• Capital flows are a problem and not just portfolio flows

• Bank credit has seen a sharp uptick

• Incremental Credit-Deposit ratio is close to 100%

• Rupee continues to depreciate against the USD and other currencies

• Core sector growth remains sluggish with petroleum being the key drag

• US trade deficit narrows sharply in January as exports rise and imports decline

The rupee is under pressure as capital flows have turned adverse. And while we are aware of the selling by FPIs, the challenges in capital flows are much more than just FPIs. NRI deposits, for example, which used to be a steady source of inflows, turned negative in January – there were net withdrawals of US$ 600 million. For reference, the last quarter of 2025 had seen inflows average US$1.7bn, so a delta of over US$2bn in January. Outward remittances have also, not surprisingly, increased. January saw US$2.7bn outflows under the LRS, up US$500mn compared to the preceding few months.

And FDI continues to struggle. January was the sixth consecutive month of negative net FDI. January saw a negative net FDI of US$1.4bn, the highest in the last 3 months. And this is in large part because the actual equity FDI received by India in January was at a 14-month low of US$2.7bn. For reference, the preceding 3 months saw India receive an average equity FDI of US$4.5bn, almost US$2bn higher.

The only component of capital flows that has improved in recent months is the ECBs. January saw ECBs totalling US$5.3bn being approved by the RBI, the highest since March last year. Some corporates are being brave (or contrarian?) raising overseas debt with the rupee is seeing sharp depreciation!

Credit growth has accelerated sharply in recent months. As of the end of February, overall credit growth had accelerated to over 15% YoY, almost 4ppt higher since November. Deposit growth has also similarly picked up, and at 13% it has similarly increased by ~4ppt in the last few months. The credit-deposit ratio is now running over 82%, and the incremental credit-deposit ratio is now running close to 100%. While it does not appear so, the banking sector is running red hot.

The rupee continues to depreciate against the US Dollar. However, as we have highlighted before, the big picture is of the rupee’s depreciation against most major currencies, not just the USD and the sheer quantum of decline. Thus, over the past year, while the USD Index fell by ~4%, the INR Index fell by 11%. The INR has thus fallen by over 10% against most major currencies.

What is surprising is that despite this, we have not seen a material increase in inflation. And this has allowed interest rates to continue to remain low. The recent rise in oil prices will complicate this picture, but at least in the short-term, the RBI is likely to see through any increase in inflation attributable to the rise in oil and gas prices.

The Core Sector grew by 2.3% YoY in February, slowing from the 4.7% growth recorded in each of the previous two months. Out of the eight industries that comprise the core sector index, three sectors registered a decline in growth. Natural gas production contracted by 5% YoY in February, marking the 20th consecutive month of decline. Similarly, crude oil production fell for the sixth straight month. In contrast, steel production showed strong performance, recording a 7.2% YoY growth in February.

Lastly, the US goods trade deficit narrowed sharply in January, declining by US$17.7 billion to US$80.8 billion on a seasonally adjusted basis. Exports grew by 13% year-on-year in January, up from a 6.8% YoY increase in the previous month. Imports declined for the sixth consecutive month in January, with the pace of decline rising to 16% YoY. US exports to China declined for the thirteenth consecutive month. Imports from China declined for 12 straight months.

• CPI Inflation rises to over 3% in February but continues to remain modest

• Oil prices rise to US$100/bbl and are up almost 50% YoY in INR terms

• India’s energy balance has worsened in the last few years

  • Domestic oil production has declined

  • Imports of Petroleum products, and not just crude oil, have increased

• China’s exports and imports are off to a strong start in 2026

CPI Inflation rose to 3.2% YoY in February, up from 2.7% in January. This is the highest reading since April last year. However at 3.2% it remains still remains below the 4% target set for the RBI’s Monetary Policy Committee. So despite the rise, CPI remains low and comfortable. This, however, is a rear-view mirror analysis. Since then, international Oil prices have shot up due to the hostilities in the Middle East. The price of Brent crude, which averaged U$71/bbl in February, has now crossed US$100 per bbl. If they sustain at this level, and given the sharp depreciation in the rupee in the last few months, this will translate to an almost 50% increase in Oil prices on a YoY basis in INR terms.

Petroleum products directly have a ~7% weight in the new CPI basket. So a 50% increase in prices will, ipso facto, push up inflation by ~3-4ppt, pushing CPI above the upper end of the MPC’s threshold of 6%. This, of course, assumes that the international oil prices are fully passed on to the consumers. They most likely will not, at least not in the short term. To begin with, it will be the Oil companies which will absorb the higher prices, and if prices remain high for more than a few weeks, then the Government will be expected to also chip in.

But petrol, diesel and LPG are just one source of impact of higher oil prices. Almost every manufactured item that we consume has some element of petroleum. And the services required to deliver those goods require petroleum. Suffice to say that such a sharp increase in prices, compounded by the fall in the rupee, will adversely impact the price system. And what might exacerbate this, at least in the short term, is the risk of shortages, which might cause production outages, curtailing supply. But given the uncertainty over how long and severe the disruption will be, it is not possible at this point to quantify the impact on either growth or inflation with any degree of precision.

But while we are discussing energy, it is worth noting how India’s energy dynamics have changed in the last few years.

India was and remains a crude oil-deficient but refining-surplus nation. What this means is that while India is a net importer of crude oil, it is a net exporter of refined products. In calendar year 2025, for instance, while India imported 250 million tonnes of crude oil, it exported, on a net basis, 15 million tonnes of petroleum products (imported 50 million tonnes and exported 65 million tonnes).

But both of these balances have worsened over the last decade. This is because while India’s energy demand has increased, domestic production has actually declined. In 2015, India’s domestic crude oil production was 37 million tonnes or 16% of total crude oil consumption (84% was imports). In 2025, however, domestic crude oil production had declined to 28 million tonnes, down 25%, and it now covers just 10% of the domestic crude oil requirement. So 90% of the crude oil is now imported.

And our excess refining capacity has also been whittled away in the last few years. In 2015, India’s exports of petroleum products stood at 59 million tonnes. And in 2025, India’s exports of petroleum products stood at 65 million tonnes, a less than 10% increase. India primarily exports Petrol and Diesel. But imports of petroleum products almost doubled during this period – from 27 million tonnes in 2015 to 50 million tonnes in 2025. And most of these imports are LPG (~45%) and Petroleum Coke (~25%).

And a similar story has played out in natural gas. Between 2015 and 2025, while consumption of natural gas increased by 40%, domestic production increased by just 10%. Consequently, imports of LNG doubled. And more than 50% of domestic consumption of natural gas is now sourced through imports.

Bottom line, India’s energy balance or petroleum balance has worsened. And thus our vulnerability to sustained dislocation in the global energy market, which was always high, has increased in the last few years. So at this point in time, we can simply watch how things unfold. Fingers crossed…

Lastly, China’s foreign trade is off to a strong start in 2026. Merchandise exports in the first two months of the year grew by over 20% YoY while Imports grew ~20% YoY. The trade surplus consequently expanded by over 25% YoY to over US$200bn during this period.

Trade with the United States weakened, with exports down 11% YoY and imports plunging over 25% YoY, reflecting the continued impact of tariffs. By contrast, exports to the European Union grew by over 25% and those to Southeast Asian nations surged by almost 30% YoY. Imports from these regions also rose sharply. Together, the data highlights China’s deepening ties with regional and European markets and underscore China’s ability to diversify trade partnerships and reduce reliance on the US amid ongoing geopolitical tensions.

That’s it for this week, see you next week…

In case you missed, we now track the active weights of mutual funds across stocks and sectors. Calculated by comparing the actual portfolio weight of every equity scheme relative to an appropriate basket of stocks that is representative of that scheme category. We build this data bottom up and so it is available at an individual scheme level and aggregate it up across all equity fund categories and the entire equity holdings of AMCs.

In this edition of This Week In Data, we discuss:

• New series of GDP is here and GDP seems to be humming along fine

• New series lowers growth rates for last two years and also lowers the size of the GDP

• Corporate tax collections have seen sharp acceleration in recent months while income tax collections remain sluggish

• FDI inflows improve sequentially but higher outward FDI keeps total FDI at modest levels

• Services exports continue to see strong growth and trade balance at record highs

• US Trade deficit widens sharply in December as trade with China continues to shrink

So India’s economy grew by 7.8% YoY during the December quarter, down slightly from the 8.4% growth during the September quarter. For FY26, the economy is likely to grow by 7.6% YoY, higher than the 7.1% in FY25 and 7.2% in FY24. This is as per the new series of national accounts released on Friday, with FY2022-23 as the base year. Key take away, the economy seems to be humming along fine.

The new series with newer and updated data sources, as well as revised methodology, closely aligns with the changes in the economy in the last decade or so. Not surprisingly, there is a significant change to growth rates earlier reported, and the key takeaway is that, in general, growth rates for the last 2-3 years have generally been revised downwards. This implies that the older series was overestimating growth, especially in FY24. Cumulatively over the past two years (FY24-25), the real GDP growth rate has seen a downward revision by ~70bps.

The other notable feature of the new series is that it actually reduces the size of the economy slightly. The nominal GDP under the new series is ~3-4% lower than that under the old series. Given that some of the scepticism over the earlier reported GDP data was due to the perception that they were overstating growth, this downward revision should help acceptance of this series amongst the sceptics.

Corporate tax collections more than doubled in January on a YoY basis. While January is not a large month for corporate tax collections, it will be the 4th consecutive month of strong growth in corporate tax collections. Over this period (Oct-Jan), corporate tax collections increased over 35% on a YoY basis as against a modest 1% growth during the six preceding months. This increase in corporate tax collections lines up with corporate profitability data, which has shown two consecutive quarters of double-digit growth.

Personal income tax collections have not seen an uptick though. The last 4 months have seen a personal income tax collections grow by 5% YoY, broadly the same growth rate as in the preceding 6 months.

FDI Inflows continue to improve sequentially. In the first 9 months of this year (Apr-Dec), FDI flows into India increased 50% YoY to US$29bn. This was driven by a 15% increase in gross inflows while repatriation of existing FDI was largely flat. That said, outward FDI from India is also rising – YTD this has increased by almost 35% YoY. And this has meant that in absolute terms, the FDI received by India, on a net basis, was a modest US$4bn between April and December of FY26.

Services exports have continued their strong momentum in recent months. January saw services exports grow 10% YoY, down slightly from the 13% growth in December but broadly the same pace as in the recent few quarters. Imports have surprisingly seen a sharp slowdown, with January seeing services imports being largely flat on a YoY basis.

January was thus the second consecutive month of over US$20bn services trade surplus, the highest ever. The backdrop for this, of course, is the rising risk of AI disrupting India’s IT exports. So, we will be watching this data closely over the next few months.

In December 2025, the US goods trade deficit widened sharply, increasing by $15.8 billion to reach $98.5 billion, a 19% MoM rise on a seasonally adjusted basis. This is the highest level of the deficit since July 2025. This increase was driven by a 3% MoM decline in exports, while imports rose 4% MoM (seasonally adjusted basis).

U.S. exports to China declined for the twelfth consecutive month on a YoY basis. Similarly, imports from China fell for the eleventh consecutive month. China’s share of total U.S. imports dropped sharply to 7.5% in December 2025, down from 13.2% in December 2024.

For the full year 2025, the US recorded a goods trade deficit of $1.23 trillion, which was 2.1% higher than in 2024 despite the imposition of tariffs aimed at curbing imports. During the year, goods exports grew by 6% YoY while imports increased by 4.6%.

That’s it for this week. See you next week…

• New series of CPI is here and it does not change the big picture of CPI trajectory

• Wireless telecom subscribers spiked sharply in last two months due to Airtel

• Life insurance sector is seeing strong growth driven by LIC

• General insurance sector is also seeing strong growth

The long-overdue shift in the CPI base is over. On Thursday, we got the new CPI series. Inflation, as per the new series, continues to be low at below 3% in January. The big picture remains that inflation is inching up, as expected, but still remains comfortable. And so, it will not immediately change monetary policy or interest rates.

One of the key changes in the new series is the lower weight for food relative to the earlier series. Given that food is the most volatile component of the CPI, this lower weight will make the CPI series less volatile. There are, of course, several under-the-hood changes in terms of a more representative basket of commodities, a larger number of commodities, more markets from which price data is collected, and so on, which should improve its credibility.

The wireless subscriber base in India increased significantly in the last two months. November and December saw a cumulative increase of over 70 million subscribers. This is an over 6% increase in just two months. But turns out this increase was due to a technicality.

Almost the entire increase is due to Airtel, which hitherto was not reporting its M2M subscriber base (sim count) in its monthly filings. Other operators were already including their M2M sims in their subscriber base. Airtel corrected this anomaly in its December filing, due to which its subscriber base increased by almost 70 million or by 18%. Airtel did not split out how much of its subscriber base increase is due to M2M and how much organic increase, but in the 6 months before this, Airtel’s monthly subscriber growth was just over 600 thousand or ~1.2 million in two months. Not a large number.

So what are M2M sim cards? They are machine-to-machine SIM cards. SIM cards that are embedded into IoT devices, such as in modern cars, which offer internet connectivity. Or in the smart metering systems that the power distribution companies are putting in place. What is absolutely fascinating, though, is the sheer scale of this! If for Airtel, a sixth of its subscriber base is just M2M sim cards or non-human sim cards, it is fair to assume that other wireless operators have a similar number. If we just include Airtel and Jio, this implies that there are over 150 million M2M ‘active’ sim cards in the country currently. And if we include all the operators, this number rises to over 20 million. That is a very large number of sim cards embedded directly into machines.

The last few months have been good for the life insurance sector. New Business Premiums have grown by almost 30% YoY over the past 3 months, the highest growth in the last few quarters. The growth is being driven by single-premium group policies, which have seen over 40% growth. And because LIC has a much higher share of business here, it is LIC which is driving this.

But even the traditional individual non-single premium segment has seen growth tick up to almost 20% YoY over the past three months after remaining in single digits through most of 2025. And the growth is driven by higher policies – the number of individual non-single premium policies sold has grown by 28% over the past 3 months. So, things are looking good!

The general insurance sector is also seeing a pick-up in growth. Over the past three months, the total business of the general insurance companies has grown by 17% YoY, the strongest growth in over 2 years.

Among the larger companies, Bajaj, HDFC, Kotak, and SBI have seen a sharp pick up in growth. The erstwhile public sector general insurance companies continue to lose market share. Their market share has fallen from close to 50% in mid-2017 to less than 30% currently.

That’s it for this week. See you next week…

• Union Budget continues the path of, slow, fiscal consolidation

• Lower receipts drive lower capex, for both center and states

• RBI keeps interest rates unchanged

• December sees 4% decline in Airline passenger traffic driven by 11% decline for Indigo

• Power generation grows 5% in January on provisional basis

• White collar hiring sees sharp slowdown as evidenced by Naukri JobSpeak Index

First, the budget. And at a high level, it did what budgets are generally meant to do – a simple statement of accounts. And the statement of accounts presented a reasonably good picture – the fiscal deficit is expected to decline 40bps this year to 4.4% of GDP, and as per the budget estimates, it will decline by a further 10bps next year. That said it is worth noting that despite the Covid19 pandemic having long ended, the fiscal deficit continues to remain well above the pre-pandemic levels.

The interesting question, though, is how this fiscal consolidation is being achieved. In the current year (FY26), as per the revised estimates, revenues will miss budget estimates. But this has been more than offset by lower expenditure.

Total receipts for FY26 as per the revised estimates are likely to be lower than the budget estimate by ~₹900bn. In contrast, total expenditure is likely to be lower by ₹1000bn. And this entire shortfall (and some more) is due to lower grants (to states) for capital expenditure. The government had budgeted grants of ₹4,272bn as grants for capital expenditure in the budget last year. The revised estimate is almost 30% lower at ₹3,081bn. This will not have an impact on the Centre’s capital expenditure, which in any case, is independently expected to grow by less than 5% in FY26 as per the revised. But this will weigh on the state government’s capital expenditure. And the first few state budgets that have come in reflect this.

So the answer to the question of why investments in the economy don’t seem to be growing lies partly here. Of course, the budget estimates suggest that next year things will change. Capital expenditure is expected to be in double digits, and the Grants for capital expenditure will also see a sharp increase. But like this year, this will almost entirely depend on whether revenue estimates fructify. They did not this year. But some of that was due to the GST rate cuts which happened post the last year’s budget. So, unless some such external event occurs, government capex should recover next year.

Following the budget, the RBI’s Monetary Policy Committee (MPC) decided to keep its interest rates unchanged this week. So, the Repo rate remains unchanged at 5.25% while the SDF and the MSF rates remain unchanged at 5% and 5.5% respectively.

What has driven this is growing confidence in the trajectory of economic growth. The MPC raised its forecast for near-term growth by ~20bps. While inflation remains low, it is expected to pick up and rise to 4% next quarter. And the MPC notes that the external sector headwinds have increased even though the overhang of high tariffs on US exports has gone away. Accordingly, the MPC reckoned that a rate cut was not warranted.

The domestic aviation data for December was released this week. And it was a weak month, as expected, given the scheduling issues faced by the airlines, notably Indigo. Overall passenger traffic declined by 4% YoY, the sharpest decline in recent months. Indigo saw passenger traffic decline 11% YoY, again the first decline in recent months.

The other carriers benefited from this decline. Air India group saw high single-digit growth in passenger traffic while SpiceJet saw domestic passenger traffic grow for the third consecutive month. Smaller airlines saw an even sharper increase in passenger traffic – Star, for example, saw over 70% growth in passenger traffic, although admittedly this is on a low base.

Power generation grew 5% YoY in January as per provisional data. This is broadly the same growth as in December and was at the upper end of the range of the past few quarters. Renewables continue to drive this growth, with power generation from renewable sources growing over 20% in January. In contrast, power generation from conventional sources grew by a modest 2%.

Lastly, White-collar hiring moderated in January, with the Naukri JobSpeak Index growing by a modest 3% YoY after a double-digit growth in the previous month.

Hiring intentions declined sharply in telecom, financial services, and electronics, contracting by 21%, 15%, and 12%, respectively. Meanwhile, IT/software and IT hardware services reported marginal declines of 2% and 4%, respectively. In contrast, accounting, taxation & finance, advertising, and architecture remained resilient, though momentum eased from the previous month.

That’s it for this week. See you next week…

• Rupee continues to depreciate against the USD, but it has depreciated much more against other currencies

• Rupee depreciates even as the US Dollar itself is depreciating against most currencies

• Long bond yields have risen both in India and the USA

• RBI continues to intervene heavily to defend the rupee but gold price change is masking the fall in reserves

• Net FDI received by India has been negative for the third consecutive month

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We start with the Rupee, which is now headed towards 92 against the USD. And while the focus remains on the rupee’s exchange rate against the US Dollar, the real story is the rupee’s exchange rate against the other major currencies. While the rupee has depreciated ~7% against the US Dollar over the past year, it has depreciated substantially more against the other major currencies. This is because the US Dollar itself has fallen sharply against most other currencies.

Thus, against the Euro, for instance, the rupee has depreciated by almost 20% over the past year and against the British Pound, the rupee has depreciated by over 15%. Even against the Chinese Renminbi, the rupee has depreciated almost 13% over the past year.

The rupee has been an outlier against other emerging market currencies, also. Over the past year, for instance, the Brazilian Real and the Mexican Peso have appreciated by over 10% against the USD. Even the South African Rand has appreciated in double digits against the USD, while the Malaysian Ringgit has appreciated 10% against the USD over the past year.

Apart from the Rupee, the Indonesian Rupiah has been the worst-performing Asian currency, and it has fallen by just 3% against the USD. Effectively, in the global USD depreciation trade, the INR (and a couple of other currencies) have massively underperformed by depreciating against the USD. And this is odd.

The RBI continues to intervene in the forex market to support the rupee. In November, it sold ~US$10bn of reserves, and between April and November, the RBI has cumulatively sold US$43bn of reserves to defend the rupee. This is, however, not manifesting itself in a decline in the FX reserves as the gains in the value of Gold due to rising prices have almost fully offset the fall in foreign currency assets.

Not surprisingly, this sharp currency depreciation is pushing up bond yields in both India and the USA. The 10-year bond yield in the USA is now ~4.25%, the highest in the last few months. It has now increased by 25bps since October and is the highest since late August. And this is despite the 75bps rate cut from the Federal Reserve during this period. The US yield curve (10yr – 3mth), which was basically flat till September, has now steepened and is over 50bps wide.

Similarly, in India, the 10-year yield is now above 6.7%, up 25bps since late October and is now the highest in almost a year. Indeed, even short-term rates have increased in the last few weeks. The yield on the 3-month GSec has increased by almost 25bps since the start of the year and is now over 5.4%, the highest since June 2025. And this is despite the 125bps of policy rate cut in 2025.

Not surprisingly, the RBI is boosting liquidity to reduce the stress in the money markets. With the Union Budget around the corner, one suspects the bond market will settle down only post the budget, once the deficit and borrowing numbers for FY27 are available.

Lastly, one of the drags on the currency and by implication the interest rates is that while the trade deficit is contained, there is a lack of capital flows. And one of the factors here is the absence of FDI. Net FDI received by India (adjusted for repatriation as well as outward FDI by Indian corporates) was negative (meaning more money went out than came in) for the third consecutive month in November as per the provisional data from RBI released this week. Over these 3 months, India saw an outflow of FDI of almost US$4bn, taking the YTD cumulative net FDI inflow to a modest US$6bn.

For reference, India’s trade deficit (goods + services) has totaled just under US$100bn between April and December of FY26. This extremely low level of FDI relative to the trade deficit increases the vulnerability to swings in portfolio flows. And this is exactly what we are seeing currently.

That’s it for this week. It will be the budget next week(end!). So, we shall see if there is anything in the budget to change any of this. The flipside of the rupee depreciation and RBI’s FX intervention will be significantly higher realised FX gains for the RBI, which it can pay as a dividend to the Central government. Will the government use it to cut some taxes or boost spending? And will any of that turn around the sentiment? We shall find out soon! So long...

• India’s trade deficit widens over 20% YoY in December as export growth decelerates

• Exports to USA still holding up with just 2% decline in December

• Aggregate cash holdings of equity funds has gradually declined with Small cap funds seeing amongst the largest decline

• Domestic coal production sees a pick up with dispatches to non-power sectors seeing strong growth

• China’s exports continue to grow despite decline in exports to the USA

• US Inflation remains sticky complicating the task for the Fed

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India’s merchandise trade deficit declined 21% YoY in December to US$25bn as export growth decelerated sharply to just 2% YoY, the lowest in the last 5 months. Europe was the big drag on exports in December – the UK, Netherlands, France all saw sharp decline in exports. Exports to Singapore and Saudi Arabia also declined sharply. However, despite the tariffs, exports to the USA dropped by just 2% YoY. This decline was, however, more than offset by continued strong growth in exports to China (+67%), Hong Kong (+61%) and the UAE (+15%).

What is worth noting is that despite the tariffs kicking in from August, exports to the USA have grown by almost 10% YoY between April and December due to the front-loading of exports in anticipation of the tariffs in the first half of the year. And given the current run rate, exports to China will likely cross US$20bn for the full year FY26, making China the third largest export destination for India after the USA and the UAE, overtaking the UK and the Netherlands!

Aggregate cash holdings of domestic equity mutual funds has steadily dropped through the second half of 2025 from a high of 7% in April 2025 to ~5.5% of AUM towards the end of the year. At this level, cash holdings are the lowest since the first half of 2024, when they were around 5% of AUM.

The decline, though, is not across all fund categories. Both Large and small-cap funds have seen sharp declines in cash levels. Large-cap funds held ~3.9% of their AUM in cash, down 2ppt from April 2025 when cash holdings had totalled ~6% of AUM. Cash holdings in large-cap funds is the lowest since June 2024. And for the small-cap funds, the decline is even sharper - from almost 9% of AUM in April 2025 to just under 6% as of December. And at below 6% cash levels at small-cap funds is the second lowest in the last 2 years, the lowest being in June 2024 at 5.6%.

If the level of cash holdings reflects the optimism or otherwise of equity fund managers, then this decline in their cash holdings does suggest that fund managers, on balance, have become more optimistic about the equity market performance over the next few months. We shall see!

Domestic coal production grew 3.6% YoY in December, the strongest growth in the last 7 months. However, dispatches to end users declined 2.7% YoY. This was largely due to the decline in dispatches to power plants – thermal power plants saw their 4th consecutive month of decline in coal dispatches, with December seeing a 9% decline.

This, though, was offset partially by a sharp growth in dispatches to the Steel and Cement sectors. Dispatches to Steel mills, for instance, almost doubled on a YoY basis in December and has grown at an average of 30% over the past 3 months while those to Cement plants have increased by over 10% YoY in the last 3 months. Captive power plants have also seen double digit growth in coal dispatches over the past 3 months. Is this a marker for strong industrial growth in the ensuing months?

China recorded a monthly (goods) trade surplus of US$114bn in December 2025, the highest in the past six months, as exports rose faster than imports. Exports rose by almost 7% YoY in aggregate despite a 30% decline in exports to the USA.

China’s exports to the USA have now declined for 9 consecutive months. However, higher exports to the EU and the Southeast Asian countries offset the drag from the lower exports to the USA. China’s total imports, rose by 6% YoY in December despite a similar ~30% decline in imports from the USA.

Lastly, CPI Inflation in the USA increased by 2.7% YoY in December, which was broadly the same rate as in November. Food prices continue to be the key driver of inflation, rising to over 3% YoY in December. What is noteworthy though is that US CPI Inflation has remained above the Fed’s target of 2% in every single month since February 2021 – so almost 5 consecutive years!

As we noted last week, the US job market has seen a marked slowdown with the economy shedding jobs in the last quarter of 2025 – the first time since Covid19. Higher inflation, even as the labour market is softening, complicates the US Fed’s job as it juggles its two objectives – price stability and full employment. Not surprisingly, then, the odds of further rate cuts from the Fed have diminished. The Fed Fund Futures are now pointing to no rate cut from the Fed till April – a month ago, they were pointing towards 70% odds of at least 1 rate cut (and 25% odds of 2 rate cuts) vs current 66% odds of no rate cut.

That’s it for this week. See you next week…

• India’s GDP Growth is expected to accelerate to 7.4% in FY26

• Nominal GDP growth will however slow to multi-year low

• Why GDP growth does not matter!

• Domestic Equity funds continue to see strong inflows but folio additions has slowed down dramatically

• Debt funds have seen recovery in folios but have been overtaken by Gold funds

• US Trade deficit falls to multi year lows in October as Imports shrink

• US labour market has softened considerably in last few months

According to the First Advance Estimate (FAE), annual real GDP is projected to grow by 7.4% in FY26, up from 6.4% in FY25, and is expected to surpass ₹200 trillion in FY26, compared to a provisional estimate of ₹187 trillion in FY25. Notably, nominal GDP for FY26 is estimated to grow at just 8% YoY, the slowest growth in the last few years, implying an economy-wide inflation or the GDP deflator of less than 1%.

Real GVA is expected to grow by 7.3% YoY in FY26, higher than the 6.4% growth in FY25, so there is not much divergence between GDP and GVA growth. And internally, the growth drivers are expected to be fairly strong: the Services sector growth is expected to rise 190bps to 9.1% in FY26, while the Manufacturing sector is likely to see growth accelerate by 250bps to 7%. This will be offset by a moderation in the Agriculture sector to 3.1% (still reasonably strong) from 4.6% and in sectors like Construction and Electricity. And capex is expected to remain strong. The share of Gross Fixed Capital Formation in GDP is expected to rise further to a multi-year high of almost 34%. So much for the constant complaining about the lack of investments in the economy.

The big picture though is that the first advance estimate of GDP for FY26 is largely an irrelevant number. This is because by the time it is time for the second advance estimate of GDP to be published, at the end of February, we would migrate to the new GDP series with 2022-23 as the base year. And as is generally the case, when there is a shift of base year, there is likely to be a significant change in both the actual GDP number and its recent growth trajectory. So it is best to completely ignore this growth number and wait for the new series to start flowing in, and interpret the data and its implications.

Inflows into domestic equity funds continue to remain strong. December saw net inflows of ₹280bn, broadly the same pace as in the previous 3 months. That said, the breadth of inflows has narrowed quite significantly. The number of net new folios fell to below 1 million in December 2025, the lowest number since May 2023 and down more than 80% from the peak of almost 5.5 million net folios being added in July 2024.

Even as Equity funds have seen a massive slowdown in folio addition, debt funds have seen a pickup. In 2025, for instance, all debt funds saw the number of folios increase by over 1 million, after a cumulative decline of almost 0.8 million in the preceding 3 years. Most of this increase has happened in liquid funds, while the longer-duration funds have seen a decline.

Gold ETFs, though, have seen the strongest growth in folios in recent months. In the last 2 years, the number of folios in Gold ETFs has more than doubled, and as a category, they have more folios than all debt funds put together!

The U.S. goods trade deficit narrowed sharply in October, falling $18.6bn month-on-month to $58.6bn, and to its lowest level since 2019! This happened as imports dropped to their lowest level since June 2023, declining 5.5% YoY in October. Specifically, the consumer goods imports declined to their lowest since June 2020.

And on the other hand, exports rose to an all-time high, driven by record high exports to countries such as the UK, Switzerland and India. This data, though, pertains to October, so it is a bit dated (and running behind the normal publication schedule due to the still lingering impact of the recent Government shutdown).

Even as the trade data remains strong, the labour market data has markedly weakened. The US economy added 50,000 non-farm payroll jobs in December, a sharp slowdown compared with the 323,000 jobs added in the same month last year. Job gains for October and November were revised downward by a cumulative 76,000, with October revised to a loss of 173,000 jobs and November revised to a gain of 56,000. Effectively, the US economy has seen job losses in the last quarter of 2025, the first quarter of job losses since the pandemic. This is a significant deterioration in the US labour market. Will this change the Fed’s stance and drive a significant monetary easing in the US? The markets are not yet suggesting an imminent change.

That’s it for this week. See you next week…

• Share of Russia in crude oil imports has started to decline

• Exports to USA rose sharply in November and are broadly flat over the past 3mths

• Exports to China are rising but off a low base

• GST collections declined in December for the second consecutive month

• Wireless subscriber growth has been very strong in 2025 led by Jio and Airtel

• Demand for work under NREGA fell to decadal low in 2025 and work provided also fell to 7 year low

India’s dependence on Russian oil is reducing. In the last 3 months (Sep-Nov), the share of Russia in India’s crude oil imports stood at 32%, down from 37% in the same period last year. Over the past 12 months, 32% of India’s crude oil imports came from Russia (in value terms), down from 36% a year ago. That said, at 32% the number is still significantly above the pre-Russia-Ukraine war. Between 2019 and 2022, for instance, just 2% of India’s crude oil imports came from Russia.

Exports to the USA are also surprisingly holding firm despite the tariffs. After a decline in September and October, exports to the USA grew over 20% YoY in November, such that over the past 3 months, exports to the USA are largely flat on a YoY basis. This is only slightly worse than non-US exports, which grew by 4% during this period. This perhaps partially explains why there has been no seeming urgency on the part of the Government to quickly conclude the trade deal with the USA.

The other notable trend is the sharp surge in exports to China. Over the past 3 months, exports to China have surged over 50% YoY. In absolute terms, exports to China in the last 3 months were the highest in the last 4 years. This growth is, of course, coming off a low base – exports to China had declined 14% YoY. And despite this growth, exports to China this year (FY26) will be below the US$21 bn reached in FY21 and FY22. So this does not yet suggest a structural change in trend.

GST collections declined for the second consecutive month in December. After a 4% decline in November, collections declined by 1% YoY in December. Before the GST rate cuts, which became effective in September, GST collections were growing by 6-7% YoY. Thus, the increase in consumption post the sharp reduction in GST rates has not made up for lower rates – there has been revenue loss on a net basis. This does not mean that the GST rate cuts were a bad policy; it simply means that the Government will have to make up for this revenue shortfall through other sources of revenue or by cutting back on expenditure or simply running a higher deficit.

Wireless telecom operators are having a strong year. Between Jan-Nov 2025, they collectively added over 20 million new subscribers on a net basis, the highest since calendar year 2017, when they had added 40 million subscribers.

Jio continues to see outsized growth in subscribers. So far in 2025 (till November), Jio has added 20 million subscribers while Airtel has added just under 10 million subscribers. Vi continues to lose subscribers – so far in 2025, they have lost 7.5 million subscribers. Surprisingly, BSNL has gained subscribers this year, albeit a modest 1.2 million. This is the first time in the last several years that BSNL has gained subscribers.

Lastly, NREGA has been in focus recently. The government intends to restructure the scheme quite significantly. While there has been a fair bit of debate over the appropriateness of this, what is interesting to note is how the scheme has shrunk in recent months. The number of active workers under the scheme, for instance, has declined to 150 million as of December 2025. At its peak, the scheme had over 200 million active workers.

While the number of person days of work created declined to a 7-year low of ~2500 million. And the number of people who demanded work under NREGA declined to 272 million in 2025, the lowest since 2015!

In theory, this should be good news. For the way this scheme was originally envisaged, almost two decades back, was a pure demand-driven scheme – a counter-cyclical policy that runs on autopilot, kicking in automatically when there is a paucity of jobs (in the rural areas), as people could simply demand 100 days of work at will. So if people are demanding less work under NREGA, it would imply they are finding enough otherwise.

But clearly, the scheme did not work as a purely demand-driven scheme. It was basically a supply-side scheme, and West Bengal is a good case in point. The state has basically seen zero implementation of the scheme for the past two and a half years - for a complex set of reasons that we will not get into. So it is a good thing that the scheme is being restructured lest it go into oblivion given the way it was progressing. The question is whether the scheme in its new avatar changes anything? Time will tell…

That’s it for this week. More next week…

• Another month of low inflation in November

• Bond markets have not celebrated the policy rate cut last week

• Mutual Funds continue to see strong inflows especially in Equity funds

• 2025 on track for second year of over 200+ increase in MF schemes

• Passive schemes now account for a third of total schemes but only sixth of AUM

• Cord cutting continues and number of Pay channels now starts to decline

• Data consumption continues to see strong growth

Another month and another low reading on Inflation. CPI Inflation printed at 0.7% YoY in November, up slightly from the 0.3% YoY print in October but well below the RBI’s target of 4%. In fact, CPI is now running even below the lower bound of the CPI target of 2% set for the RBI’s MPC. This quarter is likely to be the second quarter in a row that CPI inflation will average below 2%.

Extremely benign food inflation continues to be the key driver of lower headline inflation. CPI excluding food and beverages has remained stable, averaging around 4% since April this year. But even here, there are non-core factors. Gold prices, which have risen sharply in the last few months, have been an important upward driver of non-food inflation. Accordingly, the core-core inflation that takes out food, energy, fuel and precious metals has fallen sharply – 2.5% YoY in November, the lowest in recent times.

Bottom line is that there do not seem to be any underlying inflationary pressures. And it is this that drove the RBI to cut rates last week. And as things stand now, if inflation continues to undershoot the projected trajectory (RBI expects inflation to average ~3% during the March quarter), there might be another 25bps rate cut in the February policy meet. We shall see…

The markets, though, seem to be seeing things differently. The 10-year GSec yield has increased by 10bps in the last 10 days. So there has been a selloff in bonds, at the longer end, post the policy, which saw the RBI cut the policy rate by 25bps. At the short end of the curve, too, the yields have seen a modest 5-10bps change as against the policy rate change of 25bps. Effectively, the markets are suggesting they do not see scope for further rate cuts.

November was another strong month for flows into domestic equity funds. Net inflows totalled ₹300bn, higher than the net inflows of ₹250bn in October. Hybrid funds also saw strong inflows of over ₹130bn in November, although the pace has moderated a bit in recent months. And passive funds have also seen strong inflows in the last few months. November saw net inflows of ₹152bn, among the highest monthly inflows in recent years.

In large part, the strong inflows are being driven by new schemes. 2025 is on track to be the second consecutive month of over 200 schemes being launched. 2024 saw the number of schemes across the industry increase by 208, and so far (till November), the number of schemes has increased by 186. At the pace of the last few months, 2025 will also see the number of schemes increase by over 200.

Most of this increase, though, is happening not in active but in passive schemes. In 2024, just over 60% of the increase in schemes was attributable to passive schemes. And so far in 2025, almost 70% of the increase in schemes is attributable to passive schemes. A third of the active schemes are currently passively managed schemes. Most of these schemes, though, are small, and hence the share of passive schemes in total AUM is much lower at 17%.

Lastly, cord-cutting has continued this year. The number of DTH subscribers, as well as subscribers for the large cable operators, continues to decline. And not surprisingly, the number of Pay TV channels is now declining. As of September, this year, there were a total of 334 Pay TV channels in the country, down 28 from last year.

The flipside of this is the increase in media consumption from the OTT platforms. And this is manifesting itself in the continued increase in mobile data consumption. The September quarter saw a total of 69 billion GB of wireless data, up 6% QoQ and 20% YoY. An average wireless data subscriber now consumes almost 25 GB of data per month. This has more than doubled in the last 5 years.

That’s it for this week. See you next week…

• RBI cuts interest rates after pausing the previous two occasions. What has changed?

• How much more can interest rates fall?

• Monetary transmission has broadly kept pace with policy rate changes

• GST collections decline in November as the GST rate rejig takes its toll

• Oil prices are down 10% YoY even in INR terms

So as was expected, though by no means an overwhelming consensus, the RBI’s Monetary Policy Committee did cut the policy repo rate by 25bps last week. This comes after a pause in August and October policy reviews, which had come after a 50bps rate cut in June. The repo rate now stands at 5.25%. The RBI also announced liquidity measures, which should result in more effective transmission of the lower policy rate through to the money markets and into the economy.

What has driven the rate cut is lower inflation. Inflation has continued to surprise on the downside, leading the RBI to reduce its inflation forecast pretty much across the board. For instance, the RBI has reduced its inflation forecast for the June quarter next year from 4.5% in the October policy to 3.9% in this policy. So lower inflation for longer. And at the same time, growth remains reasonably strong. While the RBI does not expect 8% growth in 2Q to sustain, it has increased the growth forecast for say the June quarter next year from 6.4% in the October policy to 6.7% currently.

The natural question to ask is whether rates can go down further. And for that, we need a bit of context. And that is that by historical standards, interest rates are fairly low currently. Outside of the COVID-19 pandemic, the policy rate was last this low in late 2019 and early 2020. And before that, in 2010, when the economy was recovering from the Global Financial Crisis! And the last time we saw sub 5% interest rates was more than two decades ago. And in each of these occasions, economic growth was significantly slower either due to global factors or domestic cyclical factors. While currently there is no such risk to growth. So there is probably not much room for interest to go much lower than the current level. Maybe another 25bps or so. Unless GDP growth sees a material slowdown. It is hard to argue that interest rates should fall significantly from these levels if growth remains resilient around 6-7% as is currently expected.

Actual lending rates have already fallen a fair bit over the past 12 months. The average interest rate on fresh loans given by banks has fallen by ~90bps over the past year from 9.5% to 8.6% currently. This compares to the policy repo rate having fallen by 125bps during this period (of which 25bps happened just last week). So there is possibly another 25-50bps for lending rates to fall further and keep up with the delta in policy rates, but that’s about it.

Interest rates on fixed deposits have also fallen by approximately the same amount. In October, banks paid 5.6% on average on fresh term deposits, down 90bps on a YoY basis. So, like lending rates, deposit rates have another 25-50bps to fall to keep up with the change in policy rates. What this underscores, though, is that monetary transmission, long a bugbear of monetary policy, has been fairly strong in this easing cycle. A number of factors, such as liquidity management from the RBI, a slightly mature debt market and a larger proportion of personal loans being linked to an external market-linked benchmark, have contributed to this.

GST collections declined in November (capturing business activity in October), the first full month for which we have data after the GST cuts came into effect in September. Aggregate GST collections declined 4.4% YoY in November, driven primarily by a 70% decline in GST Cess collections. SGST collections also declined 1% YoY, while CGST collections slowed down to a modest 2% growth. The pace of decline could potentially be slightly in December (business activity of November), as Diwali was entirely in October this year, while last year it was partially in November also. We shall see.

Lastly, one of the factors in India’s favour currently is Oil prices. In November, the Brent Crude Oil prices averaged US$63.6/bbl, down 15% YoY. Thus, even adjusted for the depreciation in the rupee, Crude oil prices are down ~10% in INR terms. And this will have a salutary impact on inflation. And this is also one of the factors keeping the current account balance in check, but for which the rupee would have been under even bigger pressure than it is.

That’s it for this week. See you next week…

• GDP Growth accelerated but because of discrepancies

• Nominal GDP growth remains sluggish

• Domestic steel production and imports are seeing a slowdown

• Rupee is at a decadal low on REER basis

• US retail sales accelerate to multi-month high in September

• US durable goods orders also recover in September

India’s GDP grew by 8.2% YoY during the September quarter, the fastest growth in the preceding 6 quarters. This was well above the market expectation and is obviously good news. That said, our GDP data is not without its issues and so it is only reasonable that while we rejoice at 8% GDP growth, we also dwell over some of the issues with the data. And it is the same bugbear with this quarter’s data - GDP deflator and Statistical discrepancies.

Thus for instance, all the components of GDP – Private consumption, Government consumption, Gross capital formation, Net exports – grew slower than 8%! So what has driven this growth is ‘statistical discrepancies’, which swung from a small negative number to a large positive number. Statistical discrepancies is the factor used to align the GDP estimate as per the expenditure approach and the supply side (or sectoral) approach of estimating economic growth. Excluding discrepancies (admittedly not the right metric, but still) GDP growth for the quarter was just 4%.

The bigger picture is that nominal GDP growth was a modest 8.7% YoY, on top of a modest 8.3% growth in the September quarter last year. So the GDP deflator was close to 0% and this comes because a large part of the deflator estimation is basis the WPI which has no services component. Over the past few quarters, nominal GDP growth has averaged ~9% YoY. Outside of the COVID-19 pandemic, nominal GDP has very rarely grown in the single digits in the last two decades. And in the short run, it is nominal GDP that matters more than real GDP as most of the metrics we care about – corporate revenues and profits – are nominal metrics.

So while the 8.1% real GDP growth number is impressive, in practical terms, it is far less useful. But we are about to say goodbye to this series of GDP, which is well beyond its useful date. The new GDP series with 2022-23 as the base year and expanded data coverage debuts in February, along with the December quarter data. It has taken long for the data to migrate to the new series – the current series with 2011-12 base migrated much quicker from the earlier series with base year 2004-05. But hopefully, the new series has far fewer quirks of data than the outgoing series. So long GDP, hello GDP…

Domestic steel production has seen a slowdown in the last few months, although the growth remains healthy in absolute terms. Crude steel output grew 6% YoY in October, the lowest in the last 5 months, while finished steel rose by 8% YoY, the slowest pace in four months. Pig iron production contracted by 15% YoY, recording its steepest annual decline since March 2023.

Steel imports have also declined – finished steel imports declined for the seventh consecutive month in October, falling over 50% YoY - the sharpest drop since August 2020. Crude steel imports also fell for the second consecutive month in October, contracting 43% YoY, marking the steepest decline in the past seven months. Given the linkage between the Steel and the Construction sector, this makes us wonder - is the construction seeing a slowdown?

The rupee has been falling in recent months against all major currencies. And a consequence of this is that on a REER basis, the rupee is now at its lowest in over a decade. Effectively, the fall in the rupee has been more than what the inflation differentials between India and the other large currencies would warrant. And this means that the rupee has gained an element of competitiveness. In theory, this should boost exports (and offset some of the tariffs) and discourage imports. And this should reduce India’s trade deficit. Will theory translate into practice? We shall see…

Inflation declined modestly in Euro area as per the flash estimate for November. The HICP fell to 2.1% YoY from 2.2% in October. This is broadly the same level the HICP was a year ago. Germany recorded a 2.3% rise in prices in November, slightly higher than the same month last year, while consumer prices increased by 0.9% in France and 1.2% in Italy.

In the United States, the Census Bureau reported a 9.7% year-on-year increase in new orders for durable goods in September, the fastest growth in three months and higher than the 1.7% decline in September 2024. Excluding defence, durable goods orders rose 9.5% year-on-year. Additionally, U.S. retail sales grew 5.7% year-on-year in September, the fastest pace in 32 months, based on non-seasonally-adjusted data. So while the labour market data is softening, the real data is not yet seeing a material softening. Growth remains reasonably robust.

That’s it for this week. See you next week…

• India’s exports decline sharply in October while Imports rise sharply

• Trade deficit rises to a record high

• Rupee is closing in on 90 to the US Dollar and has seen across the board decline

• India’s inflation is now lower than in the USA!

• Inflation has taken off in Japan long used to ZIRP!

• US Unemployment rate is rising and so the Fed is expected to cut rates

India’s exports declined a sharp 12% YoY in October after a few months of high single-digit growth. And surprisingly, this was not due to a decline in exports to the USA. Exports to the USA declined, but by only 9% YoY. Exports to Singapore declined by over 50%, accounting for more than a quarter of the overall decline in exports. Exports to several European countries also saw a sharp decline. Exports to the UK, Italy and the Netherlands, for example, declined over 20% YoY and those to Germany and France declined by ~15%. On the flipside, exports to China saw a sharp 40% increase. And even YTD (Apr-Oct), while overall exports are largely unchanged on a YoY basis, exports to China have grown by almost 25% YoY. China has overtaken the UK and Singapore to become the 4th largest export destination for Indian goods, very close behind the Netherlands.

Imports meanwhile grew 17% YoY in October, the sharpest growth in recent months. This was driven largely by a near tripling of gold imports and more than quintupling of silver imports. Excluding these precious metals, imports declined 2% YoY. So the rise in imports is not broad-based. To some extent, there is also a seasonal angle to both the decline in exports and the increase in precious metal imports as Diwali was earlier this year compared to last year.

That said, the trade deficit widened to a record high of over US$40bn, almost a third higher than the previous record.

And this is also flowing through the rupee, which closed very close to the 90 mark against the US Dollar on Friday. Over the past few months, the INR has seen gradual depreciation against the USD and most other major currencies. The IDH INR Index has fallen ~8% over the past year as the INR has depreciated by 6% against the USD, 8% against the CNY, 10% against the GBP and 16% against the EUR during this period.

And the RBI continues to dip into FX reserves to support the Rupee. And as we have discussed a couple of times before, this intervention is not manifesting itself in total FX reserves, as the appreciation in the value of Gold is offsetting the decline in foreign currency assets. As of 14th November, the total foreign currency assets stood at US$562bn, down US$32bn since their level in late June. This decline has been almost fully offset by a US$22bn increase in the value of Gold holdings.

India’s inflation is now lower than that in the US. October will be the 5th consecutive month that the CPI Inflation in India will be lower than that in the USA. And while Inflation in India being lower is probably an exception, structurally inflation differentials seem to have moderated in the last few years. In the long run, it is the inflation differential that drives relative exchange rate movements, and thus if inflation differentials remain low, if not negative, this will be the biggest structural support for the INR against the USD. If inflation differentials remain low, that is…

In the short run, though, the persistent low inflation in India has opened up room for further rate cuts from the RBI. It now seems likely that the RBI will cut rates further in its next monetary policy meeting in early December, the rupee situation notwithstanding. If anything, a pick-up in growth pursuant to a loosening of monetary policy will support the rupee.

Inflation is rising in Japan. And the data released this week showed that CPI rose to 3% YoY in October, up 20bps over September and 80bps over the past year. A 3% inflation in Japan is as unthinkable as a 0% inflation in India. But that is precisely what we are faced with. Not surprisingly, interest rates in Japan, long used to ZIRP (Zero Interest Rate Policy), are rising.

CPI Inflation has averaged 3.3% YoY so far in 2025 (till Oct). Calendar year 2023 had similarly seen inflation average 3.3%. But before that, the last time inflation had averaged 3% or higher in Japan was in the year 1991! Between 1992 and 2021, a period of 30 years, the average annual inflation was 0.3% with 15 of those years seeing negative CPI!

In the U.S., the Bureau of Labour Statistics (finally!) released the non-farm payroll data. But for September. Total non-farm employment increased by 119,000 in September. However, job gains for July and August were revised downward by a combined 33,000, with August’s figure revised to –4,000. The unemployment rate edged up slightly from the previous month to 4.4% in September—the highest level in four years. That said, at 4.4% it is still fairly low. For reference, at the peak of Covid as well as the GFC, the unemployment rate was ~10%.

Post this data release however, the markets which were wavering over whether the Fed will cut rates in December have now decisively moved towards a rate cut – Fed fund futures point towards a 71% probability of a rate cut on 10th December now, up from 45% a week ago. Markets are now also pricing in a ~50% probability of another 25bps rate cut in 1Q26. This then becomes an added factor in favor of the RBI cutting interest rates when it meets (although the RBI rate decision is due before the Fed rate decision).

That’s it for now. See you next week!

• 2W sales see sharp rebound in October but growth in Car sales remains modest

• Bihar sees an across-the-board strong growth in Automobile sales

• New company registrations are on track for record year in 2025

• Services sector continues to attract new firms, despite the high base

• Domestic aviation sector is seeing a slowdown with domestic flights and passengers declining for 3rd consecutive month

• Central bank of Brazil keeps interest rates unchanged as inflation remains high but Bank of Mexico cuts interest rates as inflation moderates

The recent reduction in GST rate on 2Ws has significantly buoyed their sales. In October, total retail 2W sales rose by over 50% YoY. Sales growth was strong in most large states, but was especially strong in the Hindi heartland. In Bihar, sales more than doubled, while in Jharkhand they rose almost 100%. UP and MP also saw 90% growth in sales. In contrast, sales grew by a relatively modest 20% in Gujarat, 25% in Maharashtra and just over 30% in Karnataka and Kerala.

This surge in 2W sales did not rub off on Passenger cars, where sales grew a modest 11% in October. But Bihar stood out even here with sales growing almost 50% YoY. But other large states in the Hindi heartland did not see any surge in sales. MP and UP, for instance, saw a modest 8-9% growth.

And yes, Tractors saw a similar trend. While overall tractor sales grew a modest 14% YoY in October, Bihar saw almost 50% growth. Jharkhand also saw a strong 30% growth in Sales, but sales declined in UP as well as MP. So, whether this pretty much across the board surge in sales in Bihar is entirely due to the reduction in GST rates or is there something more to it?

2025 is turning out to be a very strong year for startups (new company registrations). In the first 10 months of this year (Jan-Oct), a total of 192k new companies were registered in the country. This is an increase of 30% YoY. At this rate, a total of 225k new companies would get registered in India, the highest ever, and the first time over 200k companies would be registered in any year.

Most of this growth is being driven by Industrial sector companies, which have seen a 36% growth so far (till Sept), while the services sector has also seen a 30% increase. That said, the sharp growth in new Industrial sector companies is not a structural trend. While 2025 might see just over 55k companies being registered at this rate, the year 2022 also saw almost 50k industrial sector companies. The real story is in the services sector, which continues to see secular growth in new firms being set up, despite the large base.

Lastly, the aviation sector is seeing a slowdown. Especially the domestic sector. The number of domestic flights handled by the airports declined by 3% YoY in September. This is the 3rd consecutive month of decline in domestic flights. International flights have been growing at ~4% in the last few months, down from 8% growth at the start of the year.

In sync with this, the total domestic passengers handled by the airports declined by 2% YoY in September, the third consecutive month of decline. International passengers handled grew by in the high single digits for the second consecutive month; however, despite this, the total passengers handled at all the airports declined by 1% in September, the second time in the last three months that total passenger throughput has declined on a YoY basis.

Globally, several central banks announced their rate decisions this week. The Reserve Bank of Australia (RBA) maintained its policy rate at 3.6%, the second consecutive time it has kept rates unchanged. Similarly, both the Central Bank of Brazil and the Bank of England kept their policy rates unchanged. In Brazil, the Selic rate remains at 15%, which is almost 400bps higher than the level last year.

In contrast, the Bank of Mexico reduced its policy rate by 25 basis points, lowering it from 7.5% to 7.25%. Over the past year, the policy rate in Mexico has fallen by 300bps. In part, this is being driven by a sharp fall in inflation. In October 2025, Mexico saw CPI inflation print at 3.6%, down 20bps on a MoM basis but more importantly, down 120bps over the past year.

That’s it for this week. See you next week…

• Direct tax collections continue to remain soft

• GST Collections slows down in October as expected

• Monetary transmission has kept pace with policy rate changes

• Services trade recovers in September and surplus rises in high teens

• Fed cuts rate as expected and the Bank of Canada follows but ECB pauses

• Euro area CPI moderates slightly in October but remains above 2%

• Euro area GDP grows at the slowest pace in 3 quarters

September was a reasonable month for tax collections. Overall, the central government’s gross tax collections grew by 8% YoY, the fastest growth since April-May this year.

The entire growth, though, was due to higher personal income tax collections. Corporate tax collections were broadly flat on a YoY basis in September and have grown by a modest 1% YoY in the first half of the year (Apr-Sep). Given that September saw the second instalment of advance tax being paid, it seems like the corporates in aggregate (listed as well as unlisted, large as well as small, put together) are not seeing strong growth in profitability during the current year.

Personal income tax collections grew by over 30% YoY in September. This, though, largely reflects the shift in the date for filing tax returns for individuals from July to September. What is thus important to note is that the YTD personal income tax collections growth is a modest 5% YoY. Thus, direct taxes, which account for over 55% of total tax collections, are seeing low single-digit growth in tax collections as against double-digit growth estimated in the budget.

The GST rate cuts will impact indirect tax collections in the second half of this year. In October, the total GST collections grew by just 5% YoY. And the collections in October would reflect the business activity in September, when the GST rate cuts had only seen a partial impact. So, on balance, it appears likely that the central government will face a revenue shortfall this year. The first half of this year has already seen expenditure grow faster than the budget estimate. And if there is a revenue shortfall, it does suggest that there would need to be expenditure cutbacks in the second half of the year. And that will weigh on growth.

Monetary transmission has gathered pace in recent months. September saw a 25bps decline in the weighted average lending rate on fresh loans by the Scheduled Commercial Banks. Over the past year, the weighted average interest rate on fresh loans has declined by ~100bps, in sync with the reduction in the policy repo rate. Incremental average deposit rates have similarly seen a ~90bps decline over the past year, which is also in sync with the decline in the policy repo rate.

Weighted average interest rate on outstanding loans has also declined by ~60-70bps over the past year. Thus, a fair amount of monetary transmission has already happened, and there is not much left by way of dry powder, if the RBI continues to keep the repo rate unchanged…

After a blip in August, services trade recovered in September. Exports grew by 12.6% YoY, as against a modest 3% growth in August. Imports similarly grew by 8% YoY, as against a 5% decline in August. The faster growth in exports relative to imports meant that the services trade surplus grew by 17% to just under US$19bn, and the second highest on record.

Globally, this week was a busy week, with several key updates from central banks and fresh data on inflation and growth. Starting with central banks, the U.S. Federal Reserve lowered its key policy rate by 25 basis points to a target range of 3.75%–4.00%. The decision reflects slower job growth even as inflation has seen an uptick. Fed Fund futures are signally another rate cut in December followed by a pause in the first quarter of 2026.

The Bank of Canada also cut its overnight rate by 25 basis points to 2.25%, marking its second consecutive rate reduction. Meanwhile, the European Central Bank left all three of its key interest rates unchanged, keeping the deposit facility, main refinancing operations, and marginal lending facility steady at 2.00%, 2.15%, and 2.40% respectively. The Bank of Japan also maintained its uncollateralized overnight call rate at around 0.5%.

On the inflation front, Eurostat’s flash estimates showed that inflation in the Euro Area eased slightly in October. The Harmonised Index of Consumer Prices (HICP) edged down from 2.2% in September to 2.1% in October, with services recording the highest annual inflation rate at 3.4%.

Lastly, Eurostat’s flash estimate for GDP reported that the Euro Area economy grew by 1.3% year-on-year during the September quarter, marking the slowest pace of growth in three quarters. In contrast, South Korea’s real GDP expanded by 1.7% year-on-year during the same period, its fastest increase in five consecutive quarters.

That’s it for this week. The Women in Blue take on South Africa in the ICC Women’s World Cup Final tomorrow. Don’t miss it…

• FDI slumps in August but continues to remain healthy YTD

• ECB Inflows are sharply lower YTD as are inflows from NRI Deposits

• Gold valuation gains continues to mask the fall in FX reserves

• Wireless telcos are gaining all the subscribers lost last year and then some

• India’s Fixed line subscriber base has increased 50% in the last 2 years

• Small savings inflows remain muted despite interest rates having not declined

• Globally interest rates are either falling or remaining stable

• US CPI is rising even as Fed has started to cut interest rates

August saw a sharp slump in the FDI received by India. The Gross FDI received by India was a modest US$6bn, down almost 50% from July and also down 30% on a YoY basis. Month-to-month FDI flows, though, are expected to be volatile, and thus, this is not unduly perturbing at this stage. What is relevant is that despite the weak August, YTD (Apr – Aug) Gross FDI is up almost 20% YoY to US$44bn. And repatriation of existing FDI is tracking down on a YoY basis. Consequently, the net FDI received by India is tracking 50% higher on a YoY basis as of August. Admittedly, this growth is off a low base.

Overseas debt flows are, however, struggling this year. In the first 5 months of this year, the total amount of external commercial borrowings approved by the RBI was just under US$16bn, which is almost 25% lower on a YoY basis. Inflows under the various NRI deposit schemes are down by over 20% in the first four months of this year. Lower domestic interest rates and a depreciating rupee have clearly made the interest rate arbitrage trade less attractive.

Last week we discussed how, while FX reserves have remained unchanged, their composition has changed. While foreign currency assets have declined, overall FX reserves have remained unchanged due to the gains from the increase in the value of gold holdings. The RBI’s FX market intervention by using its reserves to defend the rupee is being masked due to the increase in value of its Gold reserves due to higher gold prices.

And this past week’s data saw this trend continue. Overall, FX reserves rose by US$4.5bn, but foreign currency assets declined by US$1.7bn since the value of Gold holdings appreciated by US$6bn! At US$570bn, RBI’s foreign currency assets are at their lowest level since the last week of March, but overall FX reserves are almost US$40bn higher!

The wireless telecom operators are seeing subscriber gains this year. Last year, if you recall, the wireless operators lost subscribers when they took price hikes around July. However, the lost subscribers (or maybe new ones) are coming back. In the first five months of FY26, the wireless operators added 10 million subscribers. This more than makes up for the subscriber loss in the last year – in FY25, the wireless operators had lost 8.5 million subscribers.

And the fixed line segment is also seeing strong growth in its subscriber base. YTD (Apr – Aug), they have seen over 9 million net new subscribers being added! And on a base of less than 40 million subscribers at the start of the year, that’s a more than 25% increase in the subscriber base. In just the last two years, the fixed line subscriber base in the country has increased by 50% - admittedly, it pales compared to the wireless subscriber base…

Even as mutual fund inflows remain strong, inflows under the small savings schemes continue to struggle for the 2nd consecutive year. Net inflows under all the small savings schemes totalled ₹1120bn in the first 5 months of this year. This is down 3% compared to inflows received during the same period last year. And the inflows last year themselves were down 30% YoY. Inflows in the first 5 months of this year are the lowest in the 5 years.

While it is tempting to attribute this to the falling interest rates, it is pertinent to note that the interest rates on small savings schemes are regulated by the Government. And the Government has not changed (reduced) interest rates in the last 2 years. Falling interest rates are thus not a driver of weak small savings inflows. So, what gives?

Globally, this week began with several key central bank policy decisions. And in general, policy rates are either being maintained or being cut. The People’s Bank of China, for instance, maintained its 1-year loan prime rate at 3% and the 5-year rate at 3.5%. Interest rates have remained unchanged in China since May.

Similarly, Indonesia’s central bank also kept its benchmark rate steady at 4.75% after having lowered it by 25 basis points in the previous month. In contrast, the Central Bank of Turkey reduced its repo rate by 100 basis points from the previous month to 39.5%, the third consecutive policy rate cut. A year ago, policy rates in Turkey were 50%! The Bank of Russia also lowered its key rate from 17% in September to 16.5% in October.

Moving to inflation data released this week, Canada experienced a slight uptick in inflation, with the consumer price index (CPI) rising from 1.9% in August to 2.4% in September—higher than the 1.6% recorded in the same month last year. South Africa also saw a marginal increase in inflation to 3.4% in September, although this remains lower than the 3.8% recorded in September 2024.

Meanwhile, the U.S. Bureau of Labor Statistics reported that the U.S. CPI rose by 2.9% in September, up from 2.7% in August. Core CPI rose by 3.1% YoY in September, up 5bps from August. Both headline and core CPI are the highest since January of this year. So even as the Fed has started to cut interest rates, inflation has started to rise.

That’s it for this week. See you next week…

In this edition of This Week In Data we discuss:

• CPI Inflation fell to a 8-year low in September. Core inflation also remains benign. But this will not, ipso facto, cause interest rates to decline.

• Exports continue to grow at 6-7% despite the full impact of US tariffs coming into being

• Imports saw a broad-based growth pushing the trade deficit to the highest in recent months

• FX Reserves have remained stable in recent weeks. But that is largely due to the increase in Gold prices

CPI Inflation moderated to a multi-year low of 1.5% YoY in September. Lower food inflation remains the key driver of the decline in headline inflation. Food and Beverage inflation printed at a negative 1.4%, the lowest in recent months and the third time in the last four that the Food and Beverages component printed below zero per cent.

While core inflation ticked up, at 3.2%, the core-core CPI (which excludes food, fuel, and precious metals) remains benign and has averaged 3.2% for the September quarter, the lowest since the same quarter last year. So, both the headline and the core inflation continue to remain fairly benign. Indeed, the headline CPI has averaged less than 2% during the September quarter. While it is very unlikely to happen, if the inflation remains below 2% for another 2 quarters, the RBI Governor would have to write to the finance minister explaining why inflation is so low and what they are doing to take it back up to the target of 4%!

But as we have discussed before, low inflation is not by itself a sufficient reason to cut interest rates. Low inflation ought to be negatively impacting growth for interest rates to be cut, and the RBI just recently raised its growth estimate. So, as things stand, unless growth momentum starts to show signs of weakening, the RBI is unlikely to cut interest rates.

India’s exports grew 6.8% YoY in September, broadly the same pace as in the previous couple of months. Electronic goods saw a 50% increase in exports and were the biggest driver of export growth. Almost 2/3rds of the incremental growth in exports in September was from these two categories.

September was the first full month after the US tariffs took effect. And accordingly, exports to the USA declined by 12% YoY. But that has been offset by growth in exports to other countries. Exports to the UAE, for example, grew by 25% YoY, and those to China rose by over 30% YoY. So at least in the immediate short run, exports have not been impacted by the tariffs.

Imports saw a sharp 17% growth in September. And the growth was broad based. Fertiliser imports tripled to US$2.4bn during the month. Both Gold and Silver imports doubled. Vegetable oil imports also rose over 50% YoY. And imports of Ores, mostly Iron ore, rose by 40% YoY. And while the absolute amounts are small, Imports of Raw Cotton (incl. Waste) and Fruits & Vegetables also rose sharply.

The faster growth in imports relative to exports meant that the merchandise trade deficit rose sharply to US$32bn, the highest since November last year and the third highest ever. There is some element of seasonality in the rise in imports, and so the September trade deficit is likely not representative of the trade deficit for the rest of the year. Accordingly, the trade deficit has seen only a 7% increase YTD (Apr-Sep) despite the 30% increase in deficit in September. The full-year deficit is also likely to see only a single-digit growth.

Lastly, FX Reserves. India’s FX reserves have remained largely stable in the last few weeks. But the headline data does not tell the full story. On the last Friday of June this year, India’s FX reserves stood at US$703bn. And as of October 10th, the reserves stood at US$698bn – a modest decline of US$5bn or less than 1%. But the reason reserves have remained largely stable is due to the increase in the price of Gold and the consequent revaluation of gold holdings of the RBI.

During this period, the value of RBI’s foreign currency assets (balances with other central banks, checking accounts, short-term investments in treasury securities, etc) has declined by almost US$23bn or by 4%. But this has been almost fully offset by an increase in the value of gold holdings. During this same period, the value of RBI’s Gold holdings has increased by 21% or US$18bn. And this increase is broadly in sync with the change in international gold price – so the RBI does not appear to have bought physical Gold by selling some financial assets during this period.

Bottom line is that the RBI is defending the rupee, which has depreciated against the US Dollar as well as other currencies. But that defence is not manifesting itself in a fall in FX reserves due to the rising price of Gold. This is not to suggest that the level of reserves has fallen sharply; they remain comfortable. But this is something worth keeping a track of…

That’s it for this week… Wishing everyone reading this a very happy and prosperous Deepawali. See you next week…

• RBI keeps interest rates unchanged and is getting more optimistic about the economy

• Corporate tax collections continue to struggle

• Credit growth is picking up, albeit modestly

• Services trade decelerated sharply in August but is otherwise having a strong year

• Power generation has improved in last two months but continues to struggle on YTD basis

As expected, the RBI’s Monetary Policy Committee (MPC) kept the key policy rates unchanged. The repo rate remains at 5.5%, the SDF rate remains at 5.25% and the MSF rate at 5.75%. The policy rate has remained unchanged now for the second consecutive MPC meeting, with the last cut being in the June policy meeting. This was, however, as expected, so nothing noteworthy here.

What matters, though, is what is likely to happen in the subsequent meetings. And the clue for that is that on one hand the RBI has revised lower its inflation expectation for the current year, noting that the near-term inflation outlook has “has turned even more benign in the last few months”. And, at the same time, the RBI has increased its GDP growth forecast for FY26 by 30bps to 6.8%.

So while the inflation outlook has become more enabling of a rate cut, the outlook on growth has improved and thus, does not warrant a rate cut. So, unless this dynamic changes – growth outlook deteriorates, or inflation outlook worsens – a status quo is the most likely to continue for the foreseeable future. Worth remembering is that the CRR cut announced in June was effective from September in 4 equal tranches till the end of November. So the impact of that CRR cut is flowing through to liquidity currently.

August was another weak month for corporate tax collections. They declined 25% YoY. Corporate tax collections have declined in 3 of the 5 months this year, and cumulatively in the first 5 months of FY26, corporate tax collections have grown by just 2% YoY. This, coupled with the decline in personal tax collections, has meant that till August, overall tax revenues have grown by less than 1% as against a budget estimate of ~10% growth.

The GST cut will come into effect from September. And so, it is very likely that tax revenues will miss budget estimates, and thus meeting the deficit target will warrant a cutback in expenditure in the second half of the year.

Bank credit growth has gradually ticked up in recent months. As of 19th September, bank credit grew at 10.4% YoY, the fastest growth since early April. The uptick is modest (~100bps) but comes even as deposit growth has moderated to 9.5% as of mid-September, the lowest in recent months. Thus, the loan-deposit ratio (LDR) has risen back above 80% and is close to the highest ever. There is thus fairly limited slack on bank balance-sheets to support outsized credit growth.

Services trade had a rough August. Exports rose just 3% YoY, the slowest growth since March last year, when exports had declined 1%. Services imports declined 5% YoY, the sharpest decline since November 2023. And a combination of slow but still growing exports and a decline in imports meant that the services trade surplus rose in double digits to US$16bn.

The first 5 months of this year have seen services exports rise 9% YoY while imports have risen by just 2%. And this has meant that the services trade balance (surplus) has risen by 17% YoY to US$80bn. For the full year, this will translate to ~US$220bn, which is more than 5% of the GDP!

Lastly, power generation continues to remain soft. As per the provisional data, Power generation grew a modest 3% YoY in September, broadly the same pace as the previous couple of months. The first six months of this year have seen power generation grow by a modest 1% YoY, as against 6% in the same period last year, with power generation growth being lower than last year in every single month, barring the last two. Going just by power generation, economic growth has seen a sharp slowdown so far this year, but things seem to be picking up in the last two months.

That’s it for this week. See you next week. 2Q earnings season kicks off from this week, and so This Week In Earnings will return from next week onwards.

• FDI Inflows into India continue to see a revival, but outward FDI from India is rising as well

• Inflows from ECBs and NRI Deposits are sharply down this year

• Rupee has fallen sharply against most currencies in recent weeks

• Payments growth crashed in August most likely due to GST driven disruption

• US Exports and Imports decline in August, first decline in recent months; Trade deficit at 17-month low

• Durable goods orders continue to hold steady and GDP growth gets revised upwards

We had discussed last month that after a prolonged slump, FDI flows into India seem to be recovering. And July brought further confirmation of that trend. India received Gross FDI of US$11bn in July, the highest in the last few years. The second-highest monthly inflow was US$9.6bn in June. In the first 4 months of this year, India received gross FDI of US$38bn, the highest ever and up a third on a YoY basis.

That said, along with inward FDI, what is also rising is the outward FDI. In the first 4 months of this financial year, Indian businesses invested US$10.6bn outside India as FDI. This is up 40% on a YoY basis. While in absolute outward FDI by Indian businesses remains small, the higher growth in outward FDI nevertheless drags down the net FDI received by India.

While FDI has increased, overseas borrowings have decreased. In the first 4 months of this year, total borrowings from ECBs and FCCBs were US$12.5 bn, down 15% YoY. And even inflows through NRI deposits have moderated. The first 4 months of this financial year have seen net inflows under NRI deposits total US$4.7bn, down US$1.1bn from the same period last year. Thus, a fair bit of the higher FDI flows has been offset by weaker flows under other heads. And not to mention the weak FPI flows.

And this is largely the reason behind the weak rupee. The rupee closed close to 89 against the USD yesterday. Over the past 3 months, the rupee has depreciated by over 3% against the US Dollar. More importantly, the depreciation in recent weeks has been broad-based – meaning the rupee has depreciated against most major currencies.

So, it is not a case of strength in the USD but rather a case of INR weakness. Accordingly, the IDH INR has also declined by ~3% in the last 3 months. Even over the past year, while the rupee has depreciated by 6% against the US Dollar, the IDH INR Index has also fallen by approximately a similar magnitude. The biggest decline in the INR has been against the EUR and CHF, where the INR has fallen by ~10% over the past year.

Lastly, payments. And overall non-cash payments saw a sharp slowdown in growth in August, with growth slowing to just 5% YoY from mid-teens growth in the preceding few months. A large part of this was due to the slowdown in RTGS payments. RTGS payments grew just 3% YoY in August, down from mid-high teens in the preceding few months. But even retail payments saw a slowdown. Retail digital payments (total payments excluding RTGS and Cheques) grew by 11% YoY in August, the slowest growth since February.

One wonders if this is another manifestation of the temporary disruption in business activity caused by the announcement of GST rate cuts in mid-August, but which were effective only from early this week. If so, the business activity will recover in September, and so should the growth in Payments.

Globally, this was relatively light in terms of data releases, except in the US, which saw quite a few releases. Starting with the merchandise trade data. The advance release from the U.S. Census Bureau showed that exports declined by 1.4% year-on-year in August. This is the first decline in US exports since December last year. Imports also saw a notable drop, falling 5.6% YoY in August, the sharpest decline in the last few years.

Among major import categories, consumer goods experienced the sharpest year-on-year decline at 17.8%, followed by automotive vehicles, which fell by 11.6%. While most import categories saw declines, capital goods stood out with a double-digit positive increase.

The merchandise trade deficit narrowed from US$117bn in July to US$84.2bn in August, down 13% on a YoY basis. In absolute terms, the trade deficit in August was the lowest since March last year.

The US also released data on durable goods orders. And new orders for domestic durable goods rose by 2.9% MoM (sa) in August, following two consecutive months of decline. Excluding the volatile transportation segment, new orders grew 0.4% MoM, broadly the same growth as in the previous few months. So steady underlying growth in demand for capital goods (durable goods).

Lastly, the third estimate of U.S. GDP for the June quarter, as reported by the Bureau of Economic Analysis (BEA), showed a 3.8% seasonally adjusted annual rate, an upward revision of 50 basis points from the previous estimate in August.

That’s it for this week. We look forward to the RBI monetary policy next week. A status quo on rates is the most likely outcome, but we shall see…

• The number of internet users in India has crossed a billion!

• Data consumption continues to grow in double digits

• Cord cutting has continued

• Exports see another month of reasonably strong growth

• Imports fall 10% due to collapse in Gold imports

• Exports to US slow as tariffs kick in

• US Fed cuts interest rates by 25bps

• Most other central banks keep interest rates unchanged

A billion. Yes, that is how many internet users we have in India. As of June this year. The June quarter saw almost 35 million increase in internet users, the highest addition in almost 7 years. Of course, this does not mean that a billion Indians use the internet, for there will be instances of multiple internet connections, especially in the cities. The adult population base of India is around a billion people. And so even if we assume that there are 100-150 million cases of multiple connections, we are fast approaching near universal access to the internet. That is a phenomenal achievement considering that a decade back, in 2015, India had just over 300 million internet users. A more than tripling of users in a decade!

Most of these users are, of course, wireless users. Less than 5% of the internet user base is fixed line users. And these wireless internet users consume a lot of data. Like a lot. And the data consumption continues to grow. During the June quarter, 65 billion GB of data was consumed, almost 10% growth QoQ. And this translates to over 20GB of data being consumed per user per month! While there has been some slowdown, data consumption even on this high base has continued to grow in the mid-teens in the last few quarters.

One flipside of this, though, is cord-cutting. The number of users on DTH or Cable TV continues to decline. In the last 5 years, the number of DTH and Cable subscribers have declined by 20%.

Merchandise exports grew by 7% YoY in August, the second consecutive month of high single digit growth. Exports had grown by a similar magnitude in July as well. Electronic goods and Gems & Jewellery were the fastest growing items with exports growing 25% and 15% respectively in August. These two categories contributed almost a third of the growth in exports in August.

Imports declined 10% YoY in August almost entirely due to the more than halving of Gold and Silver imports. Excluding these two, imports saw a modest low single digit growth. YTD, Gold imports have declined by 30% YoY as high prices seem to have weighed in on demand.

The most important data point from the trade data release, though, was exports to the USA. And after months of strong growth, export growth moderated to 7% YoY, the slowest growth this year. Note that the tariffs on Indian goods had kicked in in August. The full impact of the tariffs, though, will be felt next month, and so it is almost a given that exports to the USA will decline in September. The positive takeaway, though, is that overall export growth remained unchanged, despite the sharp moderation in export growth to the USA. If this continues in September also, then it would suggest that in the immediate near-term, at least, there has not been much impact of US tariffs on Indian exports. We shall see…

Related to this is the potential impact of the changes in the H1B visa on India’s services exports. While it is unclear what the new H1B visa policy will be, what is worth noting is that from an Indian IT services perspective, the share of onsite work has gradually declined, and it is now a relatively small proportion of their total work. In FY24, only 10% of India’s IT exports were attributable to onsite work, down from 20% in FY16. The share of exports to North American while still large at 55% last year, has fallen from 61% in FY16.

Globally, it was relatively light on economic data releases. That said, several major central banks held policy meetings this week. In Brazil, the central bank opted to keep its benchmark Selic rate unchanged at 15%, the second consecutive policy pause. The previous one being in July. Unlike other countries where interest rates are falling, Brazil has seen interest rates increase. A year ago, the policy rate was 10.75% (425bps lower than current). And at 15% the current policy rate is the highest in the last several years.

In the UK meanwhile, the Bank of England also maintained its policy interest rate, the bank rate, at 4%, following the 25bps rate cut last month. Central banks in South Africa and Japan also opted to maintain their current interest rates.

Lastly and most importantly, the U.S. Federal Reserve decided to reduce its target range for the federal funds rate by 25 basis points, bringing it down to 4.00–4.25%, citing a weakening labour market and moderate economic activity in the first half of the year. This is the first rate cut from the US Fed this year, the last policy change (rate cut) was in December last year. Markets are currently expecting another two 25bps rate cuts from the Fed in the two remaining meetings this year – October and December.

That’s it for this week. See you next week…