Newspaper Summary - 201125

 The sources detail significant activity within the Financial Sector and Regulatory Actions in November 2025, primarily driven by international trade tensions, the growth of digital finance, and persistent domestic regulatory oversight.

Financial Sector and Regulatory Actions (Nov 2025)

Regulatory bodies, notably the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), have been active, addressing market access, corporate misconduct, and the fallout from key geopolitical and economic events like US tariffs and the rise of digital assets.

1. Regulation of Digital Assets and FinTech

A major theme is the regulatory stance toward evolving financial technologies, particularly digital gold and stablecoins:

• Digital Gold Regulation: The digital gold industry is seeking formal regulation to enhance investor confidence and weed out fraudulent players. This comes after SEBI issued a caution to investors in November 2025, stating that digital gold is not classified as a security or a commodity derivative and is unregulated. This caution prompted a three-fold spike in redemptions that lasted for a week. Digital gold companies plan to seek approval for a Self-Regulatory Organization (SRO) from government authorities if SEBI declines to regulate the product directly. The government could classify digital gold as a security under the Securities Contracts (Regulation) Act, 1956 (SCRA), enabling SEBI to regulate its issuance, trading, and custody, similar to the Electronic Gold Receipts (EGR) framework established in 2021.
• Stablecoin Risks (Global Context): The sources highlight that the rapid growth of stablecoins (which reached $308 billion outstanding in October 2025, up from $138 billion at the start of 2024) poses dangers to governments' control over money and debt. Stablecoin issuers are essentially conducting a "miniature version of what the US Federal Reserve does" but for profit, which could reduce the efficacy of traditional monetary policy tools like interest rates if households shift from bank deposits to stablecoins. This activity is also considered a form of financial repression, channeling private savings into government debt (Treasury bills) at below-market rates. If stablecoin confidence fails, issuers selling Treasuries could cause yields to spike, potentially forcing the Federal Reserve to intervene, creating a "shadow central banks" scenario where gains are privatized and losses are socialized.
• Leveraged Crypto Trading: Leverage in the crypto market has amplified recent losses, with market volatility fueled by complex strategies pushed by regulated institutions and fast-money traders, such as options, futures, and crypto lending. Crypto lending is making a comeback, with the dollar-denominated value of outstanding loans reaching a record high of $74 billion at the end of September 2025.

2. Banking Sector and Credit Measures

Regulatory action focused heavily on mitigating the economic impact of global trade disputes and restructuring corporate finance:

• RBI Trade Relief Measures: In the context of steep US tariffs impacting Indian exports, the RBI announced trade relief measures for exporters in 20 eligible sectors. These measures include a moratorium on/deferment of payment for all term loans and recovery of interest on working capital loans falling due between September 1 and December 31. Additionally, the maximum credit period for pre- and post-shipment export credit has been extended from one year to 450 days.
  • Exclusion of Suppliers: Industry bodies, such as Texprocil, are urging the RBI to extend this relief to the entire value chain, specifically raw material suppliers who are also affected by reduced export demand. Currently, these suppliers are subject to standard Income Recognition, Asset Classification, and Provisioning (IRACP) norms, which could push them into stress if exporters delay payments.
  • Increased Scrutiny: Banks are expected to step up scrutiny of loans to export companies after these RBI relief measures are implemented, closely monitoring the extent of moratorium or deferment availed to assess uncertainty regarding asset quality.
• Acquisition Finance Framework: The RBI's draft framework for bank-led acquisition finance is a decisive policy change, allowing Indian banks to re-enter the acquisition finance market for ‘control deals’ involving listed corporate acquirers with profitability and strong governance. Banks can finance up to 70% of the acquisition value (requiring a minimum 30% equity contribution), backed by two independent valuations. This framework is seen as pragmatic and likely to shift M&A funding, favoring listed corporate transactions over pure sponsor platforms, although private credit retains primacy in sponsor-driven deals outside this clear perimeter.
• Unauthorized Forex Platforms: The RBI added seven entities, including Starnet FX, CapPlace, Mirrox, Trive, NXG Markets, and Nord FX, to its ‘alert list’ of unauthorized forex trading platforms. This list now contains 95 entities, platforms, or websites that are not authorized to deal in forex or operate electronic trading platforms.
• New Nomination Rules: The RBI notified amendments to the Banking Regulation Act, 1949 (effective November 1), regarding nomination facilities for deposits and lockers, allowing more than one nominee. However, ambiguity exists in the accompanying rules, leading authorities to suggest a short extension (e.g., three months) to allow banks time to reconfigure software systems for smooth compliance.

3. NBFCs and Regulatory Advocacy

The Non-Banking Financial Companies (NBFCs) sector is facing challenges related to funding and competition:

• Funding and Tax Relief Requests: NBFCs met with the Finance Minister to seek tax relief and reiterated their long-standing request for a dedicated re-finance window, similar to that provided to Housing Finance Companies (HFCs) by the National Housing Bank (NHB). This comes after the RBI recently hiked the risk weight on bank loans to NBFCs due to perceived exuberance in lending, making bankers hesitant, particularly toward lower-rated NBFCs.
• Home Loan Competition: Non-bank lenders are projected to see their home loan growth slow down in FY26 (to 12-13% from 14% previously) because state-run banks have become aggressively competitive, surpassing prime-focused HFCs in loan origination.

4. Capital Markets Oversight and Efficiency

SEBI is focusing on enhancing market efficiency, transparency, and accountability:

• FPI Onboarding Digitization: SEBI is working to fully digitize the Foreign Portfolio Investor (FPI) registration process, intending to cut approval timelines from months to just a few days, leveraging digital signatures for an entirely paperless workflow. A second platform for FPI registrations is being developed by CDSL to enhance service quality. SEBI Chairman Tuhin Kanta Pandey stated that FPIs remain central to India’s capital markets and that SEBI is a facilitator of efficient capital formation, committed to a risk-based, consultative, and transparent approach.
• Supreme Court Scrutiny (Indiabulls/Sammaan Capital): The Supreme Court intervened, questioning the "reluctance" of the CBI and SEBI to probe allegations of "dubious transactions" against Sammaan Capital Limited (formerly Indiabulls Housing Finance Limited). The court ordered the CBI director to meet with officials from SEBI, the Serious Fraud Investigation Office (SFIO), and the Enforcement Directorate (ED) to look into the matter, noting that the Ministry of Corporate Affairs (MCA) had previously compounded multiple offenses. This regulatory overhang is expected to impact a proposed $1 billion investment in Sammaan Capital.
• New Regulatory Appointment: Sandip Pradhan was appointed as a Whole-Time Member of SEBI for three years.

5. Cross-Sector Fraud Prevention

The Telecom Regulatory Authority of India (TRAI) introduced a measure aimed at reducing financial fraud across the entire BFSI sector:

• Dedicated Numbering Series: TRAI mandated clear deadlines for entities regulated by the RBI, SEBI, and PFRDA to adopt the dedicated '1600' numbering series for service and transactional calls. This action aims to curb impersonation-based financial frauds perpetrated through voice calls. Commercial banks must comply by January 1, 2026, and SEBI-regulated entities (mutual funds and AMCs) by February 15, 2026.

Contextual Developments

These regulatory actions occur amidst broader economic, fiscal, and geopolitical currents:

• Geopolitical/Trade Tensions: The US imposed a punitive 50% tariff on Indian goods in an effort to wean India off Russian oil. This trade tension has created stress for export-related firms, necessitating RBI intervention. Simultaneously, India is pivoting away from Russian crude imports due to sanctions set to take effect on November 21, leading to a surge in tanker bookings from West Asia. Financial analysts predict Indian equities will scale new highs partly due to the belief that US tariffs will soften and India will cut Russian crude purchases by December.
• Domestic Macroeconomic Environment: India's macroeconomic fundamentals are generally strong, with high economic growth and robust digital infrastructure. Inflation is subdued (October retail inflation was 0.25%), strengthening the case for a repo rate cut by the RBI in early December, especially since the real interest rate is currently high. Although GST revenue growth slowed sharply in October (4.6%), it is expected to rebound to a robust 10% in November, which is crucial for meeting the FY26 fiscal deficit target of 4.4%.
• Rural Economic Strain: Despite optimism in the equity markets, the rural economy faces challenges, evidenced by the total income growth of BFSI firms (a major component of the Nifty Rural Index) slumping to a nine-quarter low in Q2 FY26 due to sluggish credit growth and tepid farm income.

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Analogy: The financial regulatory environment in November 2025 resembles a ship navigating a highly reactive, dual-fronted storm. On one front, geopolitical trade winds (like US tariffs and Russian sanctions) require immediate defensive action (like RBI's exporter relief) to keep the ship afloat. Simultaneously, the regulators are dealing with the internal technological currents of digital finance (like stablecoins and digital gold), attempting to build seawalls and establish clear navigation lanes (SEBI's cautions and FPI digitization) before these new waters overwhelm the established structures.

The sources reveal a complex landscape for Corporate and Market Activities in November 2025, characterized by robust equity market confidence despite underlying weakness in the rural economy, intense geopolitical trade pressures, and a surge in global M&A activity driven by the AI and technology sectors.

I. Corporate Market Performance and Investor Activity

Market Outlook and Performance

Indian equities, as measured by the Sensex (85,186.47) and Nifty 50 (26,052.65), saw gains on November 20, 2025. The market is poised to scale new highs following months of subdued returns. This optimism is supported by soft inflation, high economic growth, and the expectation that US President Donald Trump may ease punitive tariffs on Indian goods. The Nifty 50 index is noted as being just 1% shy of its record closing high of 26,216.05 points set on September 26.

• FPI Flows and Global Competition: Foreign Institutional Investors (FIIs) were net buyers in October, acquiring ₹10,167.46 crore of equity after three consecutive months of selling since July. Despite this late inflow, FPIs have pulled out ₹69,000 crore so far in 2025. FPIs are largely preoccupied by the tech rally in the US, particularly the "Magnificent 7" stocks, leaving little bandwidth to evaluate other markets like India, which is currently seen as a contrarian play. Fund analysts expect FPI flows to India to reverse and pick up primarily only if the US markets fall sharply.
• Rupee Rally Bets: Wall Street banks, including Citi and Goldman Sachs, are fueling bets on a potential rally in the Indian rupee, linked to the prospect of a US-India trade deal.

Concerns Regarding IPOs and Market Conduct

While markets are booming, concerns exist regarding the quality of capital mobilization:

• IPOs as Exit Routes: The market boom, marked by IPOs, is criticized as funds raised are increasingly used as exit routes for existing shareholders rather than for fresh investment, which goes against the fundamental "spirit of public markets".
• Analyst Bias and Incentives: A deep-seated issue in capital markets is the conflict of interest among stockbrokers and research firms. Analysts often maintain "buy" or "hold" ratings (over 90% of recommendations) to satisfy institutional clients and secure investment banking business, demonstrating how incentives drive behavior across all market participants.

II. Corporate Strategy, M&A, and Investment

Global Technology M&A and AI Focus

The technology sector continues to drive large-scale corporate activity globally and domestically, largely centered on Artificial Intelligence:

• Adobe’s Acquisition: Adobe Inc. is nearing a deal to buy marketing software company Semrush Holdings Inc. for $1.9 billion ($12 per share), marking its first attempted acquisition since the failure to acquire Figma in 2022. Semrush specializes in platforms that help businesses analyze and optimize their online presence, including how they appear in AI-generated search results. Semrush shares surged 71% in pre-market trading upon the news.
• Fractal Analytics IPO and R&D: Enterprise AI firm Fractal Analytics is preparing for its market debut (IPO) and plans to maintain or increase its significant research and development (R&D) outlay to remain competitive in the AI field. The company's prospectus showed an average 6% R&D spend over the previous three years.
• Global AI Valuations: Anthropic’s valuation has reached $350 billion following a joint $15 billion investment by Microsoft and Nvidia. Enterprise AI firm xAI is also in talks to raise $15 billion in fresh equity.

Domestic Corporate Diversification and Defense

Indian companies are strategically investing in high-growth or protected sectors:

• Defense Localization: Larsen & Toubro Ltd. (L&T) expects its defense business revenue to surpass $1 billion this fiscal year, boosted by the central government's aggressive localization push. This supports the national policy that mandates 75% of annual defence procurement from domestic suppliers.
• Luxury and Retail: The RP-Sanjiv Goenka (RPSG) Group is entering the luxury fashion segment by acquiring a 40% stake in FSP Design, the parent entity of the Falguni Shane Peacock label, based on an enterprise valuation of ₹455.17 crore.
• Tech Platform Pivots: Companies like Urban Company, MyGate, HealthifyMe, and Paytm are adopting a service-linked product model to drive repeat usage and enhance profit margins. Urban Company's home-solutions brand, Native, contributed 11% (₹75 crore) to its Q2 revenue, representing a fourfold growth in FY25.
• QSR Premiumization: Quick Service Restaurant (QSR) chains like McDonald’s and Domino’s are upgrading their menus with premium, gourmet offerings to capture margins, capitalizing on the fact that higher-priced items often share similar production costs (e.g., sourdough dough costing the same as regular dough).

Corporate Challenges and Financial Stress

Several firms face operational or financial hurdles:

• PayMate’s Retreat: The B2B payments firm PayMate has discontinued its West Asia operations, citing the failure of a key investor (Crimson Ventures) to wire funds for over nine months. PayMate previously withdrew a ₹1,500 crore IPO plan in 2023. The firm is grappling with unpaid salaries and senior exits, which are likely to push back its renewed IPO timeline (FY26).
• Exide Industries’ Dual Challenge: Exide is struggling to maintain its core lead-acid battery business while simultaneously trying to scale its capital expenditure-heavy lithium-ion venture. The stock is down 9% in CY25, and Q2 FY26 earnings were soft due to higher input costs and channel destocking. Analysts reduced earnings estimates due to slow scaling of the lithium business and intense competition from players like Reliance and Tata Sons.
• Siemens Underperformance: Siemens India's stock is down 7% in 2025, underperforming the Capital Goods index, reflecting sluggish private capital expenditure and muted government spending. While the company aims to grow revenue at twice India's real GDP, slower execution poses a downside risk.

III. Rural Economic Activity and Sectoral Health (Q2 FY26)

The corporate sector’s performance in Q2 FY26 reveals a significant divergence between rural consumption and overall market optimism:

• Rural Slowdown: The aggregate growth in total income for Nifty Rural Index companies hit an eight-quarter low of 2.8% year-on-year in Q2 FY26. This weakness is primarily linked to sluggish credit growth, tepid farm income caused by procurement delays and softer food prices, and an uneven consumption recovery.
• BFSI Drag: Banking, Financial Services, and Insurance (BFSI) firms, which account for nearly 60% of the index’s total income, were the main drag on growth, with banks in the group seeing total income fall to a nine-quarter low of 5.6% y-o-y in Q2.
• Relative Resilience: Despite the severe deceleration in overall revenue, rural-linked firms continued their trend of outperformance in net profit (15.6% y-o-y growth) and net sales (8.7% y-o-y growth) compared to non-rural peers. This resilience was attributed to strong volumes in auto (utility vehicles and tractors), FMCG, and cement, helped by easing input costs.

IV. Geopolitical and Regulatory Context

Corporate activities are highly sensitive to global and domestic political and financial pressures:

• Corporate Investigations: The Supreme Court directly intervened, questioning the "reluctance" of the CBI and SEBI to probe allegations of "dubious transactions" against Sammaan Capital Limited (formerly Indiabulls Housing Finance). This creates a significant regulatory overhang that could temporarily depress the valuation of the non-bank lender and impact the proposed $1 billion investment by Abu Dhabi’s International Holding Company (IHC).
• Tax Scrutiny: Waaree Energies is currently facing investigations by the Income Tax Department in India and separate investigations in the US concerning alleged evasion of duty on solar imports.
• Liquor Industry Dues: Alcohol industry groups representing major players like Heineken, Diageo, and Pernod Ricard urged the state of Telangana to settle $337 million in overdue payments dating back to May 2024, warning that delays risk supply shortages ahead of the festive season.

The environment showcases how powerful macroeconomic forces—like a potential trade war easing, high domestic growth, and the global AI hype—can elevate equity markets, even while regulatory pressure intensifies on corporate governance (Sammaan Capital, Waaree Energies) and weak consumption continues to dampen corporate performance in core sectors like rural financial services.

The sources indicate that Technology and AI Developments in November 2025 are central to global economic volatility, corporate strategy, national security concerns, and emerging geopolitical fragmentation. The environment is characterized by high valuations in the AI sector, increasing regulatory focus, and the weaponization of digital tools.

I. Global AI Boom, Financial Risk, and Market Divergence

The global Artificial Intelligence (AI) sector is experiencing frenetic activity, which is simultaneously boosting equity markets and raising alarms about financial stability.

AI Valuations and Investment Frenzy

• The AI sector is attracting massive investment, exemplified by the valuation surge of key companies. Anthropic's new valuation reached $350 billion, up from $183 billion in September, following a joint investment of $15 billion from Microsoft and Nvidia.
• Elon Musk’s AI startup, xAI, is in advanced talks to raise $15 billion in fresh equity, potentially at a $230 billion valuation.
• The overall US economy is described as having a "frenetic, sweaty-palm feel," partly due to the AI frenzy creating boom-and-bust cycles, overvalued stocks, and speculation. The IMF warned that a potential "bust of the AI boom could rival the dot com crash in severity".
• Analysts note that the massive investments required for AI infrastructure (data centers) will only be profitable if returns from top tech companies (Meta, Microsoft, OpenAI, Oracle) reach nearly $4 trillion, an outcome not expected "in a hurry". This perceived disconnect fuels the view that the world is currently willing to be fooled by business models like OpenAI, which commands a high valuation with no profits.

Technology as a Driver of Financial Market Behavior

• The sources suggest that the excitement around tech—specifically the "Magnificent 7" stocks—is consuming the bandwidth of Foreign Portfolio Investors (FPIs), leading to sustained net negative FPI flows in India so far in 2025 (totaling ₹69,000 crore). FPI flows into India are only expected to pick up significantly if the US markets fall sharply.
• The current AI boom is cited as a key factor driving up US asset prices despite weakening real economic indicators.

II. Corporate Strategy and Technology Adoption

Companies, both globally and in India, are making strategic acquisitions and pivots centered on integrating digital capabilities and AI to enhance profitability and product stickiness.

• Global M&A focused on AI Results: Adobe Inc. is nearing a deal to acquire marketing software company Semrush Holdings Inc. for $1.9 billion. Semrush's platform is relevant for optimizing how businesses appear in AI-generated search results.
• Indian AI R&D and Listing: Enterprise AI firm Fractal Analytics is planning to maintain or increase its significant R&D outlay (averaging 6% of spend over three years) ahead of its initial public offering (IPO) to remain competitive. Its debut is expected to pave the way for other domestic AI firms to access capital.
• Service-to-Product Pivot in India: Indian tech startups like Urban Company, MyGate, HealthifyMe, and Paytm are adopting a strategy of using services to gain reach but selling high-margin products to drive profits.
  • MyGate, a gated-community platform, launched smart door locks and plans to leverage cheaper hardware and better AI to gather passive, continuous, richer data streams.
  • Paytm is working to monetize its AI-enabled soundboxes by charging merchants "subscription and inference fees" for analytical and operational support.

III. Geopolitical and National Security Context

Technology, particularly AI and chips, is explicitly recognized as a strategic asset, influencing diplomatic relations and being actively deployed in global conflicts and fraud prevention.

AI as a National Security Asset

• The CEO of HSBC Holdings Plc stated that assets like Generative AI code, chips, semiconductors, data, and cloud have become, or are deemed, national security assets that are expected to fragment globally.
• US-Saudi Arabia Technology Access: Saudi Arabia's diplomatic priorities reflect this shift, with the kingdom prioritizing the acquisition of advanced U.S. chip technology. An agreement also gives Riyadh more access to American artificial intelligence technologies. This technological cooperation is essential for Saudi Arabia's transition away from a fossil fuel-dependent economy, enabling the creation of data centers.

Weaponization of AI for Geopolitical Influence

• China has employed its expanding use of generative AI and other digital tools for strategic interests. Following the May India-Pakistan border stand-off (known as Op Sindoor), China launched an online disinformation campaign to undercut the sale of French Rafale fighters to India while promoting its own J-35s. This campaign involved deploying fake social media accounts and AI-generated images.

Domestic Security and Fraud Prevention

• Counter-Terrorism Technology: The Red Fort blast utilized an improvised explosive device (IED) containing TATP (triacetone triperoxide), a substance that can slip past standard metal and object-detection systems currently in use.
• Indian law enforcement agencies are actively working with AI platforms for detecting suspicious material through image/object recognition, pattern recognition, and live video analysis.
• Financial Fraud Mitigation: The Telecom Regulatory Authority of India (TRAI) is tackling impersonation-based financial frauds by mandating that entities regulated by RBI, SEBI, and PFRDA adopt the '1600' numbering series for service and transactional calls.

IV. Technology Regulation and Compliance

Regulatory bodies in India and globally are adjusting to the rapid spread of digital services and AI, leading to increased compliance burdens.

• Digital Competition Bill (DCB): The Ministry of Corporate Affairs (MCA) is re-evaluating the thresholds for identifying Systemically Significant Digital Enterprises (SSDE) for the Digital Competition Bill, requiring a new market study following the withdrawal of the draft Bill due to stakeholder opposition.
  • The previous quantitative thresholds proposed criteria such as ₹4,000 crore turnover in India or $30 billion global turnover, alongside user metrics (1 crore end-users or 10,000 business users).
• Data Protection and Compliance:
  • Global companies are projected to spend at least $5 billion by 2027 on compliance systems due to conflicting AI regulations across the world, forcing firms to build country-specific data controls.
  • In India, the clarity on Digital Personal Data Protection (DPDP) Rules is spurring companies to accelerate hiring and empowerment of Data Protection Officers (DPOs).
  • However, the Editors Guild of India (EGI) raised concerns that the DPDP Rules’ consent risk obligations could impede routine reportage by journalists and newsrooms.

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The situation highlights a global dynamic where the enthusiasm for technological progress, especially AI, is generating immense capital gains and geopolitical competition, even as regulators scramble to contain the resulting market risks and compliance complexities. The push toward AI and advanced computing assets underscores the idea that, in November 2025, digital capability is transitioning from being merely an economic advantage to being a fundamental element of national power and security.

The sources highlight that Monetary Policy and Inflation in November 2025 are dominated by benign domestic price conditions paving the way for potential rate cuts by the Reserve Bank of India (RBI), while globally, major central banks face distinct threats: political interference in Japan and systemic disruption from the explosive growth of stablecoins affecting the U.S. Federal Reserve (Fed).

I. Domestic Monetary Policy and Inflation in India

In India, the macroeconomic environment strongly suggests a period of accommodative monetary policy due to well-controlled inflation and the need to boost investment.

Inflation Status and Rate Cut Likelihood

• Subdued Inflation: Inflation has largely ceased to be a concern. The October retail inflation print came in at a very low 0.25 per cent. The third-quarter inflation figures are expected to undershoot the Monetary Policy Committee’s (MPC) October projection of 1.8 per cent.
• Strengthened Case for Easing: This subdued inflation outlook strengthens the case for a repo rate cut when the MPC meets early next month (December). The real interest rate is currently above the conventionally accepted figure of 1.5 per cent, providing a window for a rate cut that could extend until the first quarter of FY27.
• Real Rate High: The RBI has already slashed rates by 100 basis points in 2025. Providing a further boost to consumption and investment through another rate cut is considered a "risk-free option" when inflation is benign.
• Potential Policy Shift: A change in the RBI's monetary stance from 'neutral' to 'accommodative' is suggested, which would help keep market rates in check and prioritize domestic liquidity needs over managing exchange rate volatility.

Fiscal Measures and Deflationary Concerns

• Fiscal Support to Price Stability: Monetary policy is supported by fiscal actions, as the recent GST cuts are expected to further lower core inflation (which stands at about 4 per cent). Income tax cuts and GST incentives provided in the Budget are also anticipated to lead to higher consumer demand.
• Lower Bound Risk: The latest inflation readings are nearing the lower inflation-targeting bound of 2 per cent, which is a cause for concern. Very low inflation can dampen business sentiment, impact net tax collections (which have trailed double-digit targets, rising only 7 per cent so far this fiscal), and create default risk as nominal incomes shrink.

Challenges to Policy Transmission

Despite the clear need for easier policy, actual transmission faces hurdles in the banking system:

• Sticky Market Rates: The benchmark 10-year G-Sec yields have been ruling at 6.5 per cent for a while, remaining well above the repo rate.
• Narrowing Bank Spreads: While lending rates, which are often externally benchmarked, have been reduced, this has caused banks’ spreads to narrow. Banks face limited flexibility in reducing deposit rates due to competition. Since deposit growth (10%) lags credit growth (over 11% in October), banks cannot risk deposit erosion, which would force them to borrow from the market at high rates, potentially offsetting the impact of the repo rate cut.

II. Geopolitical Context and Monetary Disruptions

Monetary policy globally is being challenged by both political pressure and the fundamental disruption posed by financial technology.

Stablecoins Threatening U.S. Monetary Control (The Fed)

The massive growth of stablecoins presents a new risk to the U.S. Federal Reserve's control over money and debt:

• Scale of Growth: The stock of dollar-denominated stablecoins reached $308 billion outstanding in October 2025, skyrocketing from $138 billion at the start of 2024. This figure is projected by some institutions to reach $2 trillion by the end of the decade.
• Erosion of Policy Efficacy: Stablecoins disrupt how monetary policy signals reach the real economy. Since traditional tools like the federal funds rate work through the banking system, if households and firms switch from bank deposits to stablecoins, these tools "lose traction". This shift could weaken the Fed's grip on short-term interest rates, turning monetary policy into a reactive mechanism.
• Fiscal Repression and Hidden Inflation: Stablecoin issuance translates directly into demand for government debt (Treasury bills). This practice is seen as a form of financial repression, channeling private savings into government debt at below-market rates, thereby suppressing the signals that reflect fiscal risks. To the extent that stablecoin issuance keeps real interest rates below the required rate for price stability, this process "will lead to higher inflation over time".
• Privatization of Gains, Socialization of Losses: Stablecoin issuers (like Circle and Tether) privatize seigniorage (profit from creating money) by earning interest on the Treasury assets backing the coins, instead of those funds flowing to the public purse. If confidence in stablecoins fails, the public sector would bear the losses, effectively creating "shadow central banks" where gains are privatized and losses are socialized.

Political Interference in Japan (BoJ)

In Japan, the new political leadership is actively influencing monetary policy despite rising inflation:

• Populist Economics: Japan's Prime Minister Sanae Takaichi is putting pressure on the Bank of Japan (BoJ) not to raise interest rates, even as inflation climbs to 3% and becomes entrenched in wage discussions. This move is characterized as "illogical populist economics".
• Market Warning Signal: Takaichi’s steadfast loyalty to loose monetary policy risks extending that era and fueling inflation. This perception was reflected when gold topped $4,000 for the first time following her election announcement, indicating market assessment of her policies as a "warning signal". Furthermore, while stock markets rallied, bond yields have risen due to expectations that she is abandoning fiscal discipline.
• Dovish Appointments: Takaichi’s government reinforced this stance by appointing more dovish economists to the Council of Economic and Fiscal Policy, including members suitable for the Takaichi administration who favor more stimulus.

The monetary landscape in November 2025 shows India enjoying the luxury of utilizing monetary easing to spur investment due to low inflation, contrasting sharply with the global environment where monetary independence is under attack—by technology in the West and by populist politics in Asia. It’s like sailing a domestic boat smoothly on calm waters while constantly checking the horizon for the tidal waves generated by global financial and political storms.

The sources provide a detailed view of Government Schemes and Welfare Spending in November 2025, highlighting a dual focus: expanding India’s national social security network and utilizing populist spending at the state level, which is threatening fiscal stability amidst broader economic and geopolitical developments.

I. Welfare Spending and its Impact on State Finances

The most highlighting a dual focus: expanding India’s national social security network and utilizing populist spending at the state level, which is threatening fiscal stability amidst broader economic and geopolitical developments.

I. Welfare Spending and its Impact on State Finances

The most prominent theme is the dramatic rise in welfare promises and cash doles by state governments, primarily driven by political and electoral cycles, leading to significant fiscal strain.

Populist Spending Driven by Elections

Political parties' welfare promises and cash doles extended ahead of elections are reshaping the fiscal landscape of Indian states. This structural shift points to the challenge of balancing welfare commitments with fiscal sustainability.

• Bihar's Strain: Bihar is cited as a prime example where populist welfare schemes announced during the recent polls have severely weakened its fiscal position.
  • The welfare push, including a ₹10,000 grant to women, is estimated to cost the state over ₹41,000 crore, or 3.8 per cent of its GDP for FY26. This amount exceeds the state’s planned capital expenditure for 2025-26.
  • The ₹10,000 grant for women entrepreneurs alone accounts for ₹27,700 crore (2.5 per cent of GDP), making it the largest component of Bihar's FY26 welfare bill. The NDA's sweeping victory was partly attributed to a record female turnout, with the ₹10,000 grant being a key driver, proving that freebies are an "inextricable part of State electoral dynamics".
  • Other major schemes in Bihar include free electricity (up to 125 units per household, costing ₹7,400 crore) and a sharp increase in social pensions (from ₹400 to ₹1,100 per month, costing ₹4,600 crore).
• Wider Fiscal Risk: This trend is visible across several states. States that held polls in 2023 and 2024 have seen fiscal deficits rise sharply in election years and stay elevated.
  • The fiscal deficit in Chhattisgarh jumped from 1.0% of GSDP to 5.3% during the election year.
  • The 3% fiscal deficit-to-GSDP ceiling set by the 15th Finance Commission is now considered the "floor" due to chronic welfare pressures.
• Impact on Development Spending: Rising committed expenses (salaries, pensions, interest payments, and subsidies) reduce states' flexibility to fund development. When welfare spending consumes a large share of revenue, asset-creating expenditure (capital outlay) suffers, which could hurt long-term employment opportunities and economic growth.

Fiscal Constraints and Revenue Reliance

These welfare commitments exacerbate existing fiscal weaknesses:

• Bihar's Reliance on Transfers: Bihar is fiscally weak among major states, heavily relying on central transfers for over 70% of its revenue. This dependence makes its finances volatile.
• GST Revenue Underperformance: The Goods and Services Tax (GST) has not yet become the robust revenue source expected. For states, revenue from taxes later subsumed under GST dropped from an average of 2.8% of GSDP (pre-GST) to 2.6% in the GST era. This gap is more visible since states stopped receiving compensation for revenue loss in mid-2022.

II. Central Government Schemes and Budgetary Commitments

The Central government is focused on expanding social security and investing heavily in infrastructure, maintaining ambitious budgetary allocations despite fiscal management concerns.

Social Security Expansion (Insurance)

The Centre is taking steps to broaden its flagship social security schemes to make them more relevant to citizens:

• Increased Insurance Coverage: The government may allow individuals to raise the insurance cover under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) from ₹2 lakh to up to ₹5 lakh by paying a higher premium.
• Scheme Recalibration: This planned review is intended to make the schemes more user-friendly, efficient, and effective. Industry experts argue that the current ₹2 lakh cover is no longer adequate protection given inflation and rising healthcare costs, necessitating recalibration to remain relevant over the next decade.
• Boosting Subscriptions: Proposed measures include allowing individuals to pay premiums for at least three years upfront and expanding the distribution base through government financial inclusion channels like Digital Banking Units (DBUs). PMJJBY and PMSBY already have a cumulative subscriber base exceeding 750 million.

Direct Farm Support (PM-KISAN)

The government continues to use direct benefit transfers to support farmers:

• PM-KISAN Instalment: Prime Minister Narendra Modi released the 21st instalment under the PM-KISAN scheme, amounting to over ₹18,000 crore to support 9 crore farmers nationwide.
• Total Transfers: In his address, the Prime Minister noted that ₹4 lakh crore has been directly transferred to the bank accounts of small farmers under the scheme to meet various agricultural needs.
• Kisan Credit Card (KCC) Expansion: Farmers have received assistance exceeding ₹10 lakh crore this year through the KCC scheme alone, which has also been extended to the livestock and fisheries sectors.

Infrastructure Investment (Railways)

Government capital expenditure remains a priority, particularly for modernization:

• Record Railway Allocation: Budgetary support for the Indian Railways is set to hit a new high of approximately ₹2.76 trillion in FY27, representing a 12% rise. This allocation is necessary for the government's ambitious plans to upgrade the national transporter with faster, modern trains (Vande Bharat) and better safety systems (Kavach).
• Spending Pace: Indian Railways is executing projects rapidly, having exhausted more than 78% of its FY26 budget as of mid-November, the highest mid-year utilization on record.

III. Welfare, Poverty, and Socio-Economic Development

Welfare policies intersect with socio-economic issues, prompting regulatory interventions in areas impacting vulnerable populations.

• Rural Economic Strain: Despite positive market sentiment, the rural economy is facing strain, indicated by an eight-quarter low in aggregate growth in total income for Nifty Rural Index companies. Sluggish credit growth and tepid farm income (due to procurement delays and soft food prices) have weighed on rural liquidity and consumption. This structural weakness likely increases the reliance on state and central welfare schemes.
• Drug Sales Regulation: The apex drug regulator in India is preparing to tighten rural drug sales by revoking licenses to end unlicensed cough syrup sales in villages. This move follows the deaths of at least 24 children in Madhya Pradesh and Rajasthan earlier this year from contaminated cough syrups. Over half of India's 641,000 villages have populations below the threshold that would be banned if the regulatory change goes through.
• Healthcare Spending Plea: Healthcare industry body NATHEALTH recommended increasing public spending on healthcare to over 2.5% of GDP in its pre-Budget recommendations, urging action to tackle non-communicable diseases and seeking tax deductions for preventive health check-ups.
• MGNREGS Drop: The sources note a 25.6% drop in the number of persondays generated under MGNREGS in 2025-26 compared with the last two financial years.

IV. Broader Context: Fiscal Discipline and Geopolitics

The increase in welfare spending clashes with national goals of fiscal consolidation and must contend with global pressures.

• Fiscal Deficit Challenge: While the Central government expects resilient GST collection growth (rebounding to 10% in November) to help it meet the FY26 fiscal deficit target of 4.4%, the increasing populist spending at the state level directly contradicts the national pursuit of fiscal prudence.
• Trade Relief Schemes: In response to geopolitical tensions (steep US tariffs on Indian goods), the government is clearing ₹1,100 crore in outstanding payments for the Interest Equalisation Schemes (IES) and Market Access Initiative (MAI) to provide relief to exporters. The IES was previously allowed to lapse but, along with MAI, will now be subsumed under the new ₹25,000 crore Export Promotion Mission (EPM) starting FY26.

The current landscape demonstrates a bifurcation in government spending: the Central government is strategically increasing capital expenditure (Railways) and fortifying national social security (PMJJBY/PMSBY), while state governments are aggressively adopting short-term populist welfare measures, creating long-term structural weakness in state finances. This divergence suggests that immediate political gains are often prioritized over fiscal discipline at the sub-national level, creating potential headwinds for overall economic stability.