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The U.S.-India deal differ from India’s deals with the EU, United Kingdom, and New Zealand in one extremely unusual way. Today, we explain more.
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Macro
2026's potential rate cuts depend on CPI (specifically food prices) this week. Economists predict prices to rise 2.6 percent y-o-y compared to 1.3 percent in December with food prices being a key focus.
The $187 billion (₹17.2 trillion) of federal borrowing this year is 18 percent higher than last year's. Expect yields to rise to 7 percent even though fiscal consolidation is continuing. Net borrowing, which strips out redemptions, will be $123 billion (₹11.3 trillion).
Governor Malhotra says India is not selling its UST holdings, fluctuations are due to FX. He cited that overall forex reserves fell and the remaining difference is just rupee volatility. India hit a 5-year low in UST holdings at $174 billion (₹15.8 trillion) in November, down 26 percent from its 2023 peak.
The RBI kept rates at 5.25 percent, suggesting that rates will likely stay flat for a while now.The decision was unanimous after the US announced a new 18 percent tariff rate — down from 50 percent — and growth projections rose for India above 7.2 percent.
Equities
ETFs account for 20 percent of all traded funds in India but still don't threaten actively managed funds. India’s wide market breadth makes active SMID-cap managers see higher returns than predetermined ETFs. Additionally, ETFs do not receive as much favorable tax treatment as they do in the US. Still, growth has been phenomenal since they were only 2 percent of the industry 10 years ago.
Tata's quarterly net income rose by 8x to $295.6 million (₹26.9 billion) from $37 million (₹3.3 billion).Insanely high production volumes in India and growing sales of their value-add products offset higher costs in Europe. Revenue from Indian operations rose 8.6 percent y-o-y while crude steel production rose 14 percent in India.
Alts
India is increasing infra spending by 9 percent y-o-y to $133 billion (₹12.2 trillion). The goal is to target cities with populations above 500,000 and particularly transportation infra like roads and airports. There could also be a risk-guarantee fund which would help finance projects that run into delays and cost overruns.
There is going to be an increase of spending in electronic manufacturing to $4.3 billion (₹400 billion).This would translate into improving order books and capacity expansion.
Policy
The government is tweaking its taxation on stock buyback rules to curb founder use. They will be taxed as capital gains, resulting in effect brackets of 22 percent for founders and 30 percent for non-corporate promoters. This is better than the old policy which taxed it as dividends, effectively a double taxation.
A Parliament ally of Modi will introduce a bill to ban social media for under-16 year olds.Such bills likely do not pass into law but start striking debate which can influence state proceedings. The planned bill would have penalties of $28 million (₹2.5 billion) per year.
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India-US Deal: India Gives Up Autonomy for Access
The emerging US trade arrangement presents itself as a diplomatic breakthrough, yet its underlying structure suggests something closer to a conditional surrender rather than a partnership. Compared to deals with New Zealand and the UK, India is having to restore market access (not gain any) by accepting constraints that narrow its autonomy. Reduced tariffs on Indian exports offer immediate relief from punitive duties imposed amid tensions over Russian oil purchases, but the accompanying oversight mechanism — allowing Washington to reintroduce penalties — introduces pressure that upends Trump 1.0 and every other relationship India has had with the US.
Exporters may regain competitiveness in their largest overseas market under lower tariffs, yet the risk of sudden reversals is likely to raise compliance costs, complicate contracts, and inject uncertainty into supply chains. Multinational buyers could demand stringent assurances about energy sourcing and trade exposure, effectively extending geopolitical scrutiny into factory-level decisions. Such frictions distinguish the arrangement from more targeted enforcement regimes used elsewhere in Asia, where penalties tend to isolate specific firms rather than threaten entire national trade flows. The most stark example is the creation of a ‘Lutnick Panel’ which would analyze India’s entire energy ecosystem compared to other Southeast Asian neighbors only receiving regular oversight on labor and country-of-origin codes.
Politics also suffers; commitments to expand imports of US agricultural goods and other commodities risk unsettling powerful domestic constituencies, particularly farmers who rely on price support and protection from foreign competition. The aforementioned farmers, particularly in the north, are already striking due to the blow their $580 billion (₹52.8 trillion) economy could take.
At the same time, large-scale pledges to purchase American energy, defense equipment, and technology worth over $500 billion (₹45.5 trillion) raise questions about financing, trade balances, and simply feasibility. Even sectors central to India’s export identity, such as pharmaceuticals and software-linked services, face lingering uncertainty tied to unresolved regulatory and security reviews.
In the near term, markets may welcome the avoidance of harsher tariffs and the stabilization of export industries vulnerable to abrupt contraction. Industries like textiles and jewelry will not face imminent shutdowns and the government can save on fiscal spending as stimulus. Yet the longer horizon is more ambiguous. Past episodes of external pressure have catalyzed reform and productivity gains in India, but the present arrangement appears less focused on liberalization than on external alignment. Whether this recalibration ultimately strengthens India’s economic dynamism or constraints it will depend on how temporary concessions evolve into durable rules that are exposed when formal trade arrangements are announced.
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Written by Yash Tibrewal. Edited by Shreyas Sinha.
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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.