📰India-EU Trade Deal Incoming | Daily India Briefing

While the Davos conference saw a whirlwind of announcements and events, one that stands out is the importance the EU is placing on India. President von der Leyen announced she would travel to India to reinvigorate ties and likely finalize the “mother of all [trade] deals”. Today, we explain more.

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Macro

• The 'quiet-quitting' of US assets has led to most EM and alt assets to skyrocket, barring India. Emerging shares in South Korea, Hong Kong, and LatAm markets are hitting record highs while gold also rose above $5,000 (₹455,000) per ounce. India has continued to struggle with a weaker rupee and stock market. 

• Indian PMIs rose with services hitting 59.3 from 58 and manufacturing going from 55 to 56.8. The composite index is up to 59.5 compared to just 57.8 last month. Business confidence continues to ride high on domestic growth potential. 

• Importers of LatAm soy oil are cancelling their cargoes due to a weaker rupee.The rupee is causing effective prices of imports to rise to $30 (₹2,730) above local prices. About 40,000 tons of deliveries scheduled for now until July have been scrapped.

Equities

• Air India is set to report a $1.6 billion (₹150 billion) loss for this past year. Earnings were hit from Pakistan airspace closures and a deadly crash on a flight bound for London. The airline has scrapped a previous 5 year profitability plan for a more aggressive one in the face of recent setbacks. 

• Walmart and Tiger Global are offering shares in PhonePe's upcoming $1.5 billion (₹136.5 billion) IPO.Insiders say the offering is less to raise capital and more to help realize gains for existing shareholders in the company. The platform has 657.6 million users with 53.4 billion annual transactions on the app.  

Alts

• India's Gen Z is partying more with religious songs. With the shift in more Hindutva politics and nationalism, there is more of a religious revival. There also are more ‘home concerts’ in the growing $1.3 billion (₹120 billion) concert industry.  

• The US's H1-B policy is leading to top tech talent remaining in India rather than emigrating.Proof has started to emerge with LinkedIn showing a 40 percent rise y-o-y in tech professionals having their location set to India. The government is also launching programs like Bharat-Talent and Bharat-Return to stop brain drain with tax and visa incentives.

Policy

• Nara Lokesh, minister of Technology and Human Resources in Andhra Pradesh, says the state will be a $2.4 trillion (₹218.4 trillion) economy by 2047. He made the comments at the Davos conference where dozens of tech billionaires who are powering the state’s economy were also there.  

• The BJP's cash stockpile has grown to $1.3 billion (₹118.3 billion); rivals have just 6.6 percent of that amount. In the last 2 years, the BJP spent $364 million (₹33.4 billion) on elections while the Congress Party spent just 25 percent of that amount. The financial firepower will also put the party at an advantage for the five state elections coming up soon.  

• The SEC is working harder to deliver litigation summons to the Adani family. After bringing the case, work has entirely stalled. Until the Adanis are delivered summons, litigation cannot proceed in the US. The Indian government has likely been stalling while Adani’s US lawyers at  Kirkland & Ellis, Quinn Emanuel Urquhart & Sullivan, and Hecker Fink have been aggressively stonewalling and lobbying the US government to not proceed.  

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“Mother of All Trade Deals”

While the Davos conference saw a whirlwind of announcements and events, one that stands out is the importance the EU is placing on India. President von der Leyen announced she would travel to India to reinvigorate ties and likely finalize the “mother of all [trade] deals”. 

More groundbreaking news quickly followed with India confirming that tariffs on one of the EU’s most important exports of cars would drop from 110 percent to 40 percent and eventually taper to 10 percent. India has already started acting in goodwill and that process will likely continue as negotiations finalize. For Europe, building trade ties is important given Russian aggression, Chinese coercion, and its own structural weaknesses. India represents a stable trade partner with a massive potential market. Differences over climate policy or Ukraine are manageable compared to the risks faced around Europe and even from the US.

India has hesitated in the past though negotiations are flowing more smoothly now. Negotiators were meant to wrap up by the end of 2025, but New Delhi slowed its pace with US actions; politicians feared that any concessions given to the EU would become a baseline for American demands. Additionally, there was a belief that stabilizing relations with the US (India’s largest trade partner) first made strategic sense in addition to the issues that India had with Europe’s demands. 

Both arguments have now worn thin. The US is looking at India more transactionally with punitive tariffs and an insistence on public deference that Modi cannot politically afford. India’s domestic demand has proven that allowing European goods in for cheaper will not shortchange domestic companies either. 

That is precisely why India should move decisively with Europe. An India-EU deal would signal that New Delhi has options and is willing to use them. The move would also take pressure off of the stock market and currency while putting more pressure on the US to join suit in a free trade deal.

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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