Newspaper Summary - 291225

 In the final weeks of 2025, India’s economic performance presents a landscape of strong domestic growth and resilient fundamentals, tempered by external headwinds and a shifting financial strategy.

Macroeconomic Indicators and Global Standing

• Top Performance among Peers: India claimed the first rank among emerging market (EM) peers for the second consecutive month in November 2025, according to Mint’s Emerging Market Tracker. This lead was driven by a rebound in exports and high relative GDP growth.
• GDP Growth: The Indian economy expanded by 8.2% in the July-September period, making it the fastest-growing among its peers. While growth is expected to slow to 7.3% in the second half of the 2025-26 fiscal year, India is still projected to significantly outpace other EMs, which are recording growth in the 1.3–6.1% range.
• Inflation: Consumer price inflation remained ultra-low at 0.7% in November, well below the medium-term target of 4%.
• The "Goldilocks" Challenge: Analysts describe the current state as a "Goldilocks economy"—recovering growth with low inflation—though the challenge for 2026 will be maintaining this balance while addressing a lack of private-sector capital expenditure.

Trade and Export Dynamics

• Export Surge: Despite a 50% tariff onslaught from the US, India’s goods exports hit $38.1 billion in November, the highest since May. This was bolstered by a low base from the previous year and successful efforts to diversify destinations, with exports to Spain growing by 63.5% and to China by 35.6%.
• Services Sector Strength: While goods trade faces geopolitical shadows, services trade is rising faster, supported by remote delivery models. India is moving up the value chain, selling professional services globally through an increasing number of Global Capability Centres.
• The Rise of "Hybrid" Products: India is finding new opportunities in "software on wheels" and medical devices bundled with diagnostic software, where the embedded services component is rising rapidly.

Financial Markets and Investment

• Rupee at a Crossroads: The Indian rupee was the worst-performing Asian currency in 2025, declining over 6% and breaching the psychologically important 90-per-dollar mark. This decline is attributed to weak capital flows and a strategic shift by the RBI to allow gradual, orderly depreciation to conserve reserves.
• Foreign Portfolio Investment (FPI): FPIs have been net sellers for much of the year, withdrawing approximately ₹1.58 trillion from Indian equities until late December 2025.
• IPO Juggernaut: Conversely, the domestic IPO market is on track for a record year, with nearly 100 new issues hitting mainboard exchanges. Collectively, companies raised about $21 billion through listings in 2025.

Sectoral Highlights

• IT Industry Transformation: Facing slowing revenue growth, India’s top 10 IT services firms have engaged in a record $4.3 billion acquisition spree in FY26 to secure competencies in AI and cloud technologies.
• Electric Vehicles (EVs): India's EV market is expected to double in value to ₹110 billion by 2029. However, manufacturers are currently seeking extensions on import exemptions for rare earth magnet motors due to ongoing supply chain disruptions from China.
• Shipbuilding: The government notified guidelines for two major initiatives with a total outlay of over ₹44,700 crore to strengthen domestic capacity and global competitiveness.
• Infrastructure: Major reforms in the Public-Private Partnership (PPP) model have been recommended to end the "one-size-fits-all" approach to project risks and to kick-start stalled infrastructure investments.

Policy and Workplace Shifts

• Labour and Governance: Companies are now required to recognize increased gratuity liabilities upfront under new labour codes. Additionally, the PMO has directed the listing of all subsidiaries of Coal India Ltd by 2030 to improve governance.
• AI in the Workplace: AI has transitioned from a buzzword to an "ever-present co-pilot" in workflows. This has led to a shift in hiring, where cognitive abilities and digital fluency are prioritized over basic technical skills.
• Microshifting: A new trend called "microshifting" is emerging, where employees work in short, intentional bursts aligned with natural focus patterns, moving away from the traditional rigid eight-hour workday.

In late December 2025, the technological and industrial sectors in India are undergoing a period of rapid modernization, driven by an "acquisition spree" in the IT sector, a pivot toward green heavy industry, and massive investments in defense and space infrastructure.

The IT and AI Revolution

• Consolidation and M&A: India’s top 10 IT services firms have spent a record $4.3 billion on acquisitions in FY26, the highest since the turn of the century. This shift is aimed at securing competencies in AI and cloud technologies as traditional revenue growth slows.
• AI Integration: AI is no longer a pilot project; it is becoming "invisible infrastructure" in sectors like law, where firms like Cyril Amarchand Mangaldas report that over 80% of their headcount actively uses AI.
• The First AI Unicorn IPO: Fractal Analytics is preparing for a ₹4,900 crore market debut, signaling strong investor appetite for homegrown AI ventures.

Automotive and Green Technology

• EV Battery Swapping: Electric trucks are emerging as the latest vehicles to benefit from battery swapping, with manufacturers like Blue Energy Motors and Montra Electric rolling out 55-tonne e-trucks. This model helps achieve price parity with diesel engines by removing the upfront cost of the battery.
• Supply Chain Hurdles: Despite domestic growth, EV makers are seeking a one-year extension on import exemptions for rare earth magnet motors due to persistent supply disruptions from China.
• Agricultural Innovation: For the first time, the Bureau of Indian Standards (BIS) has released dedicated testing protocols for electric farm tractors, facilitating the shift toward cleaner farm mechanization.

Strategic Heavy Industry and Infrastructure

• Defense Manufacturing: The Adani Group plans to invest ₹1.8 trillion next year in defense, specifically targeting unmanned autonomous systems and guided weapons. Simultaneously, Rolls-Royce is making India its third "home market," focusing on co-designing next-generation aero engines for combat jets.
• Space Exploration: ISRO is in the process of commissioning a third launch pad at Sriharikota to handle larger satellites weighing up to 14,000 kg.
• Shipbuilding: The government has notified guidelines for initiatives with a total outlay of ₹44,700 crore to revive domestic shipbuilding and improve global competitiveness.

MSME and Pharmaceutical Modernization

• Technology Upgradation: A ₹2,000-crore scheme is likely to be announced in the 2026-27 budget to help MSMEs adopt energy-efficient machinery and smart manufacturing.
• Pharma Quality Standards: Small drug manufacturers are struggling to meet new WHO-aligned quality standards (Revised Schedule M), facing upgrade costs of ₹10–15 crore per facility.
• New Growth Engines: The domestic pharmaceutical industry is viewing obesity and diabetes medicines (GLP-1) as a major new growth engine for the coming years.

Workplace and Educational Shifts

• Curriculum Overhaul: Mumbai institutions like Atharva University and MET have integrated AI, Robotics, and Data Science into their core engineering and management programs to meet industry demands.
• Hiring Priorities: In the workplace, technical skills are being commoditized by AI; consequently, employers are now prioritizing "digital fluency," cognitive abilities, and situational intuition.

In late December 2025, Mumbai’s financial district is navigating a complex period of "time correction" in equity markets, historic shifts in currency management, and a record-breaking surge in the primary (IPO) market.

Equity Markets and Investor Sentiment

• Market Performance: While the Nifty and Sensex delivered modest returns of 8–10% in 2025, the Indian market was a laggard compared to the MSCI Asia ex-Japan and MSCI Emerging Markets indices, which both saw returns of 30%. This underperformance is attributed to stretched valuations at the start of the year and lacklustre corporate earnings.
• The FPI Exodus: Foreign Portfolio Investors (FPIs) were persistent net sellers, withdrawing approximately ₹1.58 trillion from Indian equities by late December 2025. Analysts suggest FPIs may return to India if global AI-themed trades in other Asian markets begin to stall.
• Retail Resilience: Despite the FPI outflow, domestic Systematic Investment Plan (SIP) flows remained strong, helping to reduce price volatility. Retail investors have matured, with many now diversifying into international assets via the Liberalised Remittance Scheme (LRS), which saw an annualized $2 billion in outflows for global investments.

Currency and Monetary Strategy

• Rupee at Record Lows: The Indian rupee was the worst-performing Asian currency in 2025, declining over 6% and breaching the psychologically significant 90-per-dollar mark.
• RBI’s Strategic Shift: There has been a visible shift in the Reserve Bank of India's (RBI) strategy; the central bank is now more selectively intervening, signaling a higher tolerance for gradual, orderly depreciation to conserve reserves.
• Trade Deadlocks: The rupee’s future stability hinges largely on trade negotiations with the US; a successful deal could stabilize the currency at 90–91, while a breakdown could push it toward 95.

The Primary Market and M&A Boom

• IPO Juggernaut: 2025 is on track to be a record year for Initial Public Offerings (IPOs), with nearly 100 new issues raising roughly $21 billion.
• AI Unicorn Listing: Fractal Analytics, India’s first AI unicorn, is preparing a ₹4,900 crore market debut, which serves as a major test for investor appetite for homegrown AI ventures.
• M&A Activity: Cross-border Mergers and Acquisitions (M&A) reached a three-year high in value, with inbound deals totaling $28.9 billion. The IT services sector led much of this activity, spending a record $4.3 billion on acquisitions to secure AI and cloud competencies.

Wealth Management and Regulatory Changes

• Mutual Fund Pivot: Investor money is shifting toward flexi-cap funds, which accounted for nearly 29% of net inflows into diversified equity funds between May and November 2025. This trend is driven by valuation comfort in large-cap stocks after a prolonged rally in smaller-cap segments.
• Debt Fund Challenges: Plain-vanilla debt mutual funds struggled in 2025 due to the removal of indexation benefits, causing retail and HNI shares of total debt assets to fall from 24% to 21%.
• New Gratuity Liabilities: Under the new labour codes, companies are now required to recognize increased gratuity liabilities upfront, which must be reflected as an expense in December-quarter profit and loss statements.

Commodities: Gold and Silver

• Historic Gains: Gold and silver provided safe havens amid geopolitical tensions, yielding returns of 85% and 165% respectively on the Multi Commodity Exchange (MCX) in 2025.
• 2026 Outlook: Analysts warn that after this two-year "stellar rally," these metals may face volatility in 2026 due to a stronger dollar and potential cooling of safe-haven demand.

In late December 2025, India’s policy and regulatory landscape is characterized by a drive toward global alignment, a significant overhaul of labor and accounting liabilities, and a strategic push to modernize domestic industry through subsidies and standardized testing.

Labor and Accounting Standards

• The Gratuity Shift: One of the most immediate regulatory impacts on corporate balance sheets is the implementation of new labor codes. The Institute of Chartered Accountants of India (ICAI) has clarified that companies must recognize increased gratuity liabilities upfront in their December-quarter profit and loss statements.
• Wage Redefinition: The code mandates that at least 50% of an employee’s total remuneration must be treated as wages for the purpose of calculating benefits like gratuity and leave. This change is treated as a "past service cost," requiring immediate recognition as an expense under accounting standard Ind AS 19.

AI Governance and Data Privacy

• Data Protection Board: The government has begun the groundwork for appointing members to a new Data Protection Board, supported by a fully online office infrastructure. Officials are currently consulting with "Big Tech" firms to assess their readiness for compliance timelines.
• Judicial Guardrails for AI: The Supreme Court (SC) has constituted a panel, chaired by Justice P.S. Narasimha, to conceptualize and monitor the use of AI tools within the judiciary.
• Innovation-First Policy: The government’s recently released AI guidelines are viewed as "enabling provisions" rather than strict regulatory decrees, signaling a "soft-touch" approach designed to reverse the perception of India as an "AI loser" and attract foreign investment.

Financial Market and Corporate Regulation

• SEBI’s "Peace" Approach: Market experts note that 2025 was more about implementing and enforcing existing circulars than introducing new rules. SEBI has been "pacing out" business norms, providing more room for market-making while simplifying disclosure requirements for IPOs.
• Coal India Listing: To improve governance and transparency, the PMO has directed the coal ministry to list all subsidiaries of state-run Coal India Ltd (CIL) by 2030.
• Insurance Liberalization: Parliament recently passed the Sabka Bima Sabki Raksha Bill, which allows 100% Foreign Direct Investment (FDI) in Indian insurance companies and lowers capital requirements for reinsurers.

Sectoral Initiatives and MSME Support

• Shipbuilding Revival: The government has notified guidelines for two major schemes—the Shipbuilding Financial Assistance Scheme (SBFAS) and the Shipbuilding Development Scheme (SbDS)—with a combined outlay of over ₹44,700 crore. These schemes aim to provide financial assistance of up to 25% per vessel and create long-term domestic capacity.
• Pharma MSME Compliance: Thousands of small drug manufacturers are struggling to meet new WHO-aligned quality standards (Revised Schedule M). While the deadline was set for January 1, 2026, the government is considering a one-year extension to prevent mass plant closures.
• Agricultural Standards: For the first time, the Bureau of Indian Standards (BIS) has released dedicated testing protocols for electric farm tractors to ensure safety and reliability as the sector shifts away from diesel.
• Technology Subsidies: A new ₹2,000-crore technology upgradation scheme is expected in the 2026-27 budget, offering MSMEs a 20% capital subsidy for adopting energy-efficient machinery and automation.

Environmental and Power Regulation

• Mining Ban: Following a Supreme Court judgment regarding the definition of hills, the government has banned any new mining leases in the Aravalli range as of December 24, 2025, to protect the region's ecology.
• Power Trading Fees: The Central Electricity Regulatory Commission (CERC) is considering rationalizing transaction fees on power exchanges to lower costs for buyers as part of a broader "market coupling" reform.

As December 2025 draws to a close, the "Future of Work" for 2026 is defined by a shift from the "rude awakening" of mass tech layoffs and AI experimentation toward a more intentional, human-AI integrated ecosystem.

The Rise of the "Augmented Employee"

• AI as a Co-pilot: By 2026, AI is expected to move from a buzzword to a "quiet, ever-present co-pilot" behind every workflow. This transformation allows employees to move from "doing more tasks" to "directing smarter systems," where AI handles routine documentation and research while humans focus on creative problem-solving.
• AI Fluency: Professionals are moving toward "strategic fluency" (Levels 4-5), where the focus is not just on knowing how to use tools, but knowing when to use them—and when not to.
• Agentic AI: Organizations are increasingly piloting Agentic AI, which can plan and act independently to redesign workflows, though this is currently creating a sense of "fear and mistrust" among workers who feel excluded from the decision-making process.

Redefining Productivity and Flexibility

• Microshifting: The traditional eight-hour workday is being challenged by "microshifting," a trend where employees work in short, intentional bursts aligned with their natural focus patterns.
• Outcome-Based Evaluation: Companies are moving away from "presenteeism" and rigid annual appraisals in favor of real-time, honest dialogue and progress tracked through projects and experiences rather than linear tenure.
• Personal Energy Management: Future flexibility will be grounded in "managing one's energy instead of one’s clock," with sabbaticals and mental-health leave moving from perks to baseline expectations.

Shifting Hiring and Skill Requirements

• The "Human Edge": As technical skills are commoditized by AI, employers are prioritizing five hard-to-automate "human edges": contextual judgment, ethical reasoning, cross-domain synthesis, situational intuition, and creative problem-solving.
• Blue-Collar Resilience: Following over 122,500 tech layoffs in 2025, analysts suggest that blue-collar roles (such as electricians and plumbers) may have a higher survival rate than traditional "white-collar techies" in the immediate future.
• New Professional Roles: Sectors like law are expected to introduce more hybrid roles, such as "legal process engineers," to account for nearly 15% of non-fee-earner recruitment by 2026.

Educational and Regulatory Challenges

• Continuous Upskilling: Because AI evolves weekly, the workforce in 2026 must adopt a mindset of "unlearning and relearning continuously" through micro-courses and self-directed modules.
• Management Education: B-Schools are shifting focus from teaching efficient problem-solving methods to developing wisdom, teaching leaders to identify which problems actually need their focus in an automated world.
• Geopolitical Talent Shifts: Unpredictable policy changes, particularly US H-1B visa restrictions, are making Indian workers more vulnerable and forcing companies to rely more heavily on automation or local talent sourcing.