mint primer
What is the size of RBI’s total reserves?
As on 24 April, RBI’s total reserves were at $698.5 billion, up $10 billion over the past year, per data released on 1 May. While 79% was in foreign currency assets, 17% was in gold. Gold’s share in reserves has increased over the years. In April 2025, gold comprised 12% of reserves, from 8.7% and 7.8% in April 2024 and 2023, respectively. RBI, in a report last week, said of the total foreign currency assets of $552.28 billion, $465.61 billion was invested in securities, $46.83 billion deposited with other central banks and the Bank for International Settlement. The balance was deposited with commercial banks overseas.
WHY PAYMENTS BANKS FACE A SURVIVAL TEST
BY PUNEET KUMAR ARORA & JAYDEEP MUKHERJEE
PLAIN FACTS
The Reserve Bank of India (RBI) has cancelled the licence of Paytm Payments Bank in the culmination of a series of supervisory actions that began with a halt on new customer onboarding in March 2022 and subsequent stringent business restrictions. While the action may appear rooted in regulatory non-compliance, it has reignited a broader debate over the viability of payments banks. Conceived to serve the unbanked, their relevance is now being questioned amid near-universal account ownership driven by Jan Dhan Yojana and intensifying competition from fintech platforms, most notably the Unified Payments Interface (UPI). With a key player exiting, concerns are mounting over the sustainability of India’s differentiated banking model.
FINTECH FIGHT
Payments banks began operations just as UPI went mainstream, with both targeting low-value digital transactions—turning overlap into competition. UPI’s seamless bank-to-bank transfers removed the need to park funds in payments bank wallets or accounts, undercutting their model of enabling small-value transactions through stored balances. Driven by demonetization, ease of use, interoperability and zero transaction charges, UPI usage surged from 20 million transactions in 2016-17 to over 240 billion in 2025-26, an almost 12,000-fold rise. Transaction value rose from ₹0.07 trillion to ₹314 trillion, over a 4,000-fold jump. UPI has penetrated the grassroots economy, including small merchants and street vendors. With zero-cost transactions and near-universal acceptance, UPI has made them increasingly redundant. Competition has also risen from platforms such as PhonePe and Google Pay, which offer integrated payment ecosystems on top of UPI.
DEPOSIT DOMINANCE
Deposits in the segment are concentrated, with India Post Payments Bank (IPPB) commanding about 73% of total. Backed by a network of over 0.15 million post offices and nearly 0.19 million postmen and gramin dak sevaks, IPPB has scaled rapidly, especially in rural and remote areas. It had around 117 million customers in 2024-25, benefitting from the familiarity and reach of the postal system, with integration into Post Office savings accounts enabling seamless banking. Airtel Payments Bank, the next largest, holds about 13% of deposits and has grown by leveraging its large mobile subscriber base, prepaid recharge network and retailer footprint. Beyond these two, the market thins out quickly. Fino and Paytm payments banks have modest shares, while others remain marginal. The model leaves limited room for smaller players to scale, favouring institutions with strong distribution, large customer bases and the ability to operate at scale in a low-margin, highly competitive market.
WEAK WICKET
Payments banks were set up to drive financial inclusion, offering small savings accounts and digital payment to migrant workers, small businesses and low-income households in the unorganized sector. Deposit limits were set at ₹1 lakh per customer in 2014 and raised to ₹2 lakh in 2021. But, they cannot lend, issue credit cards or accept deposits from non-resident Indians. Hailed as a poster child of India’s differentiated banking experiment, enthusiasm faded early. RBI gave in-principle approvals to 11 entities in 2015, but several withdrew, citing high compliance costs, lending curbs, and thin margins. Seven licences were finally issued, with Airtel Payments Bank the first to begin operations. The constrained model and high upfront costs delayed profitability. Payments banks turned profitable only in 2022-23, aided by rising interest income. While they have remained in the black since, including in 2024-25, the recovery appears fragile, with a dip in profits reflecting higher provisions and contingencies.
MARGIN LIMITS
The core challenge is a structurally weak revenue model. Payments banks cannot lend and rely on fee-based activities —transaction charges on utility payments and small transfers, banking correspondent services, micro-ATM operations, cash management, PoS commissions, and para-banking services such as insurance distribution and mutual fund facilitation. These are inherently low-margin. Ticket sizes are small, pricing competitive, and the market crowded, leaving little pricing power. In 2024-25, about 76% of payments banks’ income came from non-interest sources, unlike traditional banks, compared with 80-85% interest-led income for traditional banks driven by lending spreads. The margin gap is stark. Commercial banks typically borrow at around 4% and lend at 10-12%, generating healthy spreads. Payments banks pay 3-4% on deposits and earn 6-7% on safe investments such as government securities, resulting in thin spreads and structurally constrained profitability.
MARKET MISFIT
Indian payments banks were modelled on mobile money platforms in Sub-Saharan Africa, where M-Pesa and Orange Money reshaped finance for unbanked populations. Over time, these platforms expanded beyond transfers into mobile-enabled credit, wealth management and microinsurance. In 2025, Sub-Saharan Africa accounted for nearly half of global mobile money accounts and processed 92 billion of 125 billion worldwide transactions. India attempted a similar model, but outcomes diverged sharply. Unlike Sub-Saharan Africa, where mobile money often serves as the primary financial account and enables service fees, India’s high bank penetration, fintech competition and the rise of free UPI have made it difficult for payments banks to monetize transactions sustainably.
War may dent India’s growth: Memani
By Gireesh Chandra Prasad
NEW DELHI
The West Asia war may temporarily hurt India’s growth rate and dampen investment sentiment, but the conflict poses no existential threat to most businesses, according to Rajiv Memani, president of lobby group Confederation of Indian Industry (CII).
DE-RISKING STRATEGIES
Memani said that as a result of the external shocks, businesses are closely examining their factories, enterprises, trade routes and export markets to de-risk themselves. Memani, who is also the regional managing partner of EY Africa-India and chair of EY Growth Markets Council, said that the challenge before businesses is to strike a balance between the costs that they can absorb and those that must be passed on to consumers, while managing the potential impact on demand. Rising cost pressures may require partial pass-through to consumers, some of which may already be happening, Memani said.
ENERGY AND INFLATION
The global energy shock due to the war in West Asia is fuelling price rise, raising concerns for policymakers worldwide, including in India. The statistics ministry data showed that wholesale price index (WPI)-based inflation jumped from 2.13% in February to 3.88% in March, signalling the fast transmission of the energy shock at the wholesale level. Consumer price index-based inflation in the meantime surged from 3.21% to 3.4%, still within the central bank’s tolerance range of 2–4%.
GROWTH OUTLOOK
Government had forecast a 7–7.4% economic growth for FY27 before the West Asia war started on 28 February, which has now clouded this outlook. The Reserve Bank of India (RBI) earlier this month forecast a 6.9% economic expansion.
FUTURE OUTLOOK
Businesses are closely evaluating the heightened risks in a volatile geopolitical situation and ways of de-risking from future shocks, Memani said, adding that quite a few large Indian companies are evaluating captive nuclear power plants, a sector that has been liberalised now. However, he noted this is a long-term development to watch.
JOBS AND SKILLING
He does not see job creation getting impacted because of the West Asia crisis. “I don’t think it should impact. There could be a short-term impact where industry’s posture may be slightly more conservative because of some moderation in growth. But overall, I do not assume that there will be an issue on the jobs front because of this,” he said. He said there is a bigger issue to tackle—skilling people at scale to ensure there is enough manpower for the advanced manufacturing capacity that comes up in sectors such as semiconductors and electronics.
FUNDAMENTAL STRENGTH
“Private sector and growth will bounce back once things settle down in a few months, due to India’s fundamental economic strength. India will remain the fastest-growing economy, and I hope the pace of reforms continues to create new opportunities...” said Memani.
Cognizant cuts payouts as AI dealmaking gathers pace
The shift mirrors TCS and HCLTech, which returned less cash to shareholders last year
Jas Bardia
jas.bardia@livemint.com
BENGALURU
Cognizant Technology Solutions has become the third largest Indian information technology (IT) services firm after Tata Consultancy Services (TCS) and HCL Technologies (HCLTech) to dial back shareholder payouts as it redirects capital towards acquisitions and building artificial intelligence (AI) capabilities.
Nasdaq-listed Cognizant, which follows a January-December financial year, returned $1.99 billion to shareholders through dividends and share repurchases last year. This year, the company is set to return less.
“This year again, $2.5 billion (in free cash flow), we have committed $1.6 billion to be returned to the shareholder... of which we have now used about $600 million from the remaining $1 billion for Astreya,” Jatin Dalal, chief financial officer of Cognizant, said on 29 April.
Cognizant ended last year with $21.1 billion in revenue, up 7% year-on-year.
“Our long-term capital allocation framework is to deploy around 50% of our annual free cash flow towards M&A... and around 50% towards dividends and share repurchases,” a Cognizant spokesperson said.
Cognizant’s shift mirrors that of TCS and HCLTech, both of which returned less cash to shareholders last year. TCS gave ₹39,571 crore (down 12%) and HCLTech gave ₹14,618 crore (down 10%). For TCS, this was the second straight year of declining returns; for HCLTech, it was the first in five years.
In contrast, Infosys, Wipro Ltd, and Tech Mahindra Ltd returned more, with payouts up 81%, 85%, and 5%, respectively.
Analyst Amit Chandra of HDFC Securities attributed the shift to the need for growth-led re-rating. “IT services companies are unable to increase their valuations just by giving excess money to shareholders so they are now focussing on growth," he said. Shares across the sector have declined between 2% and 32% over the past year, largely due to concerns over AI-led efficiencies eating into traditional revenue.
At the core of Cognizant’s lower payouts is a ramped-up acquisition strategy. It has already spent $730 million this year, including the acquisition of 3Cloud for $700 million and Astreya for $600 million.
TCS has also stepped up dealmaking, investing ₹6,770 crore on two acquisitions, including Salesforce consultant Coastal Cloud. TCS also committed $6.5 billion to build 1GW of AI data centre capacity. HCLTech announced $420 million across four acquisitions last fiscal to strengthen AI and data capabilities.
STRATEGIC SHIFT
- COGNIZANT last year gave $1.99 billion to shareholders.
- THE firm is set to return even less this year.
- COGNIZANT ended last year with $21.1 billion in revenue, up 7%.
- AT the core of reduced payouts is a stepped-up acquisition strategy.
Iran uses 1980s playbook, plus drones, to cripple shipping
Four decades ago, Iran and U.S. were on a collision course over oil shipping, an episode with inexact parallels.
By James T. Areddy
feedback@livemint.com
STRAIT OF HORMUZ
During the Tanker War of the 1980s, Iran used missiles, mines and speed boats to assert its control over the Strait of Hormuz. Back then, it took an extensive naval operation, including the destruction of command posts on offshore oil platforms by U.S. Marines, to break Tehran’s hold.
After nearly a month of relative quiet around the strait amid a U.S.-Iran cease-fire, an initiative from President Trump to protect ships appeared to spark new Iranian attacks on vessels Monday. In fundamental ways, today’s standoff is very different from the Tanker War, which was part of an “imposition strategy” designed to put Iran in control of regional waters. As Washington weighs responses in the current conflict, that war within a war four decades ago could still hold lessons.
On Sunday, Trump said the U.S. would seek to guide ships aiming to transit the strait. Senior U.S. officials said that would involve sharing the location of mines and assessing what routes are the safest to navigate. They said there was no current plan for the U.S. to send warships to escort tankers and other vessels trapped in the Persian Gulf.
Since being attacked by the U.S. and Israel two months ago, Iran’s Islamic Revolutionary Guard Corps has opened fire on more than 25 commercial ships, seized two and managed to keep the U.S. Navy at arm’s length—effectively closing off the narrow waterway. Iran warned mariners against attempting to pass through the strait without permission from Tehran and warned U.S. forces to stay away.
HISTORICAL PARALLELS
Iran’s hard-line leaders are now trying to choke regional oil exports to hurt the global economy. Whereas the regime was young in the 1980s, the country today enjoys alliances with Russia and other partners. Its goal in the 1980s was driving up oil prices without drawing the U.S. into conflict, according to Kenneth M. Pollack of the Middle East Institute.
The current military challenge is also different and costly to counter. When President Ronald Reagan reluctantly inserted the U.S. Navy into the Tanker War to keep crude flowing, the Navy deployed around 30 of its roughly 600 ships to the operation, and U.S. frigates sailed deep into the Persian Gulf. Today, the Navy has no frigates and is about half the size. U.S. Central Command is taking on Iran from a distance, dedicating around a dozen ships and over 100 aircraft.
“We do seem to be understandably concerned about being hit, and the Iranians know that,” said Duffy. Unlike the formal convoy system of the Tanker War, the newly announced U.S. operation appears to provide a framework for a “military overwatch”. This operation is located outside the strait—in the Gulf of Oman and farther afield—to avoid the regime’s blockade.
THE 1980s COST
The U.S. suffered its biggest loss of the Tanker War even before the Kuwaiti reflagging-escort operation began. An Iraqi jet mistakenly shot two Exocet missiles into the hull of the USS Stark, killing 37 American sailors. For its later escort operation, known as Earnest Will, the U.S. publicized routes in advance because it thought the presence of the Navy would be enough to ensure safe passage.
By 1988, Iran was hitting merchant vessels weekly, prompting patrols by at least 10 Western and eight regional navies. The Navy had bulked up its escort system with militarized barges and other fortifications. While Iranian forces didn’t directly attack Navy ships, gunners on speedboats shot at escorted vessels with rocket-propelled grenades. At one point, Kuwait even considered assistance from Moscow.
The U.S. eventually responded with Operation Praying Mantis, a quick series of strikes that included destroying Iranian ships and offshore oil platforms doubling as command centers. Iran then backed off. However, the deadliest single incident was still to come: in July 1988, the USS Vincennes mistook an Iran Air commercial plane for a fighter and shot it down.
Why RBI wants to keep India’s gold at home
BY SHAYAN GHOSH
The Reserve Bank of India (RBI) brought over 100 tonnes of gold back to India in the six months to March, taking the total gold reserves stored in India to 680 tonnes. Mint takes a look at why the RBI and other central banks are bringing gold back home.
Why is RBI bringing back gold?
After the US and allies blocked Russia’s access to $300 billion of foreign assets in 2022 as part of sanctions following its aggression in Ukraine, central banks became wary of storing gold away from home. India, too, has brought home a large chunk of gold reserves. In September 2023, 48.5% of the gold reserves were held by the Bank of England and the Bank for International Settlements (BIS), which has now shrunk to 22% as of end-March. By value, India’s share of gold in the total foreign exchange reserves increased from 7.4% as at end-September 2023 to about 16.7% at the end of FY26.
Why are central banks buying gold?
Global central banks, including RBI, have been raising their gold reserves aggressively over the past few years. World Gold Council data showed National Bank of Poland was the largest purchaser in the first three months of 2026, increasing its gold reserves by 31 tonnes. Central bank gold demand saw a strong start to 2026, with net purchases of 244 tonnes in the March quarter. IDFC First Bank chief economist Gaura Sengupta said central banks are raising their gold reserves to diversify holdings amid a rise in yields on US treasuries.
What is the outlook on gold holdings?
Broadly, experts agree that central bank gold buying will continue in 2026. Sengupta said lower gold prices offer a good entry point for central banks to accumulate more gold reserves and does not see central banks slowing their gold investments. The World Gold Council expects central bank buying to be solid at levels close to those in 2025. It said demand by central banks showed good traction despite price volatility, while continued geoeconomic risks could provide additional upside.
Is RBI the only central bank to bring back gold?
The central bank of France has also repatriated gold stored overseas. Madan Sabnavis, chief economist at Bank of Baroda, said countries now prefer to keep their gold reserves at home to tell global investors that they have enough firepower during a crisis. At home, he said, these reserves are also excluded from the global sanction net.
India has a chance to fix its east-west imbalance
The BJP’s West Bengal win places this state under the same party that rules at the Centre. This could improve its governance and help address India’s uneven economic emergence
OUR VIEW
The emphatic victory of the Bharatiya Janata Party (BJP) in elections to the West Bengal assembly focuses attention on an important aspect of India’s political economy: the role of politics and governance in economic development. The link is hard to quantify, especially in an era where economics is increasingly about mathematical models. However, as pointed out by a paper on ‘The relative economic performance of Indian states during the period 1960-61 to 2023-24’ by Sanjeev Sanyal and Aakanksha Arora, there is no getting away from harsh facts: the economic performance of Indian states has been vastly disparate.
West Bengal, which accounted for the third-largest slice of the country’s GDP at 10.5% in 1960-61, saw its share shrink to 5.6% by 2023-24, the most severe reduction among states. Accordingly, its per capita income went from 127.5% of the national average to 83.7% over the same period. Another eastern state, Assam, which had an above-average per capita income in 1960-61, saw it drop in relative terms to 61.2% in 2010-11, though it improved to 73.7% in 2023-24. Likewise, Bihar; the undivided state’s relative per capita income was 70.3% in 1960-61, hit a low of 31% in 2000-01 and then stayed at around 33% after it was split into Bihar and Jharkhand. Odisha, also in the east, saw a consistent decline over the three decades to 1990-91 (70.9% to 54.3%), but then recorded a significant turnaround, taking its figure to 88.5% in 2023-24.
The reasons for the relatively poor showing of our major eastern states vary. What is indisputable, however, is that they have lagged western states like Gujarat and Maharashtra. The eastern states have been resource-rich, but appear to have been held back by a combination of adverse factors. Some states have lacked business-friendly policies. Land acquisition for industrial projects in West Bengal has been difficult, for example, as seen in the Nandigram and Singur episodes (in the latter, Tata Motors moved a car factory to Gujarat). Eastern states have also lacked the sort of growth hubs full of local talent—such as Bengaluru and Hyderabad in the south—that could attract tech-related investment. Law-and-order has been sub-par too, though a long Maoist rebellion in eastern forest belts is said to have finally been quelled. In general, weak governance often features in investor complaints.
Now with West Bengal under the same political dispensation as the Centre and the BJP part of ruling alliances in Bihar and Odisha, can investors expect a shift in business conditions for the better? If so, the country would get a chance to address an economic divide that has not got as much attention as the gap between the north and south.
In the mid-1980s, demographer Ashish Bose coined the acronym ‘Bimaru’ for Bihar, Madhya Pradesh (MP), Rajasthan and Uttar Pradesh (UP) in a paper that outlined the slow progress of these states that were home to almost 40% of India’s population. Since then, these four states have made concerted efforts to shake off that tag, MP and UP especially. If eastern states undergo a gear shift in favour of economic growth, it might well be time for a new acronym, Biba, which means ‘vibrant,’ for Bihar, Bengal and Assam.
Why a wealth tax is unlikely to prevent power concentration
BY ALLISON SCHRAGER
California looks likely to put a ‘one-time’ tax of 5% on wealth above $1 billion on the ballot in November, and polls suggest it could pass despite opposition from some economists and Democratic politicians. Meanwhile, calls to tax the rich are resounding across the country, from New York’s proposed ‘pied-Ć -terre tax’ to Washington State’s first-ever income tax, imposed only on millionaires. While concentration of power among the wealthy can be harmful, using the tax code to fix it may create worse problems.
Wealth taxes—taxes on assets as opposed to income—are considered bad economics because they are nearly impossible to collect to the point where they are largely self-defeating and can often result in less tax revenue. They not only discourage entrepreneurship and job creation but also distort capital allocation, which is bad for growth. Still, some proponents admit that while a tax may reduce overall wealth in the economy, it is a price worth paying because inequality is toxic.
Other economists argue that the problem with wealth inequality is that it makes the rich too powerful, allowing them to lobby the president and Congress to ensure they maintain their status, which can distort markets and policy. No one elected Elon Musk, who has amassed significant power in markets, media, and the government. At the same time, there is concern over the amount of anger directed at the wealthy. Increasingly, Americans do not see self-made billionaires as success stories, with nearly half of the population seeing them as beneficiaries of a corrupt system who got rich at their expense.
While wealth creation is not zero-sum and the US economy benefits from companies like Amazon and the jobs they create, the anger exists because many positional goods and services are in short supply. For those who are not wealthy, it is hard to move, find a home they like, or afford things now necessary for a middle-class life. There is resentment that the rich live by different rules and do not have to worry about mortgages, good schools, or health insurance.
Now, there are concerns that jobs could disappear just as those who created the "job-stealing technology" get richer. The subsequent resentment could tear the country apart, providing another reason to justify punitive taxes. The result is a societal equivalent of what economists call a "doom loop". While there are serious issues at stake, high taxes are not necessarily the way to address them; while individuals like Elon Musk may not always spend money wisely, there is no conviction the government would do better.
There are at least two other flaws with the rationale for a wealth tax. First, imposing high taxes on the wealthy will not necessarily reduce their power but will simply reallocate it to bureaucrats. While bureaucrats are theoretically accountable to the public, giving them more influence is a recipe for more corruption, whereas billionaires are subject to the discipline and transparency of the market and their shareholders. Second, a lot depends on who decides what counts as ‘too much’ wealth, and such limits could be lowered over time or used against perceived political enemies. Appropriating wealth to limit power has not worked well in other countries.
Taxes are a necessary fact of life, and Americans have big expectations for a government that does not collect enough revenue to finance itself. The very rich are already paying a lot, but they could pay more. However, the principles of good tax policy are about raising revenue while minimizing distortions and maximizing feasibility, not about resentment or power. Concentration of power is a problem that can be better addressed by working on the weakness and loss of trust in institutions. Punishing the rich by making them less rich will only make everyone poorer by reducing growth, and a no-growth economy will only make people more resentful and miserable.
AP clears power distribution licence to Google data centre
G Naga Sridhar Hyderabad
The Andhra Pradesh government has cleared a power distribution licence for the upcoming Google data centre in Visakhapatnam, in line with a new, first-of-its-kind policy. While there is no official confirmation yet from Google or the state government, sources indicate the development will be announced in due course.
Deemed Distribution Licence (DDL) Policy
A policy framework was established a few weeks ago to provide a deemed distribution licence (DDL) to strategic data centres. This initiative recognizes the specialized activities of data centres in power procurement and the development and maintenance of distribution networks. The Energy Department noted that it has become necessary to facilitate data centres possessing requisite expertise to obtain these licences for projects being developed or proposed within the state.
This move makes Andhra Pradesh the first state to grant distribution licences to private firms outside of the power sector.
Eligibility and Restrictions
To be eligible for a DDL, projects must meet specific criteria:
- Connected Load: Projects must be undertaken by a single developer or investor with a minimum connected load of 300 MW or more within the state. Investors may aggregate connected loads across multiple locations to reach this threshold.
- Usage: Power supply is restricted exclusively to data centre loads within the licensed area.
- Third-Party Supply: The DDL is prohibited from supplying power to any third-party consumers outside the licensed area approved by the APERC.
Power Procurement Freedom
Under the DDL, entities have the freedom to procure power from any lawful source, including:
- Renewable energy generators through bilateral PPAs.
- Open access.
- Captive generating plants, including solar, wind, and hybrid systems with Battery Energy Storage Systems (BESS).
- Power exchanges.
Strategic Growth
The state government has been actively promoting data centres as a key growth sector due to their potential for attracting high-value investments and generating employment. This strategy aims to position Andhra Pradesh as a premier digital infrastructure hub.
Notably, the foundation stone was recently laid for the Google Cloud India AI Hub in the Anakapalli district, a project representing a $15-billion investment.
High oil prices put credit strain on fuel retailers
New Delhi
India’s oil marketing companies could see mounting credit pressure if crude prices stay elevated, with delayed fuel price pass-through threatening earnings and cash flow, Fitch Ratings said. Sustained high oil prices would erode EBITDA if domestic pump prices fail to keep pace with rising input costs, while large inventory holdings and refining volumes would increase working capital needs.
Kashmir widens anti-narcotics drive to choke illicit financial networks
Gulzar Bhat Srinagar
The ongoing anti-narcotics crackdown in the Valley is disrupting the channelling of drug trade proceeds into real estate and other informal investments, as authorities widen their focus from enforcement to the financial networks underpinning the illicit economy.
100-Day Campaign
Lieutenant Governor Manoj Sinha last month launched a 100-day anti-drug campaign under the Nasha Mukt Abhiyan, which is aimed at making Jammu and Kashmir drug-free. As part of this ongoing initiative, the Srinagar police recently attached immovable properties worth ₹3.5 crore belonging to narcotics smugglers.
Financial Networks Targeted
The drive specifically targets the financial structures that support the drug trade. Recent enforcement actions include:
- Property Attachments: On May 3, authorities targeted approximately 15 commercial structures linked to individuals accused in cases under the Narcotic Drugs and Psychotropic Substances (NDPS) Act.
- Real Estate Disruption: The crackdown aims to prevent drug money from being laundered through real estate and other informal sectors.
Scale of the Issue
The region faces a significant challenge with substance abuse. According to the National Survey on Extent and Pattern of Substance Use in India, an estimated 10 lakh people in Kashmir use various substances. Officials have reported that over 68,000 kg of narcotics have been involved in recent enforcement efforts.
‘AI layoffs may create budget room, but won’t deliver returns’
Our Bureau Bengaluru
According to a survey by Gartner, approximately 80 per cent of organisations piloting or deploying autonomous business capabilities report workforce reductions. However, these reductions do not appear to translate into a direct return on investment (ROI).
Survey Findings
The survey, which included 350 global business executives from enterprises with at least $1 billion in annual revenue, found that workforce reduction rates were nearly equal between companies reporting higher ROI and those seeing only modest or negative outcomes.
The study focused on organisations already using or piloting AI agents, intelligent automation, or autonomous technologies.
Human-Amplified Business
The shift toward autonomous business involves technologies like AI agents, RPA, digital twins, and tokenised assets. Gartner experts suggest this transition represents "human-amplified business" rather than "humanless business".
Helen Poitevin, Distinguished VP Analyst at Gartner, noted that many CEOs use layoffs to signal quick returns on AI, but called this approach "misplaced".
“Workforce reductions may create budget room, but they do not create return. Organisations that improve ROI are not those that eliminate the need for people, but those that amplify them,” Poitevin said.
Future Outlook
Gartner predicts a significant surge in AI agent software spending, forecasting it will reach $206.5 billion in 2026 and $376.3 billion in 2027, up from $86.4 billion in 2025.
In the long term, autonomous business is expected to create more work for humans, not less. Structural factors, such as demographic decline and the need for trust in high-stakes consumer interactions, will ensure that human talent remains central to governing and scaling these technologies.
Fundamentals are under some stress
Saumitra Bhaduri & Shubham Anand
War effects are working their way through trade, economy and financial channels. A structured response is called for.
The ongoing pause in hostilities in West Asia has brought immediate relief to the people in the region, but the aftershocks to global energy infrastructure and supply chains persist. The war has disrupted the flow of crude oil and fertilizers, creating bottlenecks in logistics and trade. Brent crude remains elevated, and India’s economic outlook is clouded by persistent volatility.
Oil makes up 26-27 per cent of India’s imports, and the oil trade deficit has averaged close to 3 per cent of GDP in recent years. In FY26, India's current account deficit was about 0.8 per cent of GDP, cushioned by services exports and remittances. But in a supply shock, that cushion shrinks fast because oil demand is relatively price-inelastic in the short run. Therefore, any price spike quickly inflates the import bill.
Next, the rupee, which had been stable for two years, has come under pressure. By March 2026, it fell past the 95 mark against the dollar, nearly a 10 per cent depreciation over the fiscal year. This was driven by higher oil prices and persistent capital outflows as global investors reassessed risk. In March alone, foreign portfolio outflows topped ₹1.3 lakh crore. While a weaker rupee can help exporters, it also raises the cost of essential imports and adds to inflation.
Despite these pressures, India’s foreign exchange reserves remain strong, covering more than 10 months of imports. Short-term debt relative to reserves is also low, around 20 per cent. These buffers provide protection, but their resilience depends on how long global volatility persists and how deep the shocks go. For instance, remittances have provided a strong buffer, but these are at risk as nearly 38 per cent come from the Gulf.
RBI’S RESPONSE
Against this backdrop, the RBI’s Monetary Policy Committee (MPC) has chosen to keep policy rates unchanged. The RBI has acted with targeted measures such as limiting banks’ foreign currency positions, easing capital rules, and improving access to working capital for small businesses. Its move to limit net open positions of banks in onshore markets helped the rupee recover a bit. While these actions have provided short-term relief, relying heavily on foreign exchange intervention and engineered stability is not a viable long-term strategy.
Channels of Stress
The stress on the Indian economy is coming through several channels:
- Supply Disruption: Energy-intensive sectors are directly affected, and the impact cascades to other sectors. The non-availability of fertilizers and other chemicals may affect the output of agricultural and industrial products, compounding the inflationary impact.
- Logistics Costs: Storage and transport are highly energy-intensive. Increased logistics costs cascade through the economy, raising the prices of all final products.
- Export Impact: Indian exports are taking a hit from both demand and supply sides. The war has affected direct trade and caused a slowdown in other major markets. With West Asia accounting for over 16 per cent of India’s exports in 2023-24, sustained disruption will hit export earnings.
- Fiscal Risk: Fiscal slippage against the budgeted 4.3 per cent of GDP remains a risk, owing to lower excise duty and corporate tax collections, reduced dividend payouts by oil marketing companies (OMCs), and a higher subsidy burden.
Vigilance and Resilience
Policymakers must remain vigilant. The outcome of the conflict, US tariff investigations, and the monsoon’s performance will all shape the next steps of monetary policy. Until there is more clarity, the RBI’s cautious approach is justified.
Resilience will depend on maintaining a strong services surplus and remittance inflows, while expanding manufacturing so the non-oil tradable base grows. Attracting stable, long-term capital and encouraging local currency financing will be crucial. Structurally, energy security must be addressed.
Saumitra Bhaduri is Professor and Shubham Anand is Ph.D scholar at Madras School of Economics (MSE), Chennai.
