its benchmark rate again in April, following the rate cut seen in February—the first in five years. The expectation is 25 basis points in April with a potential for 50 if inflation seems subdued. This will likely be followed by another 25 basis points in either June or August.

The wider economic impact has been 10-year yields dropping to 6.68 percent, reflecting expectations of lower borrowing costs. Additionally, there will likely be an economic rebound given industrial production already rose by 5 percent in January compared to 3.5 percent in December. 

A (core) risk: While core inflation (excluding food and fuel) rose slightly to 4.05 percent, the overall inflation drop strengthens the case for continued monetary easing. If inflation stays low, the RBI could adopt a more aggressive rate-cutting strategy to counter trade-related economic slowdowns.

Foodflation came down: The lowest inflation rate in seven months came largely thanks to food prices—but, previous months’ high inflation has also been largely thanks to the same. Food is a supply-side indicator that the RBI cannot directly control through monetary policy; moreover, food makes up a disproportionately large part of India’s CPI basket, reflecting decades-old spending practices. Still, vegetable inflation driven by drought, poor farming, and government price controls to keep farmers’ incomes up, forced central bankers to put the brakes on the entire economy. Recent falling food prices were largely attributable to a strong monsoon crop harvest and winter-sown output, not the RBI’s tight monetary policy and high rates. Can India continue to afford to slow down the economy at large—denying the country growth, higher incomes, and jobs—because of unpredictable and uncontrollable rainfall?

Jio Also Joins Arms with Starlink.

Today, in a surprising turn of events, Mukesh Ambani’s Jio Platforms struck deals with Elon Musk’s SpaceX to distribute Starlink’s satellite Internet services in India. 

Yesterday, Samosa Capital reported that Bharti Airtel, India’s second-largest telecommunications company, had joined forces with Starlink to provide networking services across India, originally seen as a major blow to Reliance’s Jio platforms. Jio’s announcement marks a shift from the earlier opposition to Starlink’s entry into India and reflects fierce competition to provide internet to 48.6 percent of India’s population that is yet to get access.

Key implications: Jio is going to distribute Starlink equipment via its retail and online stores. They also are going to collaborate on expanding offerings, particularly for underserved regions. There are still a few regulatory approvals before Starlink can actually launch in India.

Initially, Jio and Bharti were opposed to cheap spectrum allocation for Starlink since it upset their hegemony in the internet sector. By leveraging the network, they remain gatekeepers of India’s internet since no other company has the size to sign with Starlink and leverage its benefits. 

Additionally, Starlink focuses on remote regions with limited broadband access and Jio/Bharti dominates urban telecom markets. That being said, remote access internet will more than double satellite broadband—$3.1 billion (â‚ą270.3 billion) right now to $6.8 billion (â‚ą593 billion) by 2030. 

Musk’s growing influence: Musk has now met directly with Modi in the US, ramped up Tesla operations with showrooms, and set India as its next global expansion market. Starlink has been previously shut out of China which makes India crucial for its next huge expansion. The last hurdle is approval from the telecom and home ministries, but this will likely be attained given the Indian company partnerships.

Pricing challenges: Pricing will likely be competitive given the variable regional pricing. In the US, Starlink costs $120/month (₹10,000) with $349 (₹30,300) equipment costs while in Kenya it costs only $15/month (₹1,305); India will likely cost closer to the Kenya model. Additionally, Jio and Bharti are still rolling out their own satellites with Bharti’s OneWeb and JioSpaceFiber which went into action in October 2023.

Indian Pharma Denies Quality Control Issues.

A recent study has ignited controversy by linking Indian-made generic drugs to a 54 percent higher risk of serious side effects compared to their US-made equivalents. The findings have been met with strong backlash from the Indian Pharmaceutical Alliance, as the nation fights to protect its dominant share in the $13 billion US pharmaceutical import market.  

Findings: The study looked at 2,400 drugs from 2009 to 2018 and found that Indian generics were associated with higher adverse events like hospitalization, disability, and death. A cause listed in the study was quality corner-cutting due to cost pressures. They also found older generics were less safe which led to FDA inspections of Indian factories rising by 46 percent across 2014-24. 

Indian pharma response: The industry has said that there is no direct causality between adverse effects and manufacturing origin. Additionally, reporting biases likely distorted the study’s conclusions while FDA oversight has always been strong.

The strong response comes due to potential 25 percent tariffs on overseas bio-molecules which could pressure firms to relocate production. Moving closer to the US could prevent tariffs, especially retaliatory ones on India.  There could also be increased FDA scrutiny causing forced shutdowns. This is all on top of reputational damage which already started from tainted cough syrup deaths in Gambia and Uzbekistan in addition to contaminated eye drops in the US.

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Gupshup.

Macro

  • The rupee has now marked a period of extended volatility. Foreign outflows and the RBI’s lessened grip on daily rupee values have caused more change. Economic uncertainty has also led to constantly changing forecasts for the rupee’s true value. This has also led to borrowing costs jumping in India since rupee volatility removes foreign funding options, forcing more companies to borrow domestically. 

  • India is talking to Congo to source copper and cobalt. The mineral assets are important for battery construction and crucial to Indian ambitions in growing their EV and green tech shares. 

  • India is launching 13 auctions for mineral blocks like lithium. India has started spending more government money—$1.9 billion (â‚ą163 billion) this year — to develop natural mineral accumulation. The blocks also include diamond and copper reserves.

Equities

Alts

Policy

  • Chinese power continues to grow in the Indian Ocean. Multiple countries including the US, UK, China, and India are competing for power in the region given that nearly 3 billion people live right there. The remote base of Diego Garcia has UK/US military operations while Mauritius is being courted by China and India to gain a stronger foothold into the other country’s territory. China and India are both competing with infrastructure and debt financing projects.  

  • ArcelorMittal Nippon sues India over raw material import fights. The company alleges that India is retroactively imposing import curbs on metallurgical coke, which is used for steel production. India just blocked 168 billion tonnes from entering the country, challenging Nippon’s access to quality input materials, as local metallurgical coke is far worse in quality.  

See you Thursday.

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.