📰Good News for India's Economy | Daily India Briefing

India’s manufacturing sector expanded at its fastest pace in 17 years. Modi tells Putin that India and Russia stand together “even in the most difficult situations.” India’s GDP growth print fails to boost equities.

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Macro

• Trump says India offered to cut tariffs to nothing after the new 50 percent tariffs have started hurting 55 percent of Indian exports to the US. It is unclear if the White House is reopening trade talk and both governments have not given any further comments. 

• India's current account gap fell to $2.4 billion (₹206.4 billion) last quarter compared to $8.6 billion (₹739.6 billion) y-o-y. The improvement is due to services and front-loading by the US ahead of the 50 percent tariff imposition. Indian goods have now become uncompetitive leading to industry leaders calling for stimulus. 

• India's surprise GDP rise of 7.8 percent was likely due to a lower inflation deflator rather than progress.The growth was way above the 6.7 percent economist prediction. The real number was likely anywhere from 6.8 percent to 7.3 percent using a more typical inflation rate.

Equities

• The Jio IPO plan is underwhelming due to the lack of a spin-off. An independent company would get rid of the holding-company discount (arguing that an independent firm would operate better). The stock will likely still trade at a 20 percent discount if still owned by Reliance. 

• Textile companies like Arvind Inc are being downgraded due to 60 percent effective US levies. Local textile and apparel exporters are virtually unprofitable due to limited overseas production scope and stimulus support as well. 

• Indian equities see their biggest monthly outflow since January due to tariff concerns.There were nearly $1 billion (₹86 billion) worth of outflows from rich valuations and limited profit growth.

Alts

• Indian remittances rose to $33.2 billion (₹2.9 trillion) from $28.6 billion (₹2.5 trillion) y-o-y. The rise could have been due to front-loading after US comments on new taxes on remittances rising.  

• Ambani's NMACC Weekend show was postponed due to India/US relations. The weekend was going to feature attractions from star chef Vikas Khanna and designer Manish Malhotra, all being headlined by Nita Ambani. 

• OpenAI is planning an Indian data center with 1 GW capacity. The site would be one of the largest in India and specific details will be revealed when Sam Altman visits the country next month. The project aligns with the venture OpenAI has with the US government to bring US AI power to democratic countries to fight against China’s own developments. 

• Saudi Arabia and Iraq stop oil shipments to Nayara Energy in western India after EU sanctions.The plant last got deliveries right before August 1st and was hit with penalties due to the 49 percent Russian stake. The plant can handle 400k bpd but only worked with 242k bpd, all Russian Urals.

Policy

• BRICs leaders have scheduled a virtual talk next week to discuss Trump tariffs, says Brazil President Lula. There is still anonymity on all joining members, but another topic of discussion is rallying emerging market multilateralism. 

• India argues that oil imports file under G7 caps and protect the economy from volatile shocks.Oil Minister Puri argued that Russian imports prevented a $200 (₹17,200) per barrel shock. Additionally, Puri hit back against the Russian laundromat claims by saying that India operated under the G7 rules.

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1. India’s Domestic Industries See Good News

India’s manufacturing sector expanded at its fastest pace in more than 17 years in August, lifted by strong domestic demand even as fresh US tariffs cast a shadow over export prospects.

The HSBC India Manufacturing Purchasing Managers’ Index climbed to 59.3 in August, just below a flash estimate of 59.8 and the highest since February 2008, according to S&P Global. Output rose 7.7 percent year-on-year in the June quarter, nearly double the pace of the previous quarter, helping overall GDP growth to beat expectations at 7.8 percent.

While export orders grew at the slowest rate in five months, overall order books remained robust thanks to resilient local consumption. Companies credited stronger advertising campaigns and better alignment of supply and demand for driving sales.

Manufacturers boosted inventories and added staff for the 18th straight month, though hiring momentum eased. Rising input costs for steel, minerals, and electronic components pushed factory inflation to a three-month high, with firms able to pass on price hikes amid strong demand.

Business sentiment rebounded from July’s three-year low, but producers remain cautious as tariffs threaten to slow exports in key labor-intensive sectors such as garments, footwear, and chemicals.

2. Modi Tells Putin that India and Russia Stand Together

Modi underscored the resilience of New Delhi’s partnership with Moscow on Monday, telling Putin that the two countries “walk shoulder to shoulder even in the most difficult situations.”

The comments came on the sidelines of the Shanghai Cooperation Organisation summit in Tianjin, where Modi and Putin appeared alongside Xi Jinping. The two leaders later shared a ride in Putin’s armored Aurus limousine, a symbolic gesture of closeness as the Kremlin faces international isolation.

Russia has become India’s biggest crude supplier since the Ukraine war, accounting for nearly 40 percent of imports. While US President Donald Trump has slapped 50 percent tariffs on Indian goods to punish the trade, both India and China have given no indication of cutting Russian purchases.

“Our Special and Privileged Strategic Partnership remains a vital pillar of regional and global stability,” Modi said, adding that cooperation spans energy, fertilizers, space, defense, and culture. Putin called Modi a “dear friend” and hailed decades of “friendly and trusting” ties.

The show of solidarity comes as Washington accuses New Delhi of profiteering from discounted oil and ramps up tariff pressure. Modi, who reaffirmed to Ukraine’s President Zelenskiy over the weekend that he supports a peaceful settlement, is balancing energy security needs with efforts to preserve relations with the US.

3. Economic Growth Print Fails to Boost Equities

India’s economy expanded at a robust 7.8 percent in Q2, beating expectations, but equity investors remain cautious. Nominal GDP slowed to 8.8 percent, the weakest in nearly two decades outside the pandemic, dragging revenue growth of top firms to a seven-quarter low of 3.4 percent.

Foreign investors have pulled $15 billion (₹1.3 trillion) from Indian equities this year, including $4 billion (₹352 billion) in August as US tariffs of up to 50 percent took effect. Analysts say slowing credit growth, tariff risks, and signs of asset quality stress in banks will keep overseas investors on the sidelines.

Consumer staples highlight the pressure: Unilever’s revenue rose just 4 percent, while Colgate India posted a 4 percent decline. Analysts warn that markets, still trading near historical averages, could face further earnings downgrades over the next 1–2 months.

Yet some see opportunity. Aberdeen Investments calls the pullback a potential entry point, with reforms such as the proposed GST revamp expected to revive consumption. Economists also note that stronger household spending could trigger a virtuous cycle of private capex and credit expansion.

Until then, markets remain expensive and fragile, reflecting the disconnect between India’s strong growth story and equity investors’ muted conviction.

See you tomorrow.

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

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