An AI Job Apocalyse?

 The sources present a range of expert perspectives on how AI will reshape the labor market, characterized by a fundamental debate between those who see AI as a "rising tide" of manageable change and those who fear a more disruptive "crashing wave". While these experts generally agree that a sudden "job apocalypse" is unlikely before the end of the decade, they differ significantly on the scale of disruption and the long-term balance between job destruction and creation.

Key Expert Perspectives

• Daron Acemoglu (MIT Professor and Nobel Laureate):

  • Near-Term Outlook: He expects a small net negative impact on labor over the next five years, estimating job losses of less than 2-4%.
  • The "Replacement" Trap: Acemoglu warns that larger losses could occur over 10–15 years if the industry continues to prioritize AI that replaces rather than complements workers. He argues that a human-complementary path would be highly productive but requires a shift in industry incentives.
  • At-Risk Workers: He believes white-collar workers performing cognitive, routine tasks (such as back-office and customer service roles) will bear the brunt of displacement.
  • Skepticism of History: Unlike some peers, he is less comforted by historical precedents, noting that "no general law of economics says that job creation must match job destruction".

• Neil Thompson (Director of FutureTech at MIT CSAIL):

  • The "Rising Tide": Thompson sees AI as a gradual shift that workers and firms can anticipate and manage.
  • Adoption Barriers: He emphasizes that capability is not adoption; for AI to meaningfully change the labor market, it must be reliable, cost-effective, and have access to the right data—requirements that are often not yet met.
  • Task Framework: He distinguishes between "expert" and "inexpert" tasks. If AI automates "least expert" tasks, employment may fall but wages for the remaining specialized work will rise. If it automates "most expert" tasks, the job becomes less valuable, leading to rising employment but falling wages.

• Joseph Briggs (Goldman Sachs Senior Global Economist):

  • Significant but Temporary Displacement: Briggs estimates that the AI transition could displace over 9% of the labor force (~15 million workers) over a 10-year period.
  • Optimism for the Long Run: He believes these losses will be temporary, arguing that AI will create enough new work to offset destruction.
  • Historical Precedent: He points to the fact that 60% of workers today are in occupations that did not exist in 1940, illustrating technology's historical role as a driver of long-term job growth.

Nuanced Insights from the Broader Labor Context

• Substitution vs. Augmentation: Current research suggests AI is substituting for labor more than it is augmenting it, resulting in a small net drag on the labor market of about 16,000 monthly payroll jobs.
• The Fate of College Graduates: While college graduates are highly exposed to AI automation, researchers find little impact on their job prospects so far. Graduates and younger workers have historically adjusted more nimbly to disruption through occupational mobility and skill upgrading.
• Market Uncertainty: Markets are currently favoring AI infrastructure companies because the technology's impact on corporate labor needs and earnings is still too uncertain for investors to reward labor productivity beneficiaries.
• Token Economics: As token unit costs fall, AI agents are becoming increasingly competitive with human labor in higher-value workflows like coding, which may expand the "AI frontier" and increase the scope of automation.

In summary, the experts suggest that while AI will cause real churn and transition costs for displaced workers, the overall labor market outcome depends heavily on whether the technology is used to augment human capabilities or simply replace them.

The sources identify several primary mechanisms through which AI reshapes the labor market, moving beyond a simple "replacement" narrative to a more complex dynamic of substitution, augmentation, and expertise-shifting.

1. Substitution vs. Augmentation

The sources define two fundamental channels through which AI interacts with human work:

• Substitution: This occurs when AI performs tasks previously handled by humans, leading to a straightforwardly negative effect on employment as firms automate and hire fewer people. Occupations with high exposure but low complementarity—such as telephone operators, bill collectors, and insurance claims clerks—face the highest substitution risk.
• Augmentation: This mechanism involves AI making workers more productive. While increased productivity can mean fewer workers are needed for the same output, it can also trigger the "Jevons paradox", where lower production costs increase demand enough to create more jobs overall. Occupations like judges, construction managers, and education workers are cited as having high augmentation potential.

2. The Role of Complementarity

A key mechanism for determining a job's fate is its degree of complementarity with AI. This distinguishes between occupations that AI can easily replace and those it can only assist.

• Work that involves unstructured tasks, physical presence, human judgment, and intense social interaction is more complementary to AI.
• For example, interior designers and customer service reps have similar AI exposure, but the designer's work is far more complementary because it requires a physical presence and unstructured creative tasks that AI cannot yet replicate.

3. The Expertise Mechanism

Expert Neil Thompson proposes a framework based on which parts of a job are automated—the "most expert" or "least expert" tasks:

• Automating "Least Expert" Tasks: Workers can focus on more valuable, specialized work. This leads to lower employment but higher wages for the remaining specialists (e.g., modern proofreaders).
• Automating "Most Expert" Tasks: The job becomes easier for more people to do, which increases competition and lowers the market value of the role. This results in higher employment but lower wages (e.g., taxi drivers after GPS).

4. Historical Job Creation Mechanisms

The sources note that while AI destroys some jobs, it also triggers mechanisms for long-term growth:

• Direct Occupation Creation: Technology creates entirely new roles, such as the 15 million jobs enabled by the digital economy.
• Increased Specialization: AI can lead to more specialized roles within existing fields, a mechanism that previously grew the healthcare sector from 2 million to 18 million workers.
• Indirect Demand Boost: Productivity gains from AI can increase overall income, which indirectly boosts demand for discretionary services like pet care, tutoring, and fitness training.

5. Near-Term Frictional Mechanisms

In the short run, AI acts as a labor market drag through "frictional" unemployment. Displaced workers typically take about a month longer to find new work than those leaving stable roles, often experiencing "occupational downgrading" into roles with lower pay and higher routine content. This suggests that while new jobs may be created, the transition mechanism is often painful and uneven.

The sources outline several significant economic consequences of AI integration, ranging from broad macroeconomic growth to specific shifts in wealth distribution and market behavior.

1. Macroeconomic Uplift and Productivity

The primary positive consequence identified is a significant boost to economic activity.

• GDP and Productivity Gains: Joseph Briggs estimates a baseline 15% uplift to economy-wide productivity and GDP following full AI adoption. This is driven by the technology's ability to automate tasks and make workers more productive.
• The "AI Dividend": Expert Neil Thompson describes this potential as an "AI dividend"—higher levels of productivity and prosperity that could result if the technology is leveraged effectively.

2. Shifts in Income Inequality

A major concern raised in the sources is the uneven distribution of these economic gains, particularly regarding wages.

• Labor Income Inequality: Daron Acemoglu warns that if AI primarily displaces lower-paid white-collar workers (such as those in customer service), labor income inequality will rise. Conversely, if higher-paid managerial roles are also impacted, inequality could potentially decline, though he views this as less likely.
• Labor-Capital Inequality: The gap between income earned from work and income generated from assets is expected to increase. Because AI requires massive capital investment in data and compute, capital income is projected to rise more certainly than labor income, further concentrating wealth among asset owners.

3. Market Uncertainty and Investor Behavior

The economic impact on corporate earnings remains a point of significant uncertainty for financial markets.

• Infrastructure over Productivity: Currently, investors favor the AI infrastructure complex (companies providing the hardware and power for AI) because their earnings are tangible.
• Uncertain Returns on Labor: Markets have not yet rewarded "labor productivity beneficiaries" because it is unclear whether AI will be primarily revenue-enhancing, margin-enhancing (by reducing headcount), or both. Only 2% of S&P 500 firms have explicitly tied AI productivity gains to earnings in recent calls.

4. Changing Cost Dynamics (Token Economics)

The declining cost of AI "tokens" (the units of data processed by AI) is a critical economic driver.

• Competitive with Human Labor: As token unit costs fall, AI agents are becoming increasingly competitive with human labor in higher-value workflows like coding.
• Expanding the AI Frontier: Ongoing declines in token prices lower the breakeven point for automation, rendering more complex enterprise use cases economically viable and potentially accelerating adoption.

5. Transition and Frictional Costs

While the long-term outlook may be positive, the sources highlight immediate economic pains for workers.

• Frictional Unemployment: Displaced workers face a "frictional" period of joblessness, which typically lasts about a month longer than for those leaving stable roles.
• Earnings Losses: Technology-displaced workers incur real earnings losses of over 3% upon reemployment. Over a decade, their earnings grow nearly 10 percentage points less than those who were never displaced, largely due to "occupational downgrading" into roles with lower market value.

The sources indicate that the impact of AI on the labor market is highly uneven, with vulnerability determined by a worker's education level, experience, and the routine nature of their tasks. While experts agree that a "job apocalypse" is unlikely, specific groups are facing significant disruption.

1. Lower-Paid White-Collar Workers

Experts identify lower-paid white-collar workers as the group most vulnerable to direct displacement.

• Tasks at Risk: Vulnerability is highest for those performing cognitive, routine tasks under predictable conditions, such as customer service and back-office work.
• Scale of Impact: This group accounts for roughly 8-9 million workers, or 5% of the US workforce.
• Rising Inequality: Because these tasks are disproportionately performed by lower-paid employees, their displacement is expected to drive an increase in income inequality.

2. Younger and Entry-Level Workers

Younger workers are currently bearing the "brunt of the impact" from AI substitution.

• Widening Gaps: Since the pandemic, the unemployment rate and wage gaps between entry-level (under 30) and experienced workers (31–50) have widened by 0.6 percentage points and 1.3%, respectively, in occupations more exposed to AI.
• Hiring Slowdowns: Companies are increasingly leveraging AI to "moderate the pace of headcount growth," which often manifests as a slowdown in entry-level hiring.
• Historical Resilience: Despite these near-term risks, younger workers have historically adjusted more quickly to technological shifts because they are more mobile and likely to "move up the occupational ladder" into positions requiring advanced skills.

3. College Graduates

College graduates present a complex case: they have the highest exposure to AI but have shown the most resilience so far.

• Disproportionate Exposure: Graduates are "disproportionately employed in industries with high AI adoption" (such as finance and professional services) and occupations where tasks are highly automatable (legal, architecture, and engineering).
• Limited Impact to Date: Despite high exposure, researchers find that AI has had little impact on their job prospects so far, though their unemployment rate currently sits above pre-pandemic averages.
• Proactive Adjustment: Students are already responding to these shifts; enrollment is declining in majors with high displacement risk, like computer science, while rising in healthcare and engineering.

4. Displaced Workers (The "Frictional" Demography)

Any worker displaced by AI, regardless of their specific field, faces a difficult transition trajectory.

• Reemployment Challenges: On average, technology-displaced workers take one month longer to find new work than those leaving stable roles.
• Occupational Downgrading: Displaced workers frequently experience "occupational downgrading," moving into roles with higher routine content and lower analytical demands, which leads to real earnings losses of over 3% upon reemployment.
• Long-Term Drag: Over a decade, these workers see real earnings grow nearly 10 percentage points less than peers who were never displaced.

Summary of Vulnerability Factors

Demographic	Primary Risk	Mitigation Factor
Lower-Paid White-Collar	High substitution of routine cognitive tasks	Societal consensus on "human-complementary" AI
Entry-Level/Younger	Erosion of entry-level positions and hiring slowdowns	Greater occupational mobility and faster adjustment
College Graduates	High task exposure in specialized fields	Historic ability to upgrade skills and adapt "nimbly"
Non-College/Manual	Future risk from AI-robotics integration	AI's current inability to handle unstructured physical tasks

A Theory of Bank Liquidity and Sectoral Allocation

 In the sources, the "core friction"—or fundamental friction—underpinning the theory of bank liquidity requirements is an agency problem arising from leveraged intermediation, specifically moral hazard in risk management. This perspective contrasts with traditional views that motivate liquidity regulation primarily as a safeguard against exogenous funding shocks, such as sudden deposit withdrawals.

The Mechanics of the Core Friction

The friction emerges because banks finance loan origination using a combination of their own equity and borrowed deposits. Because depositors bear the downside risk while banks capture the upside when loans perform well, bankers have an incentive to take on excessive risk.

In this context, holding liquid assets (cash) serves as a disciplinary tool rather than just an insurance buffer. The sources highlight several key characteristics of this relationship:

• Pledgeability: Cash is safe, and its value is insensitive to the bank's risk management effort. By holding cash, a bank increases the amount of value it can credibly "pledge" to depositors, which strengthens incentives for prudent risk management.
• The Funding Constraint: Cash relaxes the banker's borrowing constraint by providing "collateral" that is ring-fenced from moral hazard, thereby reducing the bank's incentive to shift risk onto depositors.
• The Threat of Withdrawal: While the model abstracts from exogenous shocks, it notes that the threat of a bank run (depositor withdrawal) plays a crucial disciplinary role, forcing bankers to maintain adequate cash buffers to avoid liquidation.

The Friction in a General Equilibrium Context

The sources expand this theory by examining how this internal agency problem affects the sectoral allocation of the entire financial system. The economy is divided between leveraged bankers and non-bank "patient investors" who provide ex-post liquidity by buying bank assets during stress.

• Pecuniary Externalities: Because individual banks do not internalize how their liquidity choices affect market prices (fire sales) or the entry of experts into the non-bank sector, the decentralized equilibrium becomes distorted.
• Sectoral Imbalance: The core friction leads to an inefficiently large banking sector that "free-rides" on the liquidity provided by non-bank investors. Banks tend to hold too little liquidity ex-ante, relying excessively on selling assets at fire-sale prices during bad states.

Implications for Liquidity Requirements

Within this theoretical framework, the sources argue that standard liquidity regulation, such as the Basel III Liquidity Coverage Ratio (LCR), is necessary but insufficient on its own.

1. Correcting Internal Incentives: Liquidity requirements help by forcing banks to hold more cash, which disciplines risk-taking and reduces the need for fire sales.
2. Addressing the Scale Margin: Regulation alone cannot correct the "scale margin"—the tendency for the banking sector to overexpand.
3. The Optimal Policy Mix: To achieve an efficient allocation, the sources suggest that liquidity requirements must be paired with a second instrument, such as limits on bank size (e.g., a tax on bank equity) or subsidies for non-bank liquidity provision.

Ultimately, this theory suggests that liquidity regulation should be viewed as a tool for managing credit risk and incentives rather than just insurance against independent liquidity risk.

In the provided source, the role of cash holdings is redefined from a traditional insurance buffer against exogenous funding shocks to a strategic tool for mitigating internal agency problems within banks. Under this theory, cash is central to balancing the incentives of leveraged bankers with the protection of depositors.

1. Cash as an Incentive Mechanism

The primary role of cash in this theory is to address moral hazard in risk management. Because banks are leveraged, they may have an incentive to take excessive risks since depositors bear the downside while bankers capture the upside.

• Effort-Insensitivity: The "essential characteristic" of cash is that its value is safe and insensitive to a banker's risk-management effort. Unlike loans, which require careful monitoring to ensure repayment, cash maintains its value regardless of how a banker behaves.
• Pledgeability and Collateral: Because cash is riskless and effort-insensitive, its full value can be pledged to depositors. This increases the banker’s "skin in the game" and relaxes their borrowing constraint, allowing them to raise debt while credibly committing to prudent risk management.
• Resolution of Goodhart’s Paradox: This theory resolves the "Goodhart paradox"—the idea that a liquidity buffer that cannot be used is useless—by arguing that the mere presence of cash influences ex-ante behavior and incentives, even if it is never actually deployed ex-post.

2. The Disciplinary Role of Cash and Withdrawals

Cash holdings interact directly with the threat of depositor withdrawals to discipline the bank:

• Run Deterrence: Bankers must maintain adequate cash buffers to satisfy the "no-run" condition of depositors. If a banker fails to hold promised liquidity, it triggers a credible threat of a bank run, which would lead to liquidation and zero payoff for the banker.
• Commitment Device: The threat of withdrawal forces bankers to incur the costs of maintaining liquidity (such as selling loans at a discount) to satisfy incentive constraints, ensuring they do not renege on risk-management efforts.

3. The Trade-off: Timing and Cost of Cash

While cash provides disciplinary benefits, it is costly because it earns lower returns than loans. This creates a trade-off in the timing of cash accumulation:

• Ex-ante ($C_0$): Holding cash from the beginning avoids the risk of fire sales but sacrifices the higher returns of early lending.
• Ex-post ($\Delta C$): Waiting to raise cash until a "bad state" occurs allows for more initial lending but exposes the bank to costly fire sales, where assets must be sold at a discount to raise the necessary liquidity.

4. Cash Holdings and Sectoral Externalities

The sources argue that in a decentralized market, individual banks do not hold enough cash because they ignore the pecuniary externalities of their choices.

• Systemic Scarcity: When banks choose to hold too little cash ex-ante, they are forced to sell too many assets ex-post during stress. This drives down asset prices (fire sales), which further tightens the incentive constraints of all banks in the system.
• Sectoral Imbalance: Low bank liquidity choices lead to an inefficiently large banking sector and an inefficiently small "patient investor" (non-bank) sector, as the banking sector effectively "free-rides" on the ex-post liquidity provided by non-banks.

Implications for Liquidity Requirements

Within this framework, the Liquidity Coverage Ratio (LCR) and similar requirements are viewed not as insurance against "independent liquidity risk," but as tools for managing credit risk and incentives. While these requirements help correct the "liquidity margin" by forcing banks to hold more cash ex-ante, they are insufficient to achieve efficiency on their own because they do not address the "scale margin"—the tendency for the leveraged banking sector to overexpand. Achieving a constrained-efficient allocation requires pairing liquidity requirements with a second instrument, such as a tax on bank equity or limits on bank size.

In the provided source, liquidity sourcing decisions refer to the strategic choice banks make between holding liquid assets from the outset (ex-ante) or raising them through asset sales during periods of stress (ex-post). This decision is central to the theory of bank liquidity requirements because it dictates how banks manage the core agency friction of moral hazard.

The Core Sourcing Trade-off: Timing and Cost

Banks face a fundamental trade-off regarding when and how to source the cash necessary to satisfy their incentive constraints and deter depositor withdrawals:

• Ex-ante Sourcing ($C_0$): Banks can hold cash on their balance sheets from time zero. The primary benefit is that this cash is fully pledgeable and always relaxes the incentive constraint one-for-one. However, the cost is the foregone return ($Y-1$), as cash earns less than the loans it replaces.
• Ex-post Sourcing ($\Delta C(b)$): Banks can wait until a "bad state" realizes to raise cash by selling loans. This avoids early opportunity costs but exposes the bank to costly fire sales. In this state, selling a loan relaxes the incentive constraint only if the sale price exceeds the pledgeable return of retaining the loan.

The Shadow Price of Liquidity

The decision of which source to prioritize is governed by the shadow price of liquidity ($1/(1-z)$), which represents the cost of raising one unit of cash through asset sales.

• When the shadow price is high, raising cash ex-post is expensive, leading banks to source all required liquidity ex-ante.
• When the shadow price is low, banks prefer to wait and source liquidity ex-post, maximizing their initial investment in higher-yielding loans.

Distortions in Decentralized Sourcing

The sources argue that in an unregulated market, liquidity sourcing is jointly distorted with the size of the banking sector. Individual banks do not internalize how their sourcing decisions affect equilibrium asset prices (a pecuniary externality).

• Excessive Ex-post Reliance: Banks tend to hold too little cash ex-ante and rely excessively on ex-post sourcing through fire sales.
• Systemic Fragility: This collective reliance on ex-post sourcing drives down asset prices during stress, which further tightens the incentive constraints for all banks in the system.
• Sectoral Imbalance: Because banks "free-ride" on the liquidity provided by non-bank "patient investors" ex-post, the banking sector becomes inefficiently large while the non-bank sector (the ultimate source of ex-post liquidity) becomes too small.

The Role of Liquidity Requirements in Sourcing

Liquidity regulation, such as a minimum cash-to-deposit ratio, is designed to force a shift in sourcing from ex-post to ex-ante.

1. Correcting the Liquidity Margin: Requirements ensure banks carry more cash ex-ante, reducing the volume of fire sales and weakening the pecuniary externality.
2. Addressing the Scale Margin: However, the sources emphasize that fixing the sourcing of liquidity is insufficient to achieve efficiency on its own. Even with mandated ex-ante sourcing, the banking sector remains prone to overexpansion.
3. Optimal Policy Mix: A comprehensive framework requires two instruments: liquidity requirements to fix the sourcing decision and a second instrument (like a tax on bank equity or size limits) to address the overall scale of the leveraged banking sector.

In the sources, the financial sector structure is defined by the strategic allocation of capital between two distinct types of financial entities: leveraged banks and unlevered "patient investors." The theory posits that the overall health and stability of the system depend not just on individual bank liquidity, but on the balance of activity between these two sectors.

1. The Composition of the Financial System

The model envisions a system where "expert investors" choose how to allocate their endowment across two specialized roles:

• Leveraged Banking Sector: These experts specialize in loan origination using a mix of their own equity and borrowed deposits. This sector is the primary source of credit but is inherently prone to moral hazard due to its leveraged nature.
• Non-bank "Patient Investor" Sector: These experts do not take deposits or originate loans ex-ante. Instead, they remain unlevered, holding their own funds to either invest in a "late-arriving technology" or provide ex-post liquidity by purchasing bank assets during periods of stress.

2. Strategic Occupational Choice

The structure of the financial sector is determined by an occupational choice made by experts. They allocate their wealth to equalize the marginal return of equity in both sectors.

• In the First-Best Scenario: Allocation is determined solely by the productivity of loans versus the non-bank technology.
• Under Moral Hazard: The allocation is shifted by the need for banks to hold costly liquidity. The sources note that equilibrium cash management and the size of the financial structure are jointly determined.

3. The Structural Distortion: Excessive Bank Scale

A central finding of the sources is that in an unregulated, decentralized equilibrium, the financial sector structure becomes inefficiently skewed.

• Over-Expansion of Banking: Too many experts choose to operate as leveraged bankers rather than patient investors. This results in a banking sector that is "inefficiently large."
• Under-Provision of Liquidity: Consequently, the non-bank sector becomes too small, leaving the entire system with insufficient ex-post liquidity to absorb shocks.
• "Free-Riding" on Liquidity: The leveraged banking sector effectively "free-rides" on the liquidity provision of the non-bank sector. Banks hold too little cash ex-ante, counting on the ability to sell assets to the non-bank sector during stress, even though their collective actions drive down market prices.

4. Pecuniary Externalities and Sectoral Imbalance

The distortion in the sector's structure is driven by pecuniary externalities. Individual bankers ignore how their expansion affects the aggregate scarcity of cash and the equilibrium price of assets.

• Feedback Loop: A larger banking sector increases the demand for liquidity in bad states while simultaneously reducing the capital available to patient investors (the suppliers of that liquidity).
• Systemic Fragility: This double-sided pressure worsens fire-sale discounts and tightens the incentive constraints for all banks, creating a more fragile financial system.

5. Policy Implications for Sectoral Allocation

The sources argue that standard liquidity requirements (like the LCR) are insufficient to fix the financial sector's structural problems.

• The Liquidity Margin vs. The Scale Margin: While liquidity requirements can force banks to hold more cash (correcting the "liquidity margin"), they do not stop the banking sector from overexpanding (the "scale margin").
• The Two-Instrument Approach: To achieve a "constrained-efficient" allocation, regulators must use two tools:
1. Liquidity Requirements to discipline internal bank incentives.
2. Structural Interventions to limit the size of the banking sector, such as taxes on bank equity, limits on balance sheet expansion, or subsidies to encourage liquidity provision by non-bank investors.

In the provided sources, equilibrium inefficiencies arise because decentralized markets fail to account for the systemic impact of individual bank balance-sheet choices. While banks optimally manage their own liquidity to mitigate internal moral hazard, they do not internalize the pecuniary externalities their actions impose on the broader financial system, leading to a distorted sectoral structure and systemic fragility.

1. The Source of Inefficiency: Pecuniary Externalities

The fundamental inefficiency in the decentralized equilibrium stems from how bank liquidity choices interact with market prices.

• Price-Mediated Externalities: Individual banks ignore how their decision to hold less cash ex-ante affects the aggregate scarcity of cash and the equilibrium price of assets (fire sales) in bad states.
• Tightening Constraints: Because fire-sale prices enter a bank's binding incentive constraint, a drop in asset prices—caused by collective selling—makes it harder for all banks to satisfy their depositors and maintain prudent risk management.
• Systemic Underinsurance: Consequently, banks rely excessively on ex-post liquidity (selling loans during stress) and hold too little cash ex-ante relative to what a social planner would choose.

2. Distorted Sectoral Allocation

The theory highlights a structural inefficiency in the composition of the financial sector, categorized into two specialized groups: leveraged banks and unlevered "patient investors".

• Excessive Bank Scale: In equilibrium, the banking sector becomes inefficiently large while the non-bank sector, which provides ex-post liquidity, becomes too small.
• Free-Riding on Liquidity: The leveraged banking sector effectively "free-rides" on the liquidity provision of patient investors. Banks expand aggressively, assuming they can always sell assets to non-banks at a fair price, even though their collective expansion worsens fire-sale discounts and reduces the capital available to those very liquidity providers.

3. The Two Margins of Inefficiency

The sources distinguish between two distinct margins that regulators must address:

• The Liquidity Margin: This refers to the choice of how much cash to hold for a given balance-sheet size. In a decentralized market, banks under-invest in liquidity on this margin to maximize returns from lending.
• The Scale Margin: This refers to the overall size of the leveraged banking sector. Even if banks are forced to hold more cash, they may still choose to operate at a scale that is socially excessive, continuing to over-rely on fire sales during stress.

4. Implications for Liquidity Requirements

Within this framework, the sources argue that standard liquidity requirements, such as the Basel III Liquidity Coverage Ratio (LCR), are necessary but insufficient on their own.

• Incomplete Regulation: While a liquidity requirement can correct the liquidity margin by forcing banks to hold the socially optimal cash ratio, it does not stop the banking sector from overexpanding.
• The Optimal Policy Mix: To implement a truly efficient allocation, the sources conclude that a two-instrument approach is required:
1. Liquidity Requirements to discipline internal bank incentives and reduce fire-sale reliance.
2. Structural Interventions, such as a tax on bank equity or limits on bank size, to correct the "scale margin" and prevent the banking sector from crowding out non-bank liquidity providers.

In the sources, policy and regulation are re-evaluated from a tool for managing exogenous funding shocks to a mechanism for addressing internal agency problems and systemic externalities. While traditional regulation like the Basel III Liquidity Coverage Ratio (LCR) aims to provide a buffer against sudden withdrawals, this theory argues that liquidity requirements should primarily serve to discipline bank risk-taking and correct distortions in the overall structure of the financial system.

The Re-conceptualization of Liquidity Requirements

The sources argue that the primary role of liquidity regulation is to mitigate moral hazard in risk management.

• Incentive Discipline: Because cash is "effort-insensitive" (its value doesn't change regardless of a banker's management), requiring banks to hold it increases the total value that can be pledged to depositors. This reduces the bank's incentive to take excessive risks with its loan portfolio.
• The Goodhart Paradox: This framework resolves the paradox that "unused" liquidity buffers are wasteful. The sources state that the mere presence of a liquidity buffer influences ex-ante behavior and strengthens incentives, even if the cash is never actually deployed ex-post.
• Mitigating Fire Sales: By mandating higher ex-ante cash holdings, regulators reduce banks' reliance on selling assets during stress, which helps stabilize market prices and weakens negative pecuniary externalities.

The Limitations of Single-Instrument Regulation

A central finding of the sources is that standard liquidity requirements (like the LCR) are insufficient to reach a socially efficient outcome on their own.

• The Liquidity Margin vs. The Scale Margin: Liquidity requirements successfully correct the liquidity margin (the ratio of cash to assets) but fail to address the scale margin (the total size of the banking sector).
• Excessive Bank Scale: Even under liquidity regulation, the banking sector remains inefficiently large. This is because individual bankers still do not internalize how their collective expansion reduces the capital available to non-bank "patient investors" who provide essential ex-post liquidity.
• The "Free-Rider" Problem: Without broader structural intervention, the leveraged banking sector "free-rides" on the liquidity provision of the unregulated non-bank sector.

The Optimal Policy Mix

The sources conclude that a two-instrument approach is necessary to implement a constrained-efficient allocation.

1. Liquidity Requirements: A minimum cash-to-deposit ratio is needed to discipline internal bank incentives and ensure banks carry enough "skin in the game" ex-ante.
2. Structural Scale Instruments: To correct the over-expansion of the banking sector, the regulator must use a second tool, such as:
   • Limits on bank size or balance-sheet expansion.
   • A tax on bank equity to reduce the private return to bank expansion that is socially excessive.
   • Subsidies for equity-financed liquidity provision by investors outside the regulated banking sector.

Ultimately, the sources emphasize that effective regulation cannot be designed in isolation. It must jointly consider incentives, market liquidity, and the structural balance between leveraged banks and unlevered liquidity providers to ensure the financial system can absorb shocks without systemic collapse.

Iran Update: Escalation in the Strait and Axis Retaliation

 

Iran Update Special Report, July 14, 2026

Data Cutoff: 2:00 PM ET

Key Takeaways

1. Iran has attacked at least three commercial vessels in the Strait of Hormuz in the past 24 hours, demonstrating its continued ability and willingness to target shipping despite recent US strikes. US Central Command (CENTCOM) conducted a wave of strikes against Iranian military targets on July 13 that were being used to threaten shipping. Iran retaliated by attacking US military bases in Kuwait, Bahrain, and Jordan on July 14.
2. Hezbollah is conducting an information campaign to delay the Lebanese government’s disarmament efforts. The group is attempting to persuade the government that it will cooperate with the Lebanese Armed Forces (LAF) but insists that securing a complete Israeli withdrawal must take priority over disarmament.
3. The United States backed Saudi Arabia’s July 13 airstrikes on the Houthi-controlled Sanaa International Airport in Yemen. The Houthis have since warned commercial airlines against using Saudi airspace.

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Toplines

Iran has attacked at least three commercial vessels in the Strait of Hormuz in the past 24 hours, signaling that it retains the capacity to disrupt shipping despite US military pressure. On July 13, Iran struck at least three vessels, including two Emirati tankers, that were attempting to transit the southern route along Oman’s coast. These attacks resulted in one crew member killed and eight wounded. Iran has repeatedly used force to deter traffic from this alternative route because it undermines Iranian efforts to assert total control over the strait.

While CENTCOM conducted strikes on July 13 to degrade these threats, US officials, including President Donald Trump, have stated the campaign could last several weeks. Consequently, it is premature to fully assess the campaign's effects. The threshold for disrupting shipping remains low, as individual drone and missile attacks can deter risk-averse shipping companies and captains.

Iran responded to the US strikes by attacking US military bases in Kuwait, Bahrain, and Jordan on July 14. Notably, reports indicate Iran may have used a cluster munition warhead in an attack on Bahrain for the first time. While ISW-CTP cannot verify this report, if accurate, it would represent a significant tactical shift, as Iran has previously only used such munitions against Israel. Cluster munitions are designed to disperse submunitions over a wide area to maximize damage.

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US-Iran Negotiations

Nothing significant to report.

Maritime Activity in the Strait of Hormuz and Persian Gulf

See toplines.

US and Israeli Air Campaign

See toplines.

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Iranian Domestic Affairs

The Iranian Parliament held its first open session since the start of the current war to discuss legislation regarding Iranian management of the Strait of Hormuz. Lawmakers reviewed the “Strategic Action Plan for Ensuring the Security and Sustainable Development of the Strait of Hormuz and the Persian Gulf,” which was first proposed in April. The bill, which has not yet been approved or its text published, is likely intended to formalize Iran’s control over the waterway. On July 14, 180 parliamentarians signed a letter calling for an oversight committee to ensure the bill's eventual implementation.

Parliament Speaker Mohammad Bagher Ghalibaf was notably absent from the session, which was led by Deputy Speaker Hamidreza Haji Babaei. Ghalibaf has faced recent criticism from fellow parliamentarians for failing to convene the body.

Additionally, Iran may be deploying forces to the Iran-Iraq border due to concerns about anti-regime activity by Kurdish opposition groups. These groups claimed on July 14 that the IRGC deployed 3,000 "special forces" along with drones, artillery, and tanks to the border in recent weeks. While no other sources have confirmed this specific large-scale deployment, ISW-CTP has observed an uptick in attacks by these groups on Iranian security forces. The Iranian regime has historically accused these groups of cooperating with Israel and the US to destabilize the country.

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Iran’s Axis of Resistance

Lebanese Hezbollah and the Israeli Campaign in Lebanon Hezbollah is using an information campaign to delay disarmament by portraying itself as a willing partner to the Lebanese government. Hezbollah officials, including Secretary General Naim Qassem, have stated the group supports the LAF’s deployment to southern Lebanon to maintain national unity. However, the group maintains it will remain armed even if it withdraws north of the Litani River.

Hezbollah and its allies, such as Lebanese Parliament Speaker Nabih Berri, are also claiming that the Trilateral Framework Agreement’s "pilot zone" plan is an Israeli "trap" intended to provoke internal conflict between the LAF and Hezbollah. Hezbollah officials have consistently warned that disarmament efforts could result in “civil war”.

Meanwhile, US-mediated talks began in Rome on July 14 focusing on the pilot zone plan. While Israeli Foreign Minister Gideon Saar stated the IDF is ready to proceed, delegations still disagree on the timeframe for withdrawal, the geographic scope of LAF deployment, and how disarmament will be monitored.

Other Axis of Resistance Activity

• Iraqi Militias: Iranian-backed Iraqi militias are demanding guarantees—including protection from US/Israeli strikes and a full US military withdrawal—before they will consider disarming. Kataib Hezbollah threatened on July 14 to participate in a renewed war between Iran and the US/Israel.
• Internal Divisions: There are ongoing divisions among militias regarding the Iraqi government’s anti-corruption campaign. Kataib Sayyid al Shuhada rejected the campaign as "selective," while Kataib Hezbollah offered support but warned against using it to "settle scores".
• US-Iraq Relations: In contrast to other militias, Asaib Ahl al Haq expressed support for US investment in Iraq. Iraqi Prime Minister Ali al Zaydi is currently in Washington, DC, to discuss expanding economic relations and a new security cooperation framework to follow the US-led coalition's scheduled withdrawal in September 2026.
• Yemen: Two US officials confirmed that the United States backed Saudi Arabia’s July 13 strikes on Sanaa International Airport. Saudi Arabia is concerned that the resumption of Mahan Air flights between Tehran and Sanaa (the first in 10 years) is being used to transfer weapons and advisers to the Houthis. A Houthi delegation was reportedly on a flight returning from Ali Khamenei’s funeral when the strikes occurred, forcing the plane to return to Iran.

Newspaper Summary 150726

 New Services Index out; 14 sectors grow strongly

COMING SOON. Work underway to complete ISP for health & residential education, credit growth

Shishir Sinha New Delhi

The government on Tuesday unveiled the trial Index of Service Production (ISP), a new high-frequency indicator that showed formal services activity remained resilient in April despite the West Asia conflict, with 14 of the 19 sectors tracked recording double-digit growth over the previous year.

The inaugural monthly series, with 2024-25 as the base year, covers 19 sub-sectors including air transport, retail trade, accommodation and food services, road and air transport, telecommunications and banking, which together account for around 60 per cent of India’s services sector.

ISP FOR SUB-SECTORS The services sector contributes more than half of the country’s gross value added (GVA). With the launch of ISP, all three broad sectors of the economy — services, industry and agriculture — will now have regular monthly or quarterly production indices.

Anantha Nageswaran, Chief Economic Advisor, said the new series will help put the services sector on the same footing as industrial production data. "The new series will help policymakers identify shifts in the services sector much sooner," Nageswaran said at a media briefing in New Delhi.

Releasing the trial series would allow the dataset to be tested and validated by users before it is transformed into a regular index, he added. He said the new index would help policymakers identify slowdowns in the services sector much sooner. "When a sector slows, we would like to know within weeks and not after months. The inaugural series of the Index does just that," he said.

Nageswaran said that while the ISP measures production volumes, the underlying data are reported in value terms and, therefore, depend on appropriate deflation. He added that the coverage of the index would be expanded over time.

‘HOME’ TOPS The first set of data showed accommodation and food services recorded the highest annual growth at 37.2 per cent in April, followed by retail trade (30.8 per cent), administrative and support services (28.7 per cent) and real estate activities (27.7 per cent).

Transport was the weakest-performing segment, with air transport contracting 13.9 per cent and rail transport seeing a 4.1 per cent decline to an index level of 99.59. Higher fuel prices and global supply chain disruptions have weighed on this activity.

The Ministry added that the ISP uses a differentiated approach for compiling sub-sector indices based on the nature and availability of data, drawing primarily on monthly indicators, sample numbers and the Annual Survey of Unincorporated Enterprises (ASUE).

The Ministry said the ISP would be of great value to services enterprises because it would help them in better business planning and administrative data. The ISP will be released on the 20th of every month, with wider transitions and expansion in coverage as more data sources become available.

A Japanese wake-up call for America

CRISIS AHEAD. Japan's currency and bond-market woes are a result of its unsustainable public debt. The other Western nations must pay heed

Desmond Lachman

Japan appears to be on the cusp of a full-blown currency and bond-market crisis. Although the Japanese authorities spent more than $70 billion in May to prop up the yen, the currency has slumped to a 40-year low and is estimated to be at least 15 per cent undervalued against the US dollar.

Meanwhile, Japanese long-term bond yields have surged to multi-decade highs following the end of the Bank of Japan’s (BoJ) negative-interest-rate policy and signs of Japan addressing the underlying causes of its currency and debt problems. With the yen remaining vulnerable at anytime soon, there is every reason to believe that the BoJ will have to hike interest rates again.

Japan’s current challenges should be a wake-up call for other countries that appear to be on unsustainable fiscal paths, not least the US, as well as France, Italy, and the UK. After all, an economic and financial crisis in the world’s third-largest economy will draw attention to other countries facing similar issues. That is what happened in the case with the Asian currency crisis in 1997-98, when Thailand’s problems triggered similar devaluations in Indonesia, Malaysia, the Philippines, and South Korea.

It was also the case with the eurozone sovereign-debt crisis triggered similar crises in Ireland, Italy, Portugal, and Spain.

UNSUSTAINABLE PUBLIC DEBT What has amplified concern over Japan’s currency and bond market woes is its unsustainable public finances and its difficulty in getting its inflation back down to the US. At 230 per cent, Japan has by far the highest debt-to-GDP ratio among G7 countries, and it still runs a 3.5 per cent primary deficit, which adds to the existing debt.

Combined with a shrinking and aging population, as well as a stagnant economy, the prospect of Japan targeting a single-year primary budget surplus via a vague medium-term debt-reduction target is not something to keep markets at ease about the country’s long-term debt trajectory.

It does not help that Sanae Takaichi, a leading LDP politician, has expressed uninterested in putting the country on a sounder budget footing anytime soon. Among her first economic-policy moves was to adopt a supplemental budget that increased energy subsidies in response to the shock to international oil prices from the closure of the Strait of Hormuz.

Japan’s large debt burden makes it difficult for the BOJ to raise interest rates even at a time when inflation appears to be accelerating.

Tightening monetary policy would only exacerbate the country’s public-finance problems by increasing competitive moves. While the US Federal Reserve’s short-term interest rate is at 5.5 per cent, the BoJ’s policy interest rate is at just 1 per cent.

This large interest-rate differential gives investors an incentive to borrow cheaply in Japanese yen and lend in higher-yielding dollar-based assets (the “carry trade”).

JAPAN’S OPTIONS This will remain the case as long as the yen continues to depreciate.

As Herbert Stein’s famous aphorism bears repeating: If something cannot go on forever, it will stop. In principle, Japan could get out of its unsustainable debt path in an orderly manner if the government made a preemptive and timely economic-policy U-turn to avert a currency and bond-market crisis. Or it could do so in a disorderly manner if a loss of investor confidence forced the government’s hand.

That is what happened in the UK in 2022 in response to Prime Minister Liz Truss’s ill-advised budget measures. Unfortunately, all available signs suggest that Japan is headed in this direction. A deepening Japanese currency and bond-market crisis is bound to draw attention to other countries with troubling public finances, and especially to the US.

At around 100 per cent, the US debt-to-GDP ratio is considerably lower than that of Japan; but the country is on track to maintain a budget deficit of more than 6 per cent of GDP as far as the eye can see. That means its debt ratio will soon reach its highest level since the end of World War II.

Three additional factors are making the US more vulnerable to a bond-market crisis. Consider, for example, that foreigners own around one-third of all Treasury bonds.

Second, the US government is increasingly reliant on hedge funds rather than more stable holders (like insurance companies and pension funds) to finance its deficits.

The bottom line is that highly indebted nations like the US, France, Italy, and the UK all have good reason to address their shaky public finances. The prospect of spillovers from an early Japanese currency and bond-market crisis could make the task only more urgent.

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The writer is a senior fellow at the American Enterprise Institute, is a former deputy director of the International Monetary Fund’s Policy Development and Review Department, and that of the emerging-market economic strategist at Salomon Smith Barney. © Project Syndicate, 2026. www.project-syndicate.org

Direct tax mop up jumps 16% to ₹6.5 lakh crore so far in FY27; STT, corporate tax lead surge

Shishir Sinha New Delhi

Driven by a surge in corporate tax, India's net direct tax collections grew by more than 16 per cent between April 1 and July 10, the Income Tax Department announced on Tuesday. The strong momentum has raised expectations that the government will meet or exceed its fiscal targets as outlined in the Budget Estimates.

For the current fiscal year (FY27), the government has set a direct tax collection target of ₹26.97 lakh crore, representing a 15 per cent growth over the ₹23.40 lakh crore collected in FY26. Early data indicate a strong start, with overall net collections already crossing 24.5 per cent of the full-year goal.

The momentum was led by net corporate tax collections, which surged nearly 22 per cent to approximately ₹2.40 lakh crore, while net personal income tax (non-corporate) collections rose around 12 per cent to ₹3.85 lakh crore. Additionally, Securities Transaction Tax (STT) receipts jumped 66.5 per cent to exceed ₹26,000 crore.

COS' PROFIT IMPACT Comparing the net collection of corporate tax with overall net direct tax collection, Rohinton Sidhwa, Partner at Deloitte India, said: "This indicates that Indian corporate earnings do not seem to have been hit by the war, or a slowdown and profits seem to be largely insulated. STT also seems to show a healthy increase driven by higher volumes traded due to the volatility in the stock market".

According to a partner at Price Waterhouse & Co, non-corporate tax collections have also maintained a healthy momentum. "Gross non-corporate tax collections are up 15.02 per cent and net collections have grown 11.66 per cent. These collections indicate compliance continues to be buoyantly rising... supported by strong market activity and the revised STT rates on futures and options," he said.

Significantly, net corporate tax collections have already reached around 19.5 per cent of the Budget Estimates, while net non-corporate tax collections stand at 27.6 per cent. "This is a good and encouraging close to the first quarter, with three more quarters still ahead," he said. It may be noted that non-corporate taxpayers include individuals, HUFs, firms, AoPs, BoIs, local authorities and artificial judicial person.

GROWTH DRIVERS Jayesh Sanghvi, Tax Partner at EY India, said the notable feature of the current trend is the stronger growth in corporate tax collections relative to personal income tax collections and healthy advance tax payments by corporates. At the same time, STT collections signal continued investor participation, plus improvements in compliance and formalisation, while the sharp increase in STT collections signals continued capital market depth and robust personal income despite geopolitical risk premiums weighing on global portfolios.

"Looking ahead, the data suggest that while the Strait of Hormuz tensions, tariff uncertainty, and oil price volatility may continue to challenge the government's projections, India's fiscal engine is proving structurally more resilient than the macro headlines suggest," he said.

Trump’s great Hormuz cash machine

US President wants ships traversing the strait to pay $15 for every barrel they carry. The sums involved are eye-watering.

By Paran Balakrishnan

Has anyone done the math on President Donald Trump’s latest demand for cash payments from ships sailing through the Strait of Hormuz?

Trump says ships carrying oil through the world’s most important energy chokehold should pay the US $15 for every barrel they carry. His argument is simple: if the US Navy is keeping the sea lanes open, America should be paid for the service. “We’ll become the guardian of the world’s energy supply, and we should be reimbursed for that,” he said.

It sounds like a joke, but is it? A very large crude carrier, or VLCC, typically carries two million barrels of oil. Under Trump’s proposal, every tanker passing through the strait would be handed a bill for $30 million.

Before the Israel-US war erupted, some 21 million barrels of oil and gas passed through the strait. Multiply that by $15 and the sums involved could very quickly become astronomical. The US could make $315 million every day, or more than $100 billion a year from the efforts of sailors patrolling those waters. Did someone mention shadow-toll?

Oil markets, meanwhile, are once again kicking like a bucking bronco. Brent crude, the global benchmark, shot up $7.40 a barrel last week, spurring fears of a fresh round of inflation. Then Iran and the US resumed shooting through each other once more, touching $87 a barrel on Tuesday. A year ago, Brent was at $74. It is now well below the $118-a-barrel peak hit earlier this year.

The current moment at least, is not clutching its worry beads. The country has a much better foreign exchange position than during previous energy shocks. In June, India imported more crude oil than ever before, with Russia accounting for 32 per cent of those purchases. “India’s crude import basket is much more diversified than it was a few years ago,” says Sumit Ritolia, senior analyst at Kepler, the shipping data and analytics firm.

Russian crude continues to anchor a large share of India’s imports. But just as the old saying goes, it’s an ill wind that blows nobody any good. Ukraine’s drone attacks on Russian refineries have had the unintended effect of pushing more Russian crude onto international markets. India has been standing at the front of the queue to buy it.

The picture is less comfortable when it comes to LPG and LNG, but here too India has been scouring global markets for alternatives. LPG imports are estimated at 1.4 million tonnes in June, significantly above normal, with a substantial amount coming from the US. The same trend can be seen in LNG.

That naturally raises another question: just how expensive has India’s global energy shopping spree become? Before the Iran war, India was spending $10-13 billion a month on imported crude. In April and May put together, India paid $35.5 billion, nearly 70 per cent more than in the same period a year earlier.

BUYING FROM NORTH AMERICA The drawback, meanwhile, in buying from North America is obvious. Gas shipped from there has a long journey to make before reaching Indian ports, and transport costs inevitably rise with every extra nautical mile travelled.

For years, Qatar has supplied 40 per cent of India’s LNG imports. But that equation may begin to change. The UAE is constructing a huge LNG export facility at Al Ruwais in Abu Dhabi, and India is seen as one of its biggest customers. There’s another silver lining to the crisis, although perhaps not one that will cheer motorists or households. India’s exports of refined products have climbed to their highest monthly levels of the year. Indian refineries have been exporting everything from jet fuel to diesel and gasoline.

Another important development is taking place in the UAE. Abu Dhabi is moving ahead with plans to expand Fujairah and Khor Fakkan, two ports on the Gulf of Oman that sit outside the strait altogether. Fujairah’s expanded facilities could be operational within 18 months.

The attraction is obvious. Cargoes unloaded there would bypass the strait completely before being moved onwards across the UAE by pipeline, road and rail links. Iran, however, has warned its own ports could become targets for drone attacks in any future war.

For Asia, however, the greatest danger may lie in the risk of a double whammy. What happens if the Houthis decide this is the moment to re-enter the conflict and once again attack Red Sea shipping?

If disruption in the strait were combined with renewed attacks in the Red Sea, two of the world’s most vital energy arteries could come under pressure at precisely the same moment, making energy far more expensive. India’s economy really might find itself up a creek without an outboard motor, desperately searching for a paddle.

Wholesale inflation in June surges to 9.9%

GROWTH DRIVERS. Food articles, metals and chemicals push up prices

Our Bureau New Delhi

With the rise in fuel and food prices, wholesale inflation based on the Wholesale Price Index (WPI) surged to a 15-month high of 9.9 per cent in June from 9.7 per cent in May. At the same time, the output Produce Price Index (PPI) inflation too rose to 9.6 per cent against 9.4 per cent in May.

"Across groups, ‘mineral oils’ (containing petroleum products), ‘food articles’, ‘chemicals and chemical products’, ‘basic metals’, and ‘manufacture of chemicals’ products, have been major drivers of WPI inflation in June," an official statement said.

The June print is the fourth monthly series with the base year of 2024-25. The consumer price index-based inflation, too, had surged to a four-month high of 4.38 per cent in June, as higher food prices offset the previous month's fall.

"June WPI inflation rose further on account of higher inflation in ‘primary articles’ (adding 46 bps to headline, led by higher food articles)," said Aditi Nayar, Chief Economist at ICRA.

OIL PRICES Echoing the same sentiments, Madan Sabnavis, Chief Economist with the Bank of Baroda, said that oil prices had come to the low seventies during the last few days of June but since then they have crossed the $80 mark; it looks like there will be no administered action taken to cool down prices and the status quo on fuel prices will remain for some time.

Hence, “WPI inflation may be expected to be in the range of 9-10 per cent for the next couple of months, too. A lot will also be dependent on the monsoon and the kharif outcome,” he said.

MONSOON EFFECT Adding to this, Rajni Sinha, Chief Economist with CareEdge, said that on the domestic front, inflation risks stem from the weather related uncertainty and the increasing likelihood of a weak monsoon strengthening during the soon-soon season. Food prices, particularly vegetables, pulses and edible oils, remain the most vulnerable. "Any sustained disruptions and warrant an increase in prices, taking these factors into account, we project WPI inflation to average 8.7 per cent in FY27,” she said.

However, she noted that India is relatively better positioned than others to handle such episodes, supported by higher reservoir levels and comfortable foodgrains stocks.

Moreover, “historical experience suggests that such weather-related shocks result in a sharp rise in food inflation. The extent of any increase will depend on government supply-side interventions as well as the temporal distribution of rainfall,” she concluded.

India faces potential natural gas supply cut of up to 1.5 mt/month

Rishi Ranjan Kala New Delhi

The West Asia conflict has adversely affected the LNG supply chain, and as a result, India along with other South Asian countries may face supply shortages. India is facing an estimated LNG shortfall of around 1.5 million tonnes (mt) per month.

Wood Mackenzie in its latest commentary pointed out that Qatar accounted for nearly 90 per cent of Qatari and the UAE LNG shipments transiting the Strait of Hormuz (SoH) in 2025. Within Asia, South Asia is most exposed.

SUPPLY DISRUPTION The South Asian picture is particularly concerning, with the Wood Mackenzie report saying that India, Pakistan and Bangladesh are navigating supply disruption in markets that remain structurally tight. In India, spot prices are now at levels that are translating directly into demand curtailment, industrial fuel switching and, in the most acute cases, fertiliser plant shutdowns and power sector load shedding.

"India faces potential supply curtailments of up to 1.5 mt per month, the largest location has been diverted to essential sectors," the report said.

Urea output is being squeezed by Qatari LNG curtailments. Energy-intensive industries such as refining and power plants are also seeing cuts and switching to propane, fuel oil and naphtha at pace.

Gramodyam to encourage rural entrepreneurs

Our Bureau Bengaluru

The National Bank for Agriculture and Rural Development (Nabard) launched ‘Gramodyam’, an entrepreneurship development programme to unlock the potential of rural India, on its 45th Foundation Day on Monday.

Launched by Shaji KV, Chairman of Nabard, the initiative is being implemented in collaboration with the National Skill Development Corporation (NSDC) and the Union Ministry of Skill Development and Entrepreneurship.

DIGITAL-FIRST It will be implemented through a digital-first approach. Gramodyam seeks to identify, nurture, mentor and empower aspiring entrepreneurs from rural India in industry-relevant skills, entrepreneurial competencies and access to essential support systems. By providing young innovators with converted ideas into viable enterprises, it aims to transform rural opportunities into pathways for sustainable economic growth and employment generation.

EQUITABLE OUTREACH Designed as an inclusive, digital-first, hybrid delivery model, Gramodyam aims for equitable outreach.

Through a combination of digital platforms, social media, community-based outreach and on-ground mobilisation, aspiring entrepreneurs will be enrolled and guided through a structured five-stage journey, a Nabard media statement said. Gramodyam will be conducted under e-KYC verification to ensure authenticity. During the pilot phase, it aims to support the creation of at least 50,000 new entrepreneurs over three years.

 The following is a full reproduction of the provided text from the article "Russian Offensive Campaign Assessment, July 13, 2026."

Russian Offensive Campaign Assessment, July 13, 2026

Ukrainian forces continue to intensify and expand their strike campaign aimed at denying Russia’s ability to sustain logistics and transport fuel to occupied Crimea and isolate the peninsula. The Ukrainian Security Service (SBU) reported on July 13 that Ukrainian forces conducted a large-scale strike operation on the night of July 12 to 13, simultaneously striking Russian military, logistics, and fuel facilities in occupied Crimea and Russia. The SBU reported that Ukrainian forces struck two Russian project 12150 Mangust-class patrol boats in the Black Sea; hangars with military and special equipment at the Baherove military air base in occupied Crimea; three stationary radar stations used to detect Ukrainian unmanned service vehicles (USVs) and drones in an unspecified location; the Yeisk and Maria cargo and passenger ferries at the Krym ferry terminal in occupied Kerch, Crimea; the Lavrentiy and Panagia cargo and passenger ferries and three oil tanks in the port of Kavkaz, Krasnodar Krai; a railway warehouse with oil tanks at the Kavkaz freight station, Krasnodar Krai; and an oil tank farm at an oil depot in Vyazniki, Stavropol Krai.

Ukrainian forces are engaged in a systematic multipronged interdiction campaign aimed at isolating Crimea and denying Russia the ability to sustain logistics to the peninsula, striking bridges, major highways, and rail infrastructure from occupied Kherson Oblast to occupied Crimea; Kerch Strait crossings and ferries moving between occupied Crimea and Krasnodar Krai; and fuel tankers and vessels in the Sea of Azov. The SBU’s July 12 to 13 overnight strikes demonstrate the enhanced planning capabilities of Ukrainian forces in their ability to simultaneously conduct such strikes against various targets. Continued Ukrainian strikes, if sustained, can continue to disrupt Russia’s ability to sustain logistics to the peninsula, which can degrade frontline Russian offensive operations and impede Russian advances in southern Ukraine.

Ukrainian forces reportedly liberated six settlements and 120 square kilometers in the Oleksandrivka direction over an unspecified time period as part of their ongoing counterattacks in the area supported by intensifying intermediate-range strikes. A Ukrainian regiment operating in the Oleksandrivka direction announced on July 13 that Ukrainian forces liberated Ternove, Zaporizke, Novoheorhiivka, Vorone, Sichneve, and Maliivka (all southeast of Oleksandrivka), liberating 120 square kilometers and advancing 25 kilometers in depth. The regiment seemingly deleted its original announcement without issuing a formal statement retracting its initial report later on July 13, but several Ukrainian media outlets have reported on and republished the announcement. Ukrainian forces began counterattacks in the Oleksandrivka direction in Winter 2026, liberating around 480 square kilometers in Dnipropetrovsk and Zaporizhia oblasts since January 2026. The regiment reported that it inflicted critical losses on elements of the Russian 120th Naval Infantry Division (Baltic Fleet) and destroyed a personnel concentration of the Russian 656th Motorized Rifle Regiment in Temyrivka, forcing Russian units to retreat. Ukraine’s tactical success in the Oleksandrivka direction continues to force Russia to choose between defending against Ukrainian counterattacks or allocating manpower and resources to priority sectors.

A Russian Geran-2 drone struck Copanca, Moldova, on the night of July 12 to 13. The Moldovan Ministry of Defense (MoD) reported on July 13 that a Russian Geran-2 (the Russian-produced version of an Iranian Shahed-136) drone crashed and exploded in Copanca, roughly 25 kilometers from the Moldovan-Ukrainian border, after entering Moldovan airspace during strikes against Odesa Oblast. Russian drones or drone debris have crashed onto Moldovan territory over 20 times and onto Romanian territory at least 30 times since February 2022. Increasingly frequent Russian drone incursions into European and NATO airspace indicate that Russian President Vladimir Putin has adopted a reckless policy that accepts the risk of Russian drones entering European and NATO airspace as an acceptable consequence of its strikes in Ukraine. This underscores the need for European and NATO states to consider negotiating possible air defense agreements with Ukraine as a matter of self-defense.

Key Takeaways

1. Ukrainian forces continue to intensify and expand their strike campaign aimed at denying Russia’s ability to sustain logistics and transport fuel to occupied Crimea and isolate the peninsula.
2. Ukrainian forces reportedly liberated six settlements and 120 square kilometers in the Oleksandrivka direction over an unspecified time period as part of their ongoing counterattacks.
3. A Russian Geran-2 drone struck Copanca, Moldova, on the night of July 12 to 13.
4. Russian forces launched three Kh-59/69 cruise missiles and 134 drones against Ukraine overnight.
5. Ukrainian forces recently advanced in the Oleksandrivka direction.

Ukrainian Operations in the Russian Federation

Gasoline shortages due to Ukrainian long-range strikes on Russia’s energy infrastructure are impacting Russia’s agricultural sector and the delivery of aid to Russian forces. The Ukrainian Foreign Intelligence Service (SZRU) reported on July 10 that Russian farmers are complaining about fuel supply shortages, noting that the fuel crisis could lead to a loss of up to 30 percent of the harvest this season. Restrictions on gasoline sales are forcing Russian forklift drivers to fill up almost every hour, and prohibitions on filling canisters at gas stations are affecting the work of bulldozers or excavators that cannot drive on public roads. Several Russian volunteer organizations are also struggling to deliver humanitarian aid due to the shortages. The Ukrainian General Staff reported that July 11–12 strikes against the Syzran Oil Refinery damaged its AVT-5 and AVT-6 primary oil processing units.

Russian Supporting Effort: Northern Axis

Russian forces continue to conduct infiltration missions in northern Sumy Oblast. Geolocated footage published on July 13 shows Ukrainian forces striking a Russian position north of Komarivka after what ISW assesses was a Russian infiltration mission.

Russian Main Effort: Eastern Ukraine

Russian Subordinate Main Effort #1 – Kharkiv Oblast Russian forces continued offensive operations in northern Kharkiv Oblast on July 12 and 13 but did not make confirmed advances. A Russian milblogger claimed Russian forces advanced in southern Kozacha Lopan. Ukrainian authorities implemented measures to protect against Russia’s growing first-person view (FPV) drone strike campaign by installing anti-drone nets on sections of the Kharkiv City ring road.

Russian Subordinate Main Effort #2 – Oskil River Russian forces continued infiltration missions in the Kupyansk direction. Geolocated footage published on July 13 shows Ukrainian forces striking a Russian-occupied building in central Kupyansk-Vuzlovyi after an assessed Russian infiltration mission. Russian forces continued offensive operations in the Borova direction on July 13 but did not advance.

Russian Subordinate Main Effort #3 – Donetsk Oblast Ukrainian forces maintain positions east of Slovyansk, contrary to previous Russian claims of advance. Russian forces continued infiltration missions within and southwest of Kostyantynivka. Geolocated footage published on July 4 and 8 shows Ukrainian forces striking Russian-occupied buildings in northwestern Kostyantynivka and eastern Dovha Balka after assessed Russian infiltration missions. Russian sources continue to publish likely artificial intelligence (AI)-altered footage showing alleged Russian advances in Kostyantynivka to propagate claims for informational effects. Russian forces are intensifying strikes against Druzhkivka, where 4,000 people remain without power, water, and gas. Ukrainian forces recently advanced or maintained positions in the Dobropillya tactical area. Ukrainian forces continued their strike campaign against Russian military assets in occupied Donetsk Oblast, striking a Russian Navy vessel in the port of Mariupol and various logistics targets in Kuteinykove, Starobesheve, and Yenakiieve.

Russian Supporting Effort: Southern Axis

Russian forces continued offensive operations in the Hulyaipole direction and western Zaporizhia Oblast on July 12 and 13 but did not advance. Russian forces continue to use the Zaporizhia Nuclear Power Plant (ZNPP) to store military equipment and launch drone strikes. The GUR reported that Russian forces are storing military equipment in engine rooms and using ZNPP roofs for machine-gun nests and missile systems. Russian forces are reportedly deploying drone control points at the plant, sometimes involving underage student workers from the Alabuga SEZ.

Ukrainian forces used a USV to deploy a UGV to the Kinburn Spit in Mykolaiv Oblast in the first unmanned amphibious assault mission. Strikes on Russian vessels have significantly reduced naval traffic in the Sea of Azov, with the number of vessels decreasing from 132 on July 6 to 43 on July 12. Ukrainian forces also continued to strike military and energy infrastructure in occupied Crimea overnight, hitting four power substations, an S-400 air defense system, and a large logistics hub near Armyansk.

Russian Air, Missile, and Drone Campaign

Russian forces conducted a series of long-range drone and missile strikes against Ukraine on the night of July 12 to 13. The Ukrainian Air Force reported the launch of three Kh-59/69 cruise missiles and 134 strike and decoy drones; Ukrainian forces downed all three missiles and 123 drones. Russian strikes damaged residential and commercial infrastructure across several oblasts and hit a Togo-flagged civilian merchant vessel carrying fertilizers. Strikes on the Chornomorsk port destroyed 45,000 tons of wheat and 9,000 tons of sunflower oil. Russia is increasingly using Shahed-type drones with jet engines, which fly at low altitudes and fast speeds, to frighten civilians and make Kyiv City "completely unlivable."

Significant Activity in Belarus

Nothing significant to report.

Newspaper Summary 140726

 The following is the article titled "Does America face a middle-age crisis—or existential?" by Narayan Ramachandran, reproduced from the sources:

Does America face a middle-age crisis—or existential?

By Narayan Ramachandran

America is 250 years old this year. It is tricky to establish a ‘nation-state’ equivalent of human years, but if I were to hazard a guess, then it would be about one nation-state year for every seven to ten human years. Broadly similar to the dog-human ageing relationship. Of course, dogs age unevenly with respect to humans, reaching a ‘human age’ of 24 in their first two years and then slowing down over the next decade plus. By this yardstick, the US today is middle-aged at most. There is no science behind this nation-state equivalence, only the backing of recorded history: great civilizations of the past often lasted a thousand years, a little more than 10 human lifespans by the aforesaid reckoner.

The Egyptian civilization was among the longest lasting; it endured from about 3000 BCE till its Roman annexation at the turn of [the era. The Ottoman Empire, which] conquered what’s now Istanbul, prevailed for about half a millennium. The Han dynasty in China held sway for nearly 400 years and the British Empire for about 350 years.

So, is America on its last legs, or is it going through a middle-age crisis, or simply a reset for a long innings ahead?. Like with the canine epigenetic clock, we must be careful in our analysis: this need not be a phase in which it ticks faster, as national ageing has no biological inevitability, nor would it be merely such a clock at work.

Before we evaluate America’s future, it is instructive to consider how the country got here. Alexis de Tocqueville, French philosopher and an early visitor to the US, made some incisive observations in his 1835 book, Democracy in America. He praised the US for its township self-government (a laboratory for democracy), its spirit of volunteerism, its free press as a check on power, and for its freedom of association as a counterweight to majority tyranny. He was most impressed by its practical, restless energy and work ethic, as also its cultural mores.

If Tocqueville had revisited America 150 [years later, he might have seen] majority tyranny and a strange “equality of conditions” brought about by a mass consumer culture. To this, I would add two things: first, that America in its period of ascendancy established a ‘high trust’ society as described by Francis Fukuyama in his book Social Virtues and the Creation of Prosperity; and second, that its ability to attract the best to its universities and its pathway for that talent to develop new technology and products for the world sustained its success. Vannevar Bush, in his 1945 policy recommendation to then president Harry S. Truman titled Science: The Endless Frontier, advocated federal investment in scientific research as the fund from which practical applications of knowledge must be drawn. That led directly to the creation of the National Science Foundation in 1950. This established the bedrock upon which is built a pillar of America’s great-[ness].

[In the recent] wave of globalization, it left some of its communities behind even as the world benefited. Its high-trust society was fractured in this process as described in Dan Rodger’s book, The Age of Fracture. A backlash in the context of low trust brought about its current political movement against globalization and towards putting up physical walls and technology barricades.

If Tocqueville were to assess America today, it is unlikely that he would pick up any strong signal on ‘free association’. As measured by interpersonal trust or trust in government, Fukuyama’s ‘high trust’ society no longer holds, as most recent surveys indicate. America’s incumbent president, Donald Trump, has been taking a chainsaw to research funding and has created fear even among legal migrants and students at its top universities.

The only US pillar left standing is its com-[petitiveness]. On the evidence of just these indicators, the country’s future looks cloudy. The living history of a people who form a nation, though, is subjective. To comprehend and evaluate whether they can regain their vitality, one must draw from periods of difficulty. So far, the US has shown remarkable resilience and bounced back from each. This is evident in periods such as the Great Depression of the 1930s, oil shock of the 70s, global financial crisis of 2008 and the more recent covid pandemic.

Historically, America’s greatest strength has been its ability to adapt and re-invent itself in the face of crisis. The country still possesses reservoirs of political talent and well-built institutions and mechanisms of democracy, apart from the personality traits required for a resurgence. In my view, US declinists are calling a fall prematurely. It does have deep challenges to overcome, such as societal polarization, an affordability crisis, lack of housing and healthcare for all, and excessive debt. Yet, American resilience should be able to combat them and emerge victorious.

The following is the article titled "Hotel rates soar but industry sees room for price increases" by Varuni Khosla, reproduced from the sources:

Hotel rates soar but industry sees room for price increases

Limited new supply and rising travel have pushed average room rates in India to record highs By Varuni Khosla

After several years of record-breaking room rates, India’s top hotel chains are pushing back against suggestions that they have reached their ceiling. Instead, hotel executives said the country’s premium hospitality market remains underpriced compared with global peers and is entering a phase where protecting room rates, rather than chasing occupancy, has become the dominant strategy.

“India is still significantly underpriced versus Europe, North America and many Asian luxury markets,” Vikramjit Singh Oberoi, managing director and chief executive officer (CEO) of EIH Ltd, which owns the Oberoi and Trident group of hotels, said on a recent earnings call. While luxury hotels globally now charge upwards of $1,000 (about ₹96,000) a night, India remains well below those levels, he added. Room rates at the Oberoi Hotel New Delhi hover between ₹20,000 and ₹30,000 per night, depending on the season.

After several years of strong demand, limited new supply and rising domestic travel pushed average room rates in India to record highs. Instead of discounting to fill rooms, luxury and five-star hotel operators say they are increasingly prioritizing pricing power.

The Leela’s average daily rates increased during the March quarter due to its “strong consumer pull, brand, pricing power and disciplined execution,” Anuraag Bhatnagar, CEO of the luxury hotel chain, said on the company’s fourth-quarter earnings call. “While occupancy in March took a hit due to international travel being disrupted, we continued to grow average daily rates in double digits,” he said. Bhatnagar said the company offset weaker occupancy with higher room rates, reinforcing what appears to be a broader shift across luxury hotels. He added that resilient demand, rising aspirational spending and constrained new luxury supply in the company’s key micro-markets continued to support improvements in both occupancy and pricing. At The Leela Palace New Delhi, rooms are priced from ₹39,000 to ₹55,000 this week, according to its website.

ITC Hotels reported that average daily rates (ADRs) for rooms continued to rise despite a volatile operating environment. External factors “created temporary fluctuations in demand, which briefly affected occupancy levels; however, ADRs witnessed a year-on-year growth, supported by smart revenue management and value-based offers,” the company said in its annual report for fiscal year 2026 (FY26). ADRs rose 6% during the year, while occupancy expanded by 229 basis points, resulting in a 10% increase in revenue per available room (RevPAR). ITC Hotels also maintained a RevPAR premium of 37% over the industry average.

Nikhil Sharma, managing director and chief operating officer, South Asia, Radisson Hotel Group, said the industry had entered a more mature phase where pricing was increasingly driven by the quality of experiences. “Demand remains robust across business and leisure destinations,” he said, adding that occupancy across Radisson’s India portfolio increased by around 5% this summer from a year earlier. “Sustainable growth will be driven by differentiated experiences that guests genuinely value and are willing to pay for, rather than by occupancy or room rates alone.”

Hospitality consultant Vijay Thacker, managing director of Horwath HTL, said recent softness in rates in some markets on account of geopolitical reasons should not be interpreted as a sign that luxury pricing has peaked. “We cannot look at a short window of time for the luxury sector. You need to take a medium- to long-term perspective. For the quality of the product and service that India offers, we are underpriced,” he said.

While some luxury hotels may eventually reach optimal occupancy, pricing will increasingly become the main lever for growth. “Once occupancy reaches a certain level, then it’s a rate game,” Thacker added. Branded hotel supply is expected to rise to about 300,000 rooms by FY30 from 196,464 rooms in FY25. Developers are betting heavily on the premium end of the market, with luxury hotels accounting for about 21% of the upcoming branded room pipeline, according to hotel consultancy Hotelivate-Savills.

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RATE RACE (SIDEBAR)

• ROOM rates at the Oberoi Hotel New Delhi hover between ₹20,000 and ₹30,000 per night.
• ITC Hotels reported that ADRs continued to rise despite a volatile operating environment.
• INDIA’S luxury resorts remain undervalued relative to destinations overseas.
• HOTEL stocks usually advance during economic booms, when consumption rises.

The following is the article titled "A quarter-trillion-dollar onslaught of AI bonds tests limits" by Sam Goldfarb, reproduced from the sources:

A quarter-trillion-dollar onslaught of AI bonds tests limits

Tech giants are borrowing even more than expected, weighing on bond prices. By Sam Goldfarb

Wall Street is sending a message to tech companies engaged in a historic borrowing spree to fund investments in artificial-intelligence infrastructure: for pity’s sake, please slow down.

Over the past several weeks, the investment-grade corporate bond market has struggled to absorb a combined $75 billion of bond issuance from Nvidia, SpaceX and Amazon. While Nvidia and SpaceX were able to borrow at reasonably low interest rates, their newly issued bonds quickly slumped in the secondary market, disappointing investors who often like to flip such bonds. Amazon, meanwhile, had to pay unusually steep rates by its standards to complete its debt sale, reflecting investors’ newfound caution.

For the most part, those investors say they aren’t particularly worried about the tech companies' creditworthiness. The problem instead is that they fully expect those hyperscalers to continue flooding the market with new bonds. The hyperscalers are in such a heated race for computing power that they appear prepared to issue tens of billions of dollars of bonds at any moment, regardless of market conditions and whether they might need to pay higher interest rates.

“For us, it’s all we’re talking about, and for them it’s like, ‘Oh yeah, you know, we hit the bond market,’” said Ryan Jungk, investment grade corporate sector co-head at Newfleet Asset Management. “They don’t necessarily care if they’re flooding our market”.

“Everyone wants to leave some room for the next deal,” said Travis King, head of investment-grade corporates at Voya Investment Management.

The recent weakness in hyperscaler bonds is a big deal for fund managers and investors, because investment-grade corporate bonds tend to be fairly stable. That means even modest price declines can make a major impact on a fund’s performance relative to its peers. And it isn’t clear that hyperscalers are going to change their behavior anytime soon.

Six companies that bond investors consider hyperscalers—Alphabet, Amazon, Meta, Oracle, Nvidia and SpaceX—have already issued around $244 billion in bonds globally this year, up from $108 billion all of last year and $17 billion in 2024.

Investors entered the year knowing that hyperscalers were going to issue a lot of bonds. The extra yield, or spread, that investors demanded to hold the companies’ existing bonds over U.S. Treasurys had already increased accordingly, and demand was relatively strong for new bond sales during the first few months of the year.

As it turns out, however, companies are spending and borrowing even more than investors had anticipated. Many investors were especially caught off guard by Nvidia’s $25 billion bond sale in June and again last week by Amazon’s issuance of the same size, fueling a jump in bond spreads across all of the hyperscalers.

The spread of Alphabet’s 10-year bonds rose 0.12 percentage point last week, while Meta’s 10-year bond spread climbed 0.16 percentage point. The average investment-grade bond spread ticked up only 0.02 percentage point.

As a first-time bond issuer, SpaceX has presented a particular challenge, with investors uncertain over how its bonds should be priced. The spread of its 10-year bonds has leapt nearly half-a-percentage point since being issued on June 23.

John Lloyd, global head of multi-sector credit at Janus Henderson, said his team has long believed that companies would spend more on AI infrastructure this year than the consensus estimate, leading them to hold fewer hyperscaler bonds than benchmark indexes. Going forward, he said, “you still have a wide range of outcomes” for how much the companies will invest in AI, with high-end estimates coming in north of $10 trillion over the next several years.

Moves in tech company bond prices are now especially important to portfolio managers, because those bonds make up an increasingly large share of benchmark bond indexes. If investors are spooked by the threat of further issuance and go “underweight” tech bonds, they could get burned if issuance is less than expected and the bonds rally. Conversely, they could get hurt if they start buying up the bonds and issuance doesn’t let up.

“If you get the tech trade wrong, that probably makes or breaks your year,” said Jungk.

If borrowing costs rise, tech giants such as Amazon, Alphabet and Meta Platforms should be able to keep spending, but they could be pushed to issue more equity instead of debt. Alphabet, for one, already announced in June that it would issue more than $80 billion in equity this year to help fund its AI investments. That, in theory, should have been good for its bonds. In reality, the boost was limited because investors read the issuance as a sign the company might spend even more on AI, requiring just as much borrowing.

The following is the article titled "BSNL revenue up 10% in Q1: Scindia", reproduced from the sources:

BSNL revenue up 10% in Q1: Scindia

State-run Bharat Sanchar Nigam Ltd (BSNL) has provisionally posted around a 10% increase in revenue from operations in the first quarter of fiscal year 2027, telecom minister Jyotiraditya Scindia said on Monday.

While speaking to the media after the review meeting of BSNL for the first quarter of the current fiscal, Scindia said that BSNL’s enterprise business segment and consumer mobility have shown growth, while the consumer fixed access segment has remained almost flat.

“Last year, we closed first quarter (Q1) at ₹4,017 crore. This year, we have closed Q1 at ₹4,418 crore. So there’s a delta of ₹401 crore, an increase,” Scindia said.

The following is the article titled "DMart faces a quick comm test" by Ananya Roy, reproduced from the sources:

DMart faces a quick comm test

By Ananya Roy

Avenue Supermarts, which owns and operates supermarket chain DMart, is struggling against cut-throat competition from quick commerce in metros. Standalone revenue rose 15.1% year-on-year to ₹18,340 crore in the June quarter (Q1FY27), and Ebitda rose 16.3% to ₹1,527 crore.

The Ebitda margin expanded by only 10 basis points (bps) to 8.3% despite a 50-bps expansion in the gross margin. An improved mix with a higher share of margin-accretive general merchandise and apparel category buoyed the gross margin. Higher staff costs to support FY26’s back-ended store-addition contained operating margin expansion. That, along with higher depreciation and interest costs, led to a slower 12.8% growth in net profit to ₹936 crore.

Overall, growth is stalling as mature stores—those operating for two years or more—in metros become less productive. Of the 85 stores added in FY26, 58 came up in Q4. This slowed to just three stores in Q1, taking the total store count to 503. But the store footprint was 19% higher year-on-year and drove growth even as like-for-like (LFL) growth in mature stores slowed to 5.5% in Q1 from 10.8% in Q4. Bills cut—the number of daily invoices generated—rose 13.4% year-on-year to ₹11 crore due to new stores added in Q4. Store productivity, as measured by bills cut per store, fell about 5%.

Elara Securities believes quick commerce has weakened DMart’s historical pricing moat in metros. Blinkit, Zepto and Swiggy Instamart have been joined by Amazon and Flipkart in the quick commerce race. Sure, DMart also offers same-day delivery of online grocery orders. But the difference between consolidated and standalone results, which proxy DMart Ready’s performance, shows that growth has slowed to just 5.5% from a 20% growth profile earlier, Nuvama Research noted. It added that losses have widened to ₹75 crore in Q1 from ₹57/68 crore in Q1FY26/Q4.

The company has responded by cutting down its DMart Ready presence, while shifting focus towards quicker delivery. It exited seven cities during the quarter and is now present in only 11. Compared to 40% of orders currently taking over 12 hours for delivery, the management is gunning for six-hour deliveries by FY27. Breakeven is expected over the next few years.

Non-metro stores held up better. Elara estimates that metros account for about 60% of DMart’s revenue, implying encouraging 14-15% LFL growth in non-metros, while metro sales remained flat. This can be due to low quick commerce presence, along with price-sensitive customer behaviour in non-metro cities. But it leaves a significant expansion runway in non-metros for DMart, which can support growth even if quick-commerce competition continues to derail growth in metros.

Store expansion, a key growth lever, is expected to pick up pace. The board has approved raising about ₹1,000 crore through non-convertible debentures, which signals store additions in H2, says Nuvama. New stores are operating at about 55% of mature-store throughput, providing an important cushion to overall growth.

So far in CY26, the stock is up about 8% and continues to trade at 61 times estimated FY28 earnings, leaving little room for disappointment. Unless metro growth stabilizes or store productivity improves meaningfully, valuations may continue to cap near-term upside.

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GROWTH WOES (SIDEBAR)

• DMART’S OVERALL growth is stalling as mature stores in metro cities become less productive.
• IT HAS CUT DOWN its DMart Ready presence, while focusing on quicker delivery.

The following is the article titled "Meta told to remove ‘pirated’ Zee content" by Yash Tiwari and Krishna Yadav, reproduced from the sources:

Meta told to remove ‘pirated’ Zee content

By Yash Tiwari & Krishna Yadav

The Delhi high court on Monday directed global technology giant Meta Platforms to remove Facebook posts that allegedly included pirated content belonging to Zee Entertainment Enterprises Ltd, granting the broadcaster immediate interim relief in its fresh copyright infringement suit against the social media company.

Justice Anup Jairam Bhambhani issued summons to Meta Platforms after hearing Zee Entertainment’s plea and directed the social media company to take down the identified Facebook URLs hosting the allegedly infringing copyrighted content.

Zee argued that several Facebook pages were illegally uploading its television programmes and clips, allowing users to watch them without permission. They also alleged that such pirated videos continued to resurface despite repeated takedown requests. Zee told the court that while Meta occasionally removed specific videos after receiving takedown notices, the remedy was ineffective as the infringing content continued to resurface on Facebook in different geographical locations.

The following is the article titled "South Africa’s anti-immigrant protests raise many questions" by Justice Malala, reproduced from the sources:

South Africa’s anti-immigrant protests raise many questions

The rise of xenophobia is a danger all of Africa needs to examine By Justice Malala

As betrayals go, South Africa turning its back on its continent is particularly brutal. Between 1960 and 1994, when South Africa’s liberation movements were banned and leaders like Nelson Mandela were imprisoned by its apartheid government, African countries established camps and schools for the diaspora and gave money and military aid to the resistance. Yet, last week, a months-long violent campaign of anti-African immigrant protests in the country by the newly minted organization March and March culminated in attacks on homes and property and the shutdown of major cities. Although these rallies did not descend into wholesale violence, shameful scenes of South Africans attacking alleged illegal foreigners and citizens they misidentified as immigrants were beamed across the globe. Organizers have vowed to protest every Thursday until local elections scheduled for 4 November.

These attacks are reprehensible, hateful, xenophobic, largely misinformed and have damaged South Africa’s reputation. The anti-migrant campaign imperils major investments on the African continent as pressure mounts from key destinations such as Nigeria for boycotts and diplomatic sanctions to be imposed. That said, tough questions need to be asked of Africa’s leaders about why millions of their citizens gamble with death to reach Europe or to wade through the crocodile-infested Limpopo River to escape Zimbabwe and reach South Africa. For too long, pointing out the faults of fellow Africans was seen as playing into the West’s post-colonial playbook. Those arguments are no longer sustainable as Africans themselves are asking these questions.

South Africa’s President Cyril Ramaphosa said in an address to his nation that solving migration pressures requires “peace where there is conflict, economic growth where there is stagnation and opportunity where there is poverty”. Rwanda’s foreign minister Olivier Nduhungirehe said on a visit to South Africa in mid-June that any discussion on migration should focus on root causes and that poverty, conflict and limited opportunities in countries of origin must be addressed, rather than shifting the blame to destination states such as South Africa. In plain language, Africans are fleeing undemocratic and kleptocratic leaders to find succour in places where they feel they can live freely and prosper.

Take mineral-rich Zimbabwe, the home nation of by far the vast majority of illegal immigrants in South Africa. Its former President Robert Mugabe was ousted from office after 37 years; his successor since 2017, Emmerson Mnangagwa, has just changed the constitution to extend his power beyond 2030. Instead of condemning him, Ramaphosa rewarded him with a high-profile visit two months ago. The millions of Zimbabwean migrants in South Africa were not mentioned. So even as South Africa drives out unregistered Zimbabweans—60,000 were deported just last week—many more will continue to come because their home country is politically and economically intolerable.

In Uganda, Muhoozi Kainerugaba, the army chief and son of President Yoweri Museveni (41 years in office), has just shut down the country’s main independent media group’s television station and newspaper. Two weeks ago, Kainerugaba kidnapped an opposition leader and posted pictures on X of the man begging for mercy while being tortured. It will not get better anytime soon unless something changes. According to US nonprofit Freedom House, nine countries have slid into dictatorship from democracy in Africa since 2019. Many of these are blessed with abundant mineral wealth—but only politically connected elites benefit.

It is convenient for the privileged to blame colonialism for Africa’s migration crisis. There is some truth to that, of course; but look at South Africa’s western neighbour, Botswana. It experienced 30 years of annual economic expansion surpassing 7% due to the astute management of its diamond wealth and its fidelity to democratic leadership. Botswana’s people do not flee; leadership matters.

What is to be done?. Ironically, African leaders have shown the way. Through the Lome Agreements of 2000, African Union (AU) leaders agreed to hold each other accountable and even boot out anti-democratic actors and kleptocrats among them. Major state wars in Africa declined to just four in 2010 from 12 in 2000. African leaders have now thrown their admirable handiwork aside. The AU has reverted to the bad ways of its predecessor, the Organisation of African Unity, which was notorious for tolerating dictators. If a few good leaders can rejuvenate the AU and reinforce the spine of the Lome agreement, then there is hope.

The following is the article titled "Has El Niño spared the monsoon? Not exactly" from the "Our View" section, reproduced from the sources:

Has El Niño spared the monsoon? Not exactly

Rainfall coverage is still of enormous importance to Indian well-being. While initial fears of an El Niño dry-up this year might have begun to evaporate, it’s too early to relax our guard

Nearly six weeks after the South-west monsoon that accounts for about 75% of India’s total rainfall arrived in Kerala, it is time to take stock of this age-old determinant of economic outcomes, especially in the country’s rural hinterland. The sectoral composition of India’s economy has transformed over the years, with agriculture now making up only about 18% of gross value added, but this reduction in share has not been matched by a corresponding decline in the numbers who depend on farming. As estimated, the farm sector supports almost 43% of India’s workforce today. No wonder the annual monsoon’s progress holds us in thrall year after year.

The good news is that our worst fears about 2026 being an El Niño year—when a pronounced tilt in warm equatorial waters from the Pacific Ocean’s western side to its eastern tends to give India a harsh summer and weak monsoon—have not been realized. Some of the initial deficit in rainfall has been made up over the past week or so. The bad news is that although rains have now covered the entire country, its progress has been far from uniform. According to the India Meteorological Department, rainfall is likely to be ‘subdued’ over large parts of the landmass over the next six-seven days. Region-wise, east and northeast India are the worst off, recording a deficit of 37% due to weak rains in Bihar, Jharkhand and five states of the Northeast. Also, total precipitation is not all that counts. The spatial and temporal spread of rainfall is highly relevant to agriculture. And here, the harsh reality is that only about half our arable land is irrigated, leaving vast tracts reliant on seasonal rains.

Worse, irrigation facilities are largely concentrated in the relatively rich north-western part of India and some coastal states, which means poorer states suffer more from scanty rains. The impact of this year’s erratic rainfall, critical for the kharif season crop, is already visible in sowing data. The latest update, dated 6 July, shows that sowing is 21% lower than last year, with the shortfall higher in the case of pulses and oilseeds, both of which already stand out for high import dependency. Cereal supplies are less of a problem. As reported, stocks of wheat and rice in the central pool are nearly four times the prescribed buffer norm. This offers a cushion against any scarcity-led price pressures. But as Indian diets move away from an overdose of cereals towards more pulses and other protein-rich foods, a poor domestic harvest of pulses may have a disproportionate effect on people’s cost of living. Add to that a revival of uncertainty over oil supplies via the Strait of Hormuz, and general price volatility is hard to escape. Retail inflation was almost 4.4% last month, with food inflation not just higher, but looking up.

In such a scenario, the government bears the onus to relieve a potential rise in distress. Employment can make a difference. The Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission Gramin, which promises rural jobs, went into effect on 1 July. But several fiscally stretched state governments are reportedly reluctant to let it soak up funds, since the scheme is not fully funded by the Centre and they can suspend it during harvest season. This tangle may need to be resolved swiftly. At midway point, the monsoon hasn’t suffered much of an El Niño dry-out, but it’s too early to relax our guard.

The following is the article titled "IT Act 2025 tidies up presumptive tax—with a catch" by Gautam Nayak, reproduced from the sources:

IT Act 2025 tidies up presumptive tax—with a catch

A drafting tweak may have unintended tax consequences for presumptive taxpayers By Gautam Nayak

The new Income Tax Act, 2025, which replaces the Income Tax Act, 1961, has become applicable from 1 April 2025. According to the government, there have been no policy changes—only simplification of the language and rationalization of the structure of the provisions. One area where this exercise is evident is presumptive taxation.

Three schemes combined The 1961 Act had three separate presumptive taxation schemes—one for small businesses (6% or 8% of turnover, with turnover limits of ₹2 crore/₹3 crore), one for low-income professionals (50% of gross receipts, with receipt limits of ₹50 lakh/₹75 lakh), and one for transport operators of commercial goods vehicles (presumptive income based on vehicle capacity, subject to a limit of 10 goods transport vehicles).

All three have now been consolidated into a single section under the 2025 Act and will apply from the tax year 2026-27, for which income tax returns will be filed next year. The new provision contains a table setting out the type of business or profession, conditions for eligibility, limits of total turnover or gross receipts, and the manner of computation of presumptive income. The eligibility conditions, turnover limits and method of computing presumptive income remain unchanged from the 1961 Act for all three categories.

Higher income clarified The earlier law left room for confusion over whether taxpayers whose actual income exceeded the presumptive income could still offer only the presumptive income to tax. While many assumed they could, the wording suggested that the higher of the actual or presumptive income had to be offered to tax.

Under the 2025 Act, this has been made explicit and unambiguous. The computation table specifies both the presumptive income and the profit claimed to have actually been earned, and clearly provides that the higher of the two will be treated as taxable income.

Deduction dilemma The other key change—whether intended or unintended—relates to the applicability of deductions. Under the 1961 Act, once presumptive income was taxed, all deductions under the head "Profits and Gains of Business or Profession" were deemed to have been allowed, and no further deduction under those provisions, such as depreciation, could be claimed.

The 2025 Act, however, states that any loss, allowance or deduction under the provisions of the Act shall not be allowed against the presumptive income. This is broader than the earlier restriction, as it applies to all losses, allowances and deductions, and not merely those relating to the computation of business income. Of course, if the taxpayer opts for the new tax regime, deductions for investments and losses from self-occupied house property are in any case not available. However, there are other items that may still affect taxpayers, even under the new regime.

To illustrate, a taxpayer may have a loss from another business (which does not fall under the presumptive taxation provisions), a loss from house property on account of interest paid on a housing loan for a let-out property (up to the permissible limit), or a loss under the head "Income from Other Sources" arising from interest paid on borrowings used to invest in debt instruments. Under the earlier law, such losses could generally be set off against presumptive business income under the head "Profits and Gains of Business or Profession". Under the 2025 Act, such setoffs may no longer be available. Of course, these losses can still be set off against other eligible income, wherever permitted under the Act.

A substantive change? This is a significant and substantive change, and not merely a drafting simplification. One does not know whether this is a drafting error or an intended policy change, particularly given the government's repeated assertion that the 2025 Act was not meant to introduce substantive policy changes.

If this is indeed an unintended drafting mistake, the law may need to be amended, which would likely happen only during the next Budget. Therefore, taxpayers should carefully review the new provisions while computing their income for the tax year 2026-27, remaining alert to changes in the law that may appear minor on the surface but could materially affect the computation of taxable income.

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Gautam Nayak is a partner at CNK & Associates LLP.