Newspaper Summary 200126

 Govt mulls reforms to help SEZs leverage home market

BUDGET PLAN. Commerce Dept pushes move in face of global uncertainties, US tarifs Amiti Sen, New Delhi

The government is considering announcing a reforms package for Special Economic Zones (SEZs) as part of Budget 2026-27 to boost manufacturing competitiveness and help exporters better leverage the domestic market as they grapple with global uncertainties and US tariffs. Discussions are ongoing between the Commerce and Revenue Departments with a focus on flexibilities, such as easier domestic market access, the introduction of reverse job-work, and allowing rupee payments for services provided by SEZs to domestic units.

According to sources tracking the matter, while the government has been working on SEZ reforms for a long time, the SEZ Amendment Bill has faced delays despite several attempts to table it; therefore, the current plan is to expedite the reforms through a Budget announcement.

DTA SALES DEMAND SEZs have long demanded that units should be allowed to sell in the domestic tariff area (DTA) on a ‘duty foregone’ basis to bring down the burden of duties. This would mean their duty payable would be based on the duty of the raw materials used to manufacture the goods, rather than the Customs duty on the final product. Export promotion councils argue that this would level the playing field with FTA partners such as ASEAN countries, whose goods enter India duty-free.

Another demand being considered on a priority basis for the Budget is to allow SEZ exporters to undertake “job work” for domestic clients. This is intended to help units utilise expensive machinery and idle capacities, keeping skilled labour employed during periods when global demand is low.

RUPEE PAYMENTS A third demand is that SEZ service units should be allowed to accept rupee payments for services rendered to DTA units. Currently, domestic units wanting to avail services from SEZs are often constrained by rules requiring payments to be made in a foreign currency; allowing rupee payments is expected to boost demand.

Safeguards are being included in all proposals to address the concerns of other Ministries and Departments. These proposed reforms, which also include measures for ease of doing business and an overhaul of the SEZ framework, are seen as mitigating the effects of the Trump tariffs. Following US President Donald Trump’s imposition of 50 per cent tariffs on most Indian exports, the government is increasingly focused on leveraging the domestic market more for exporters.

KEY TAKEAWAYS

• The Budget announcement could speed up reforms, as the proposed SEZ Amendment Bill has faced delays.
• Allowing domestic sales on a “duty foregone” basis by giving Customs duty relief is being considered.
• There are over 276 operational SEZs employing over 31,94,100 people.
• Exports from SEZ units in 2024-25 were valued at $172 billion, up 7.37% over the previous fiscal

IKEA steps into Tamil Nadu with online deliveries for now

Swedish home furnishings retailer IKEA announced on Monday the launch of online deliveries across Tamil Nadu, making its products accessible to customers in Chennai, Madurai, Coimbatore, and Salem. From January 22, residents in these cities can explore and purchase over 6,400 home furnishing products using the IKEA app, the ikea.in website, or via Shop-by-Phone assistance.

While the state does not yet have a physical IKEA location, the company has not ruled out setting up a physical store in Chennai in the future. Currently, all orders for Tamil Nadu are fulfilled through the company's distribution network in Bengaluru.

Patrik Antoni, CEO of IKEA India, noted that the company has been evaluating the Chennai market since 2015 and believes the brand resonates well with the blend of tradition and modernity found in Tamil Nadu. Antoni further stated that India is considered one of the most potential markets for IKEA globally.

Key Expansion and Sourcing Details:

• IKEA currently maintains 30 per cent local sourcing in India and aims to increase this figure.
• The online segment is a significant driver for the business, contributing approximately 30 per cent of IKEA’s total sales in India.
• The company is focusing on an omni-channel approach to grow its footprint in the country.

India, UAE to double trade to $200 b by 2032

India and the United Arab Emirates (UAE) finalized a series of agreements on Monday, aiming to double bilateral trade to $200 billion by 2032. Prime Minister Narendra Modi met with UAE President Sheikh Mohamed bin Zayed Al Nahyan in New Delhi to strengthen strategic and economic ties that have already seen bilateral trade surpass the $100 billion mark.

KEY AGREEMENTS AND STRATEGIC COOPERATION The discussions primarily focused on expanding cooperation across trade, energy, defence, and emerging technologies. Key highlights of the agreements include:

• LNG Import Deal: India (specifically HPCL) signed a pact to import 0.5 million tonnes of liquified natural gas (LNG) annually from the Abu Dhabi National Oil Company (ADNOC) Gas for 10 years, beginning in 2028.
• Strategic Defence Partnership: Both nations agreed to establish a ‘Strategic Defence Partnership Framework Agreement’. This will expand cooperation in areas such as defence industrial collaboration, advanced technology, special operations, and counter-terrorism.
• Investment in Gujarat: The UAE pledged an unspecified amount of investment in a Special Investment Region in Dholera, Gujarat. This project is envisioned to include an international airport, a greenfield port, smart urban townships, and energy infrastructure.
• MSME and Trade Facilitation: Leaders agreed to focus on linking MSME units on both sides and promoting new markets through initiatives like Bharat Mart, the Virtual Trade Corridor, and Bharat-Africa Setu.

Foreign Secretary Vikram Misri reaffirmed that these agreements reflect the comprehensive strategic partnership that has significantly expanded over the last decade, particularly following the Comprehensive Economic Partnership Agreement (CEPA) signed in February 2022.

Textiles sector driving growth, jobs

RESURGENCE. It is creating first-generation entrepreneurs, stable jobs for women, and opportunities for rural youth

GIRIRAJ SINGH

India’s textile sector has evolved from a legacy industry into a powerful job-creating, people-centric engine of growth, embodying the spirit of Atmanirbhar Bharat. This resurgence is rooted in resilient domestic demand; the domestic market grew from ₹8.4 lakh crore to an estimated ₹13 lakh crore in just five years. Per capita textile consumption has doubled over the last decade and is projected to reach ₹12,000 by 2030.

EXPORTS AND EMPLOYMENT Export performance has mirrored this expansion, rising from ₹2.49 lakh crore in 2019-20 to nearly ₹3.5 lakh crore in 2024-25. Crucially, the sector is India’s second-largest employer after agriculture, directly supporting approximately 5.6 crore people. Since 2020, export-led growth alone has added an estimated 1.5 crore new jobs in the organised sector.

THE SEWING MACHINE EFFECT The sector's growth has been powered by the sewing machine, which acts as a catalyst for industrial transformation. Since the pandemic, over 1.8 crore sewing machines have been imported into India, with a record 61 lakh machines imported in 2024-25 alone. Given that each machine supports roughly 1.7 workers, this surge has translated into the creation of over three crore jobs across the value chain. As factories upgrade, older machines are reused by smaller enterprises and home-based businesses, multiplying employment for women and rural youth at the grassroots.

STRATEGIC INITIATIVES AND FAST FASHION To capture the scale of this employment, the government is advancing the District Led Textiles Transformation (DLTT) initiative to formalise the workforce and improve social security. Additionally:

• Fast Fashion: Expected to grow from $20 billion to $60 billion by 2030, creating 40 lakh jobs over the next four years.
• Infrastructure: PM MITRA Parks have the potential to create 20 lakh jobs, while the PLI scheme is expected to generate over three lakh direct and indirect opportunities.
• FTAs: New trade agreements, including the upcoming India-EU FTA, are set to boost competitiveness and market access.

HANDLOOM AND HANDICRAFTS The handloom and handicraft sector continues to anchor sustainable employment for over 65 lakh artisans and weavers. Exports in this segment are targeted to double from ₹50,000 crore to ₹1 lakh crore by 2032.

VISION FOR 2030 The decade from 2020 to 2030 is set to generate more than five crore new jobs across organized and unorganised sectors. As India moves toward Viksit Bharat 2047, the textile industry remains central to building a globally competitive economy where demand and skilled labour deliver growth with dignity.

The writer is Union Minister of Textiles.

China needs to rebalance trade

TRADE BALANCE. Higher Chinese imports will help emerging economies deal with Trump tariffs CP CHANDRASHEKHAR, JAYATI GHOSH

Early in January, preliminary estimates of China’s trade surplus (from the General Administration of Customs of China) placed it at $1.7 trillion in 2025, as compared with $993 million in 2024. The sharp 20 per cent rise in the trade surplus occurred because, while China’s aggregate exports rose by 5.2 per cent in dollar value, imports rose at a much slower rate of 2.5 per cent.

These trends are surprising as they occurred in a year when, starting April, China has been the special target of US President Trump’s effort to weaponize tariffs to achieve multiple goals. Around 15 per cent of China’s exports were directed to the US in 2024. Trump did have to walk back on many of the high tariffs he imposed on imports from China in the wake of China’s aggressive response, including a threat of banning exports of rare earths. Even so, the Penn-Wharton budget model estimated the effective tariff on Chinese imports into the US to be 37.4 per cent in October, much higher than that on most other trading partners.

TARIFF IMPACT One explanation advanced for the counter-intuitive rise in Chinese exports to the US is that Trump’s trade war began with his so-called ‘Liberation Day’ of April, followed by a brief period for negotiations. Anticipating high tariffs, Chinese suppliers did frontload exports to the US, leading to a spike around April.

However, that is not a correct explanation, since China’s exports to the US over the first 11 months of 2025 fell by 18.8 per cent relative to exports during the corresponding months of 2024. Though there was a spike in March 2025, rates for all subsequent months were negative and far below corresponding rates in 2024.

The adverse impact was visible in all HS1 product categories, with the decline in exports to the US being more than 20 per cent in 12 of 22 HS1 product categories. Exports in Machinery, appliances and equipment, Textiles and Plastics and rubber, which together accounted for 60 per cent of China’s exports to the US, fell by more than 20 per cent over May-November 2025.

Despite this, China’s aggregate export performance held up, rising by 5.2 per cent in 2025. This implies that China has been able to find new markets for its goods to compensate for the loss of exports to the US. China’s exports from May to November 2025 to Asia, Africa, Oceania and the EU grew at a pace significantly or dramatically higher than in the corresponding months of 2024.

TEPID IMPORTS This diversification would have been good news for the rest of the world if it reflected enhanced two-way trade. But sluggish demand in China and the absence of conscious effort to enhance imports from countries not endowed with foreign exchange surpluses has resulted in a limited growth of imports into China from the rest of the world. China’s imports rose only marginally to $1.8 trillion in 2025, or by 2.5 per cent, resulting in the large trade surplus.

While this development may be the result of immediate responses to US tariff aggression, it is clearly in China’s interest to work towards greater balance in its trade relations with the rest of the world. In fact, it might serve China to use its surpluses to finance investments in these countries to diversify their exports to China. As pressure on all countries to reduce dependence on the US rises due to weaponized tariffs and military aggression, this is clearly the best strategy for all other trading nations.

Priority sector loans purchased via ‘securitisation notes’ under lens

Our Bureau, Mumbai

To ascertain the priority sector status of the underlying portfolio purchased via ‘securitisation notes’, banks may rely on a combination of external auditors’ certification provided by the originating entity, such as a non-banking finance company (NBFC), and the conduct of sample checks by their own staff or by an auditor for that purpose. These norms may be specified in the internal policies of banks, as per the Reserve Bank of India (Priority Sector Lending — Targets and Classification) (Amendment) Directions, 2026.

These new guidelines have been introduced following observations that the asset quality of PSL (Priority Sector Lending) originated by banks themselves has proven to be significantly better than the quality of portfolios purchased through securitisation or direct assignment routes.

ELIGIBILITY AND RESTRICTIONS Investments made by banks in securitisation notes that represent loans to various priority sector categories (excluding the ‘others’ category) are eligible for classification under those respective categories, provided they meet specific conditions. However, investments in securitisation notes where the underlying assets are loans against gold jewellery originated by NBFCs are specifically not eligible for priority sector status.

CO-OPERATIVE AND HOUSING CREDIT The RBI further clarified that bank credit provided to the National Co-operative Development Corporation (NCDC) for the purpose of on-lending to co-operative societies is eligible for classification as PSL under respective categories. Additionally, bank credit to housing finance companies—approved by the National Housing Bank for refinance—intended for on-lending for purchasing, constructing, or reconstructing individual dwelling units, or for slum clearance and rehabilitation, qualifies as PSL. This is subject to an aggregate loan limit of ₹20 lakh per borrower under the ‘housing’ category.

LIMITS ON CHARGES The RBI has mandated that no loan-related charges, including guarantee fees for credit guarantee schemes or ad hoc service/inspection charges, may be levied on priority sector loans up to ₹50,000. In the case of priority sector loans granted to self-help groups or joint liability groups, this ₹50,000 limit applies per individual member rather than to the group as a whole.

Govt issues compensation norms on ‘Right of Way’ for transmission lines

PRICING REFORM. Power Ministry’s new norms address landowner concerns over low circle rate compensation

Rishi Ranjan Kala, New Delhi

The Power Ministry has issued supplementary guidelines for the payment of compensation in regard to Right of Way (RoW) for transmission lines, building on a framework first introduced in March 2025. According to an official note, the Ministry identified that land valuer nominations and the submission of valuation reports to District Magistrates were often taking an excessive amount of time.

In March 2025, the Ministry initiated the formation of a Market Rate Committee (MRC) to determine land rates for interstate transmission lines in states lacking an established mechanism. This move was prompted by landowners raising concerns that proposed compensation was being tied to unacceptable circle rates, which were significantly lower than actual market values.

VALUATION PROCESS AND TIMELINES Under the latest amendments, the MRC is now required to engage land valuers empanelled by the Insolvency and Bankruptcy Board of India (IBBI). These valuers should preferably be from the same state or, if necessary, adjoining states. The process involves appointing three valuers—one each nominated by landowner representatives, the transmission service provider (TSP), and the District Magistrate (DM)—on the same day the MRC meets. The landowner representative must be an affected landowner.

These nominated valuers must submit their reports in sealed envelopes to the DM within 21 days. Once all three reports are received, two are selected and opened via a lottery system.

DETERMINING THE MARKET RATE The reference market rate is calculated based on the two opened valuations:

• If the difference between the two is less than 20 per cent over the lower value, the average of the two is used as the reference market rate.
• If the difference exceeds 20 per cent, the rate may be set at 10 per cent higher than the lower valuation.
• If this is not agreeable, the third valuer’s report is opened, and the reference market value is determined as the average of the two lowest valuations.

The Ministry also specified that the TSP must pay an equal professional fee to all land valuers, and these charges will be considered part of the overall RoW compensation cost.

THE OVERHAUL The revised rules are designed to streamline land valuation timelines, committee processes, and fees for major transmission projects. These assessed reference rates will serve as the final basis for the MRC’s determination of market rates.

Our Gaza calculus

Should India join the Board of Peace for Gaza being set up by the US? This decision would hinge on what it implies for India’s strategic autonomy. While this post-war initiative has approval of the UN, a body whose power balance New Delhi wants updated to today’s reality, Board decisions would clearly be under US control. This risks the UN getting side-tracked. The Board’s composition is arbitrary, like the $1 billion contribution required for long membership. A Palestinian body for Gaza’s administration is part of the US plan for the war-battered territory, but since its authority will be limited to education, municipal services, etc., with little say on redevelopment, Gazans may find themselves largely voiceless. These drawbacks must be weighed against what gains Pax Americana (even if shaped by White House whimsy) can yield for India, apart from the risk of US ire if we don’t sign up and what help we can actually give Gazans within this US-created framework. India’s participation is a call best made on a fine calculus of national interests in a range of plausible scenarios. Either way, it’s a moment for New Delhi to articulate India’s position on Gaza’s future.

TRUMP 2.0: ONE YEAR OF TWISTS AND TURNS

BY RUPANJAL CHAUHAN

Since returning to office in January 2025, Donald Trump has used tools ranging from tariffs to tighter borders and military interventions, many of which have hit India significantly. In just one year, the US President has upended the global order, treating friends, foes, and allies alike to achieve desired results. While India had enjoyed expanding trade and diplomatic relationships over the past decade, it faced one roadblock after another following Trump’s return. Relations took an awkward turn when Trump claimed to have mediated a ceasefire between India and Pakistan, and when Washington imposed a 25% penalty on India for purchasing Russian oil.

Export escape

India has faced 50% US tariffs since August 27, which include the additional penalty for Russian oil purchases. This has placed India at a disadvantage compared to peers like China (32%) and Vietnam (20%). Despite this, Indian exports have shown resilience, with only a 1% marginal decline to $25.57 billion between September and December. However, labor-intensive sectors were hit hard: gems and jewellery fell 60%, while plastic and linoleum dropped 44.3%. Efforts to diversify to alternative markets like China, Spain, Vietnam, and Hong Kong resulted in an overall export rise of 3% during that period.

Oil toil

India, previously the second-largest consumer of Russian oil after China, has begun curtailing these purchases to ease tensions with the US. The share of Russian oil in India’s imports declined to 32% in FY26. Conversely, the share of US oil imports nearly doubled to 8.1% in FY26, up from 4.6% the previous fiscal year.

Surge in deportations

Migration has become a defining issue of the relationship. The US deported 3,258 Indians by November 28, 2025, a figure that far exceeds deportations in previous years. This included the controversial deportation of over 200 Indian immigrants in handcuffs and chains in February 2025.

Visa pangs

A major blow to skilled Indians was the crackdown on high-skilled immigration through costlier visa processes. The most significant change was a $100,000 one-time fee for new H-1B visa petitions. Additionally, the administration is moving toward a wage-based weighted lottery system for H-1B visas. Initial employment H-1B approvals for the top 25 companies fell 19% in FY25, while the top seven Indian IT companies saw a 37% decline. TCS alone witnessed a 41.7% decline.

AT A GLANCE: GLOBAL IMPACT

• Trade Warfare: Trump launched a trade war with China, taking tariffs to 145% before retreating to 32%. He also threatened a 10% tariff on eight European nations for opposing US control of Greenland.
• Transactional Geopolitics: The US signed a minerals deal with Ukraine in exchange for past military aid and provided F-35 jets and AI tech to Saudi Arabia in exchange for a $600 billion investment pledge.
• Military Interventions: Trump ordered aerial attacks on three Iranian enrichment facilities and launched strikes in Venezuela that resulted in the capture of President Nicolás Maduro.
• Immigration: The administration indefinitely suspended immigrant visa processing for citizens of 75 countries.

Budget Should Aid Growth With Fisc Consolidation

Expert View: C. Rangarajan & D. K. Srivastava

Economic Backdrop India’s real and nominal GDP growth rates for 2025-26 are estimated at 7.4 per cent and 8.0 per cent, respectively, according to the National Statistics Office’s first advance estimates. For 2026-27, with prospects of higher retail and wholesale inflation, expectations for real and nominal GDP growth rates are close to 6.5 per cent and 9.5 per cent. These basic numbers provide the framework for budget makers, with the nominal GDP magnitude for 2026-27 projected at ₹391.1 trillion.

Revenue Trends and Cushions Between April and November 2025-26, the Centre’s gross tax revenues (GTR) grew only 3.3 per cent, falling short of the budgeted full-year growth of 10.8 per cent. However, shortfalls may be counterbalanced by:

• Newly introduced measures relating to central excise tax on tobacco.
• The health security and national security cess.
• Higher dividends from the RBI.

With these cushions and potential cuts in revenue expenditures, meeting the budgeted fiscal deficit target of 4.4 per cent of GDP for 2025-26 appears possible.

The Fiscal Consolidation Path While the 2025-26 Budget focused on reducing the debt-GDP ratio, the fiscal deficit remains a critical operational target. The authors propose reducing the fiscal deficit-to-GDP ratio to 4 per cent in 2026-27, a 40-basis-point fall that would magnitude to roughly ₹15.83 trillion. This consolidation is necessary because the net financial saving of households as a ratio of GDP is declining, and the government must draw less from investible resources to spur private investment.

Fiscal Aggregates for 2026-27

• Gross Tax Revenues: Estimated at ₹43.9 trillion (assuming a buoyancy of 1).
• Net Tax Revenues: Estimated at ₹29.2 trillion.
• Total Non-Debt Resources: Estimated at ₹37.1 trillion.
• Expenditure Adjustment: To achieve the 4 per cent deficit target, the revenue expenditure-to-GDP ratio should be adjusted downward from 10.7 per cent to 10.3 per cent, while capital expenditure should be increased by 0.1 per cent.

Capex and Investment Strategy The real gross fixed capital formation-to-GDP ratio has remained steady at approximately 33.6–33.8 per cent. While GST rate cuts and repo rate reductions have supported consumption, private investment has not yet shown significant signs of picking up. Consequently, the Centre should continue to support growth by maintaining its capex growth momentum for the time being.

C. Rangarajan is Chairman, Madras School of Economics and former RBI Governor; D.K. Srivastava is a member of the advisory council to the Sixteenth Finance Commission.

IMF Cautions on AI, Raises India FY26 Forecast

The International Monetary Fund (IMF) has issued a warning regarding the current exuberance surrounding artificial intelligence (AI), cautioning that a failure to realize expected productivity gains could curb investments, impact global markets, and trigger a tightening of financial conditions,. Despite these concerns, the multilateral agency sharply raised its growth projection for India’s FY26 to 7.3 per cent, up from the 6.6 per cent estimated in October,.

India’s Economic Outlook The upward revision of 70 basis points reflects a better-than-expected performance in the third quarter of 2025 and strong momentum heading into the fourth. While India is projected to remain the fastest-growing major economy, the IMF expects growth to moderate to 6.4 per cent in FY27 and FY28 as temporary and cyclical factors wane,. Domestic drivers such as GST rationalization, healthy corporate balance sheets, and agricultural prospects are expected to support continued activity.

The AI Dual Narrative The IMF’s latest World Economic Outlook highlights both the risks and rewards of the AI boom:

• Downside Risks: If AI does not deliver the anticipated productivity boosts, a sharp drop in high-tech investment could occur. This might lead to an abrupt financial market correction, eroding household wealth and radiating across the globe through tighter financial conditions,.
• Upside Potential: Conversely, rapid AI adoption could significantly improve productivity sooner than expected. This could lift global growth by 0.3 percentage points in 2026 and by 0.1 to 0.8 percentage points annually over the medium term, depending on global AI readiness,.

Global Growth and Inflation The IMF also upgraded its global growth estimates to 3.3 per cent for both 2025 and 2026. This resilience is attributed to a balance between volatile trade policies and the surge in tech investments. Other global trends noted include:

• Inflation: Global headline inflation is projected to decline from 4.1 per cent in 2025 to 3.8 per cent in 2026 and 3.4 per cent in 2027.
• Trade Volume: Global trade growth is expected to slow from 4.1 per cent in 2025 to 2.6 per cent in 2026, before rising to 3.1 per cent in 2027.

Expert Commentary Economists noted that India has handled external headwinds, such as supply-chain uncertainties and tariff issues, with deftness. While the IMF and RBI both peg FY26 growth at 7.3 per cent, some analysts, such as those at Deloitte India, have slightly higher expectations of 7.5-7.8 per cent for the current fiscal year,,. However, they warned that geopolitical tensions in Central Asia and disruptions in the Red Sea corridor remain key risks to monitor.

BRANNAN’S BLUEPRINT ON DALAL STREET

In India’s capital markets gold rush, can ‘shovel companies’ be the shining bets? By Abhishek Mukherjee

The Gold Rush Strategy Samuel Brannan, a prominent businessman and Mormon preacher, is a name inextricably linked with the great California gold rush of the 19th century. In 1848, after verifying that massive gold deposits had been found near Sacramento, Brannan made a counterintuitive move. Instead of mining for gold himself, he hurriedly set up a store selling picks, shovels, pans, and other supplies. To stoke the frenzy, he paraded through San Francisco streets waving a vial of gold and shouting about the discovery.

As tens of thousands of hopefuls streamed into California, Brannan’s store did roaring business, selling $5,000 worth of goods per day (about $200,000 in today’s dollars). He became California’s first millionaire, proving that in a gold rush, the biggest winner is often the one who sells the tools to the dreamers.

India’s Modern Shovel Sellers A similar dynamic is now playing out on Dalal Street, where market infrastructure players act as modern shovel sellers. While investors hunt for returns, exchanges, depositories, and registrar and transfer agents (RTAs) thrive by collecting consistent fees from every single trade.

Head-Spinning Numbers The growth of the domestic capital market infrastructure is reflected in staggering statistics:

• BSE Performance: The BSE stock has posted an astonishing five-year total return CAGR of 124% during 2020-2025.
• Mutual Fund AUM: Expanded from ₹12.75 trillion in 2015 to more than ₹80 trillion by December 2025.
• Demat Accounts: Grown fivefold from 41 million in FY20 to over 216 million today.
• SIP Inflows: Risen to around ₹31,000 crore per month as of December 2025.

The Ecosystem India’s capital market infrastructure generated ₹70,000 crore in revenues in FY25, led by brokers and exchanges.

• Brokers: While full-service brokers like ICICI Securities and HDFC Securities remain large, discount brokers like Zerodha and Groww now account for over 60% of active demat accounts.
• Exchanges: The NSE is the world’s third-largest equity exchange by trades, while the BSE saw its shares jump 50% in 2025 despite a sideways market. The MCX stock soared nearly 80% over the same period.
• Depositories: India holds a duopoly with NSDL and CDSL.
• RTAs: Specialized providers like CAMS and KFin Technologies serve as the administrative backbone for mutual funds and companies.

Structural Shift Experts suggest that India’s equity culture is moving from a “trend” to a “structure,” making infrastructure players attractive medium-to-long-term investments. These entities benefit from asset-light, scalable ‘toll-booth’ business models with strong moats, such as regulatory barriers and network effects. Unlike brokers, whose revenue is heavily linked to trading volatility, depositories and RTAs are seen as defensive compounders driven by account proliferation and AUM expansion.

Regulatory and Market Risks Exchanges are not risk-free; regulatory intervention regarding derivatives remains a significant swing factor. SEBI has introduced measures to cool speculative excess, such as increasing minimum contract sizes and limiting weekly expiry contracts. Brokerage firm Jefferies estimates that a shift from weekly to monthly index option expiries could adversely impact earnings by 20-50% for some players.

Conclusion Despite these risks, the consensus remains that the longer-term structural drivers of the Indian equity market are firmly in place. As history showed with Samuel Brannan, it is often the picks-and-shovels businesses that emerge as the quiet, definitive winners of a gold rush.

WHY INVESTORS MUST CARE ABOUT JAPAN’S RECORD YIELDS

By Dhirendra Kumar (Value Research)

The Era of Free Money For as long as most working professionals can remember, money has cost nothing. If you are under 40 and work in finance, startups, or investing, you have spent your entire career in a world where capital was essentially free. That world is now ending, and a chart of Japanese 30-year bond yields tells the story better than any expert commentary. Japan’s 30-year government bond yield hit 3.5%, the highest level ever recorded. Japan did not just participate in the global experiment with free money; it invented it.

The End of a 25-Year Experiment In 1999, while the rest of the world was partying, Japan discovered it could simply print money. For most of the past 25 years, Japanese 30-year yields bumped along between 0.5 and 2.5%, actually dipping below 0.5% as recently as 2016. Now, there is a vertical line upward to levels not seen since before most readers started their careers. If even Japan—the most committed practitioner of ultra-loose monetary policy in human history—cannot sustain the fiction of free money, then the era is definitively over.

Impact on Business and Investing Indian investors must care because the free-money era shaped how modern business and investing work. The entire startup playbook of the 2010s was built on the premise of raising money you don't need, growing at all costs, and worrying about profits later or never. WeWork could burn billions on fancy sofas and free beer, while Uber could subsidize every ride below cost. Crypto could promise infinite returns from nothing but belief. When the cost of capital is zero, any business model can be made to look viable on a spreadsheet.

The Reality Check for Indian Markets Indian investors saw this logic play out at home through the spectacular valuations of companies that had never turned a profit. These models only made sense in a world where capital had no cost. Founders raised funding rounds they didn't need, corporations borrowed to buy back their own stock because it was cheaper than equity, and governments ran deficits without consequence because bond markets never punished them. An entire generation of finance professionals has never worked in an environment where capital had a real cost; they genuinely don’t know what normal looks like.

The New Headwind Japan was the last place faithful to the free-money religion, but they have finally lost that faith. For investors, this means the tailwind that lifted all asset prices over the past fifteen years is now a headwind. Businesses will now need to generate actual returns on capital, not just growth in users, eyeballs, or gross merchandise value. Equity valuations must be justified by actual cash flows, not by narratives about total addressable markets. The companies that survive and thrive will be the ones that understand capital has a cost and treat it accordingly.

India must study the science of marine carbon removal

By Hisham Mundol

India’s Practical Approach to Technology India has a habit of approaching big technological questions in refreshingly practical ways, adopting new ideas when they solve real problems, fit the context, and prove themselves through evidence. This level-headed competence has previously helped the nation scale solar power, digital payments, and vaccines. This same instinct is now useful as a new global climate conversation takes shape: marine carbon dioxide removal (mCDR).

The Scientific Inquiry At this stage, mCDR is not something India is being asked to deploy; it is simply a scientific inquiry. It matters to India because it is a coastal nation with strong marine-science institutions and communities whose lives are deeply tied to the ocean. Climate action requires two "oars" to avoid spinning in circles: emissions cuts (cleaner energy, transport, and industry) and carbon removal.

The Ocean as a Carbon Sink The ocean is already the world’s largest active carbon sink, having absorbed approximately 30 per cent of all human-released carbon dioxide since the start of the industrial age. It performs massive climate work through natural chemistry and biology, leading scientists to ask if these processes can be understood better and safely enhanced.

Two Broad Ideas for Removal

• Chemistry: When the ocean becomes slightly more alkaline (less acidic), it naturally converts carbon dioxide into stable minerals.
• Biology: Marine life moves carbon from the surface to deeper waters. For example, seaweed absorbs carbon as it grows, and if it sinks naturally to deeper layers, that carbon remains out of the atmosphere for long periods. Similarly, microscopic marine plants take up carbon and can move it downwards under the right conditions.

The Need for Local Evidence None of these methods are ready for wide global use, as questions remain regarding their reliability, environmental safety, and verification. Crucially, India needs its own research because its seas—the Arabian Sea and Bay of Bengal—have unique monsoon-driven currents, warm waters, and nutrient patterns. What works in the cold waters of the North Atlantic may not apply to Indian conditions.

India’s Capacity and Readiness India possesses the scientific capacity to generate this evidence through institutions like the Indian National Centre for Ocean Information Services, the National Institute of Oceanography, and several Indian Institutes of Technology. Researching mCDR can improve the understanding of oceans in ways that matter beyond carbon removal, such as predicting fishery shifts and algal blooms.

Exploring mCDR does not commit India to deployment, but it ensures literacy and readiness. By engaging now, regulators, coastal administrators, and communities will be prepared rather than informed late. In climate strategy, leadership is often about being prepared.

The writer is director, Environmental Defense India Foundation.

IT sector: From cyclical resilience to strategic relevance

By Siddharth Pai

In the unfolding economic narrative of 2026, the Indian IT services industry finds itself at a crossroads described by analysts as the "Great Integration". This phase marks a transition where traditional outsourcing models are giving way to AI-infused digital transformation engagements. Artificial Intelligence (AI) is no longer merely a niche proof-of-concept; it has become a strategic lever for automation, customer experience re-imagination, and core operational redesign.

Earnings and AI-Led Demand Latest corporate earnings provide early signals of this shift. Infosys recently adjusted its 2025-26 revenue growth outlook to 3–3.5% in constant currency terms, highlighting large AI-led contract wins involving platforms that integrate data, workflows, and autonomous agents. Similarly, TCS, the leader of the Indian IT pack, reported a 5% on-year revenue growth in its third quarter, with AI contributing an estimated 5.8% of its annualized revenue run rate. This illustrates that even for giants with legacy business lines, the pull of AI services is growing as they navigate headwinds like cautious discretionary spending.

Global Competitive Interplay Non-Indian IT majors, such as Accenture, are also relying on AI consulting and solutions integration as primary drivers for future growth. These players are competing with Indian firms for the same deals, raising the bar for technical delivery and business outcomes. This competition is pushing Indian firms to reinforce their AI offerings, retool their market approach, and invest in partnerships with cloud and platform providers to maintain strategic relevance.

Talent Strategies and the Hiring Landscape The positive outlook for AI is tempered by a broader tech hiring slump; overall job openings in India’s tech sector fell sharply in early 2026. This suggests that while demand for AI-specific capabilities is rising, recruiters are exercising cost discipline. Despite this, the resumption of campus hiring at scale by firms like Infosys reflects a strategic imperative to acquire AI-ready talent. These trends indicate that fresh hiring is driven by the need for specialized skills rather than general volume.

A Transition from Volume to Value The industry’s role in 2026 is defined by a shift from volume-based services to value-based digital and AI integration. Analysts view 2026 as the point where AI moves from experimentation to scaling and integration, a shift that is expected to expand both total contract values and the strategic footprint of Indian IT service providers within client organizations. While broader demand remains "tender," the AI opportunity is robust enough to redefine the future of the sector.