Newspaper Summary 020326

 

SECTOR IMPACT: India’s $10 billion West Asia IT exports face fresh headwinds

By Sanjana B, Bengaluru

Of India’s $233 billion in IT exports, roughly $10 billion is generated from West Asia. Although firms typically report this under the wider MENA classification, the region has been among the fastest-growing markets for Indian IT services, expanding at an annual rate of about 6 per cent. Analysts caution that the ongoing war could disrupt this momentum, compounding pressures on an industry already grappling with AI-led disruption.

“The Gulf region has been a growth driver for Indian companies in the last two-three years as they were diversifying the economy beyond oil," explained Pareekh Jain, founder and CEO of EIIR Trend. "As the region becomes a financial, tourism, energy, telecom and high-tech hub, disruption could hurt Indian IT companies’ growth”.

Client Base

The region has been a significant client base for Indian IT firms, spanning sectors such as oil and gas, telecom, BFSI, airlines, hospitality, energy, and large government-led smart city initiatives.

Reflecting this importance, Indian IT major Wipro relocated its West Asia regional headquarters last year from Al Khobar to Riyadh, Saudi Arabia. This new office adds to Wipro’s growing regional footprint, which includes locations in Riyadh, Al Khobar, Jeddah, and Jubail.

Jain further noted that a sustained rise in oil prices would affect all sectors. While growth was expected to rebound as companies increased spending, high oil prices could push those plans to the back burner. If the conflict drags on, heightened uncertainty may lead companies to deprioritise AI-led transformation in favour of cost optimisation.

Positive Side

On the positive side, the defence sector could see an upside, with Indian defence companies potentially seeing increased demand from Gulf countries. Additionally, India may gain importance as an alternative location for Global Capability Centers (GCCs) as Gulf hubs face competition. While the Gulf had become an attractive destination for expats and professionals returning from the US, India now stands to benefit as a more stable option.

“GCC regions are already facing challenges — first Eastern Europe, then Latin America after Donald Trump returned to office, and now the Gulf," Jain highlighted. "This could strengthen India’s relative positioning as a delivery and talent hub”.

Airlines cancel 350 flights on Sunday

Our Bureau, Mumbai

Indian carriers cancelled 350 international flights on Sunday following the closure of airspace amidst ongoing clashes in the West Asia region. Airspace in the UAE, Bahrain, Kuwait, and Qatar remains closed for air traffic due to drone assaults and attacks on local airports. While Oman and Saudi Arabian airspace remained partially open, Indian carriers avoided transit, cancelling their outbound Europe and US flights on Sunday.

Air India reported that close monitoring and assessment of the evolving situation resulted in the curtailment of scheduled operations to Europe and the US. Select flights to Birmingham, Zurich, and Copenhagen have been cancelled for Monday. Additionally, non-stop flights to New York and Newark will operate with a halt at Rome. IndiGo stated its Europe and West Asia flights would be cancelled, while Air India Express extended cancellations to GCC member countries until Monday midnight.

The shutdown of major West Asia hubs has led to massive disruption, with flights bound for Dubai and Doha diverting to European airports or returning to their points of origin. The Indian embassy in Hungary arranged meals for 130 passengers on an Emirates Chicago-Dubai flight that diverted to Budapest, while the Indian embassy in Kuwait is in touch with and assisting stranded nationals.

Meanwhile, the Directorate General of Civil Aviation issued instructions on Saturday requiring airlines and airports to set up disruption help desks to assist with passenger facilitation and operational coordination.

GST collection in Feb up 8%, ‘marks sustained growth’, say experts

By Shishir Sinha, New Delhi

Goods and services tax (GST) collections rose over 8 per cent in February, according to data released by the Finance Ministry on Sunday, which experts feel marks sustained consumption growth. GST collection in January recorded a growth of over 6 per cent. However, that figure was for 31 days, while the mop-up in February was for only 28 days, making the growth rate in the month under consideration more significant.

Data showed that while domestic collection grew by over 5 per cent, collection from imported goods increased by over 17 per cent, contributing to the growth in February. According to MS Mani, Partner at Deloitte India, the GST collection figures reflect a consumption uptick that has more than compensated for the rate reductions. “However, in terms of absolute numbers, the collections which were previously inching towards ₹2 lakh crore per month, have pulled back after the rate reduction and it will take some more time for the ₹2 lakh crore mark to emerge,” he said.

Broadbased Growth

Bigger States such as Maharashtra and Uttar Pradesh showed growth rates of 6 per cent and 5 per cent, respectively. However, these figures are lower than the national average. Also, States such as Tamil Nadu (-6 per cent), Madhya Pradesh (-8 per cent), and Rajasthan (-1 per cent) showed negative growth.

However, experts found an encouraging trend in other States. “The strong uptick in States such as Jammu & Kashmir, Bihar, Sikkim, Nagaland, Manipur, Meghalaya, Odisha and Ladakh reflects the deepening of economic activity across the breadth of the country, signalling that growth is becoming broader-based than ever,” said Saurabh Agarwal, Tax Partner, EY India.

Vivek Jalan, Partner at Tax Connect Advisory Services, felt that the impact of GST 2.0 was clearly showing on domestic consumption at ₹1.25 lakh crore, up 8 per cent against February 2025’s 6.2 per cent, even after the reduced GST rates from September 2025. “If we incorporate the impact of the GST 2.0 rate reduction, the y-o-y growth would be even more,” he said.

According to Jalan, the year-to-date GST numbers also reflect the robustness of the Indian economy, as even after rate rationalisation under GST 2.0, the net GST collections from domestic consumption stand at ₹13.37 lakh crore, which is still a growth of 4.9 per cent against ₹12.75 lakh crore in FY25.

Indian economy: Macro, 100. Micro 0

By TCA Srinivasa Raghavan

Why do successive governments of India manage the macro economy so well and make a complete dog’s breakfast of the micro economy? This question was first asked in the late 1960s by Jagdish Bhagwati and the late TN Srinivasan. As is to be expected in a bureaucratic state with a semi-colonial and semi-imperial outlook, no one paid a blind bit of attention to this highly perceptive insight and hugely uncomfortable question. But it remains valid even today.

Just look at the record of even governments that have tried to solve the problem. After nearly a dozen years, the three Modi governments have provided massive macroeconomic stability. But unfortunately nothing much has changed for the business environment. This, after trying quite hard since 2014 to improve the ‘ease of doing business’.

The low rate of private investment is proof of the comprehensive failure of this effort. India remains a very bad place to do business in. Sharad Marathe, one of India’s foremost economists between 1950 and 2008, put it baldly: “India is the only country that says to its businessmen, thou shalt not produce.” This is despite the fact that we have always needed an investment rate of at least 37-38 per cent. But we are stuck at about 30 per cent. China, and all of East Asia, managed to get close to or more than 40-plus per cent investment rate for three straight decades. That’s why they are where they are now and we are where we are.

All this has been known for many years. But our political, administrative and, of late, sociological arrangements are such that we are unable to dig ourselves out of this very deep hole.

Institutional Arrangements

Politics is about power and the way it is distributed in a country. In India there is very little clarity about this because the Constitution makers opted for the best design, forgetting that in these matters the best is the enemy of the good. I am referring to the three lists that distribute power in the Union of India: the Central list, the States list and the Concurrent list. This last is a colonial abomination. It well and truly muddies the waters especially in economic matters because much of microeconomic policy and execution is a State subject.

The economic consequences of split jurisdiction are absurd. Thus while interest rates are a Central subject, wage rates are a State subject. However, environmental policy is both a Central and a State subject. These examples can be multiplied. Suffice it to say that we have glorious confusion. So what should be done? The answer is simple but politically very difficult. We should abolish the Concurrent list by transferring most items in it — notably those in which the Centre has very little interest — to the States list.

The point is this: the Concurrent list was necessary as a reassurance in 1950. It isn’t any longer. Today it’s just a hindrance and a handy provider of excuses for non-action by the Centre as well as the States. In truth we have the worst aspects of both China and the US. In China there’s virtually no independence for the provinces. In the US it’s the federal government that’s constrained by the freedom that the states have. In India both the Centre and the States constrain each other, which, I must say, is a new interpretation of “checks and balances”.

As to the administrative aspects, they are easier to sort out, except when the sociological complications make them difficult. The central problem here is pervasive incompetence caused by flawed induction on the one hand and excessive job protections policies on the other. You can’t employ the unfit and then keep them on for 35 years. Efficiency is the victim.

Three Big Contradictions

There are three other huge contradictions. The judiciary tries to ensure “justice for all”. The executive tries to ensure equity via distribution and redistribution. But absolutely no one tries to ensure efficiency.

Indeed, the persistent and extreme focus on equity, orchestrated by the Left, damages both justice and efficiency. We thus have the worst of all worlds, at least where the microeconomics of India is concerned. Indian business has been reduced to a sad Kafkaesque spectacle of political, judicial and bureaucratic oppression.

It is no one’s case that equity and justice are not important. Of course they are. But should they come at the cost of efficiency to the extent that prevails in India? I mean why cripple your own racehorses? As that TV news anchor used to say, the nation wants to know. Or at least I do. Maybe you should too.

Well-intentioned, but politically fraught

By M Ramesh

Much water has flowed under the bridge since the government unveiled its first National Electricity Policy in 2005. Against a vastly altered backdrop — rising renewable energy, storage, distributed generation, electricity markets and cybersecurity concerns — the Ministry of Power released, in January, the Draft National Electricity Policy, 2026.

Key Features

The draft proposes a significantly revamped regime for the electricity sector. Its key features include:

• Tariffs indexed to inflation, allowing for automatic revisions.
• Recovery of full costs without deferring them as “regulatory assets”.
• Abolition of cross-subsidy surcharges, which currently make industry pay for subsidised power provided to poorer consumers.
• Complete solarisation of agriculture by 2030 to shift farm demand to daytime solar hours and ease sharp evening peaks.

At its core lies an anticipated rise in per capita electricity consumption, currently about 1,460 kWh. The draft projects this will rise to 2,000 kWh by 2030 and double that by 2047. Crucially, this expansion in demand is expected to be green.

Shifts in Thinking

The draft reflects deeper shifts in thinking, moving away from headline capacity addition toward structured resource adequacy planning and stronger demand forecasting. It also emphasizes financial discipline and the expanding role of energy markets through the "India energy stack".

Greening the grid finds explicit mention, including the development of capacity markets and building flexible coal-based capacity to complement renewables. Furthermore, cybersecurity receives due emphasis, with new regulations and a strict requirement for data localisation: all infrastructure and control systems storing or processing power sector data must be located within India.

Sensible, But Tough

While analysts have broadly welcomed the draft as a compilation of sensible ideas, the challenge lies in execution, particularly regarding the fragile financial health of State-owned distribution companies (discoms). State-run discoms have accumulated losses of ₹6.77 lakh crore and owe ₹7.11 lakh crore to creditors.

The policy seeks to impose discipline through automatic tariff adjustments and the timely payment of subsidies by State governments. However, these measures are politically sensitive. Rationalising tariffs could mean reducing industrial rates while raising domestic ones, which often faces resistance. Institutional constraints, such as litigation-induced stays and delayed regulatory hearings, also persist as obstacles to timely tariff implementation.

The Ministry has stated that the draft does not contain provisions that would adversely affect poor consumers, implying that direct benefit transfers could be used to compensate vulnerable households if tariffs rise.

Agri Solarisation

Perhaps the most significant directionally positive element is the push to solarise agricultural feeders. It mandates that states complete solarisation of all agriculture feeders by 2030, suitably backed by storage. By segregating agricultural load onto dedicated feeders, solar power can be supplied more effectively, aligning farm consumption with daytime generation and reducing the overall subsidy burden.

From agarbatti to aerospace — the radiating scent of success

By Venkatesha Babu

Mysuru is just 140 km southwest of vibrant and chaotic IT hub Bengaluru, but even today evokes nostalgic memories of a bygone era with its tree-filled avenues and old-world charm. The largest private sector business to have emerged out of the city is the ₹2,000-crore — in annual revenues — NR Group. Steering the fortunes of the group today is third-generation scion Arjun Ranga, managing a conglomerate that spans everything from agarbattis to aerospace engineering.

A Diversified Empire

The NR Group has interests in six core areas:

• Agarbatti (incense stick), perfumed candles, and fragrance-related business through N Ranga Rao & Sons.
• Natural and essential oils through NESSO.
• High-tech engineering through Rangsons Aerospace & Defence.
• Lifestyle and air care products through Ripple Fragrances.
• Internet of Things (IoT) and artificial intelligence through Rangsons Technologies.
• Neurocare and health services under NR Neuro Care and the Sitaranga hospital.

If you have used a Calvin Klein or Dolce & Gabbana perfume, there are high chances some ingredients were supplied by NESSO. In aerospace and defence, the group produces high-tech components like heat exchangers, SATCOM antennas, and flight data recorders for global OEMs and Indian agencies like HAL, DRDO, and ISRO.

Steady Pedalling: The Founder’s Legacy

The group’s success is rooted in the solid foundation laid by the patriarch, N Ranga Rao. Born in 1912 in Madurai, Ranga Rao lost his father at age eight and became the primary caregiver for his family. After working various jobs and showing early entrepreneurial sparks — such as selling peppermint to fellow students at a mark-up — he moved to Mysuru at the time of Independence to pursue his passion.

In 1948, supported by his wife who pledged her gold for initial capital, he launched N Ranga Rao and Sons. He identified the need for a universal brand and chose “Cycle” because it was a ubiquitous vehicle and pronounced the same in all languages. The group's enduring tagline remains: “everyone has a reason to pray”.

Innovation and Discipline

Arjun Ranga explains that his grandfather focused on three things: innovation, market fit, and financial discipline. At a time when incense sticks (then called ‘baalbatti’) were sold as thin strands of poor quality, Ranga Rao offered 30 thick, high-quality sticks in paper cartons instead of 100 poor ones in metal boxes. He even imported perfumery texts from France to develop his own unique fragrances.

Today, the group maintains a unique structure where family members meet at least once a month for collective decisions guided by elders. Arjun himself is a master perfumer who can often reverse-engineer a product's source just by its smell.

Table Talk at the Radisson

Meeting at a business centre in the Radisson hotel, Arjun Ranga reflects on the group's commitment to Mysuru. Despite the lack of frequent flights from the local airport, the group refuses to move to Bengaluru. Arjun, who is on the road meeting clients for at least two weeks a month, maintains a spartan diet of diet coke while recovering from a tennis-related hand injury, sticking to the values of discipline that have defined the group for three generations.

‘We have to start thinking of AI as a public good’

Nitin Paranjpe, Chairman of Hindustan Unilever (HUL), delivered the 44th Palkhivala Memorial Lecture in Chennai on the theme ‘AI for Aam Aadmi’. In a conversation with businessline before the lecture, he shared insights on the role of AI in India and the leadership philosophy at HUL.

On Small vs. Large AI Models

Paranjpe addressed the view that India should focus on "small" AI models for practical use by farmers and the general public, rather than trying to compete with global giants in large language models. He noted that while a few entities dominate large-scale datasets and infrastructure, India can excel in:

• Application Shaping: Determining how AI applications are designed and used.
• Governance and Deployment: Managing the rules and rollout of AI technologies.
• Domain-Specific Models: Developing targeted "small language models" for specific sectors like agri-services, which can sometimes outperform general-purpose large models in those areas.

He cited Mahavistaar, an agri-services digital platform in Maharashtra, and the national Bharat Vistaar initiative as examples of AI already serving the "aam aadmi".

AI as a Public Good

Paranjpe proposed a fundamental shift in how AI is viewed: “We have to start thinking of AI as a public good, like electricity or roads”. He argued that by treating it as infrastructure, the government can:

• Enable Private Innovation: Allow private entities to build applications on top of this "highway".
• Ensure Universal Access: Provide students, entrepreneurs, and SMEs with the tools needed to create real utility for society.

Leadership at HUL

Discussing HUL's reputation as a "school for CEOs," Paranjpe highlighted a long-standing commitment to talent development:

• Cultural Ethos: A focus on recruiting people who understand India's complex and diverse cultural landscape.
• Grooming and Mentoring: A tradition, dating back decades, of identifying top talent and "throwing them into the deep end" while providing strong mentorship.
• DNA of the Organisation: The belief that it is a leader's job to identify and mentor future leaders, ensuring the company remains an employer of choice.
• Meritocracy: Creating an enabling culture based on values and merit.

Turks cheer gold’s rise, rush to buy even more

Yellow metal holding swells to half the size of Turkey’s GDP, but most of it is ‘under the mattress’ Reuters

Gold-loving Turks grew $300 billion wealthier in the past year as record prices swelled the value of their holdings to nearly half the size of Turkey’s economy, but the resulting resilience in domestic demand has slowed the country’s already difficult fight against inflation.

With global bullion soaring to all-time highs in recent times, the total value of Turkey’s gold stock has climbed to more than $750 billion, which is exceptionally high by global standards, considering Turkey’s GDP of about $1.57 trillion.

The central bank says $600 billion of that stock is “under the mattress”, or “under the pillow”: gold held by households and companies outside the banking system, reflecting a long tradition of Turks holding tight to the metal as a safe, portable, tangible store of wealth.

The doubling of the value of these coins, bangles and other gold pieces in a year has encouraged spending, despite annual inflation above 30 per cent. Economists and the central bank say this has complicated a disinflation path, prompting slower interest rate cuts.

Buying Confidence

Gold hit $5,000 an ounce in January, driven by trade disruptions and geopolitical instability. For Turks, the global gold rush marks some relief after a nearly decade-long inflation and currency crisis that eroded the lira’s value.

“Gold is the only thing we trust,” said 34-year-old shopkeeper Furkan as he used cash to buy a gram of gold at an Istanbul shop. “I believe prices will rise even further. I’m planning to buy a car”.

Turkey has among the highest levels of household gold ownership alongside India, Germany and Vietnam. Beyond what is under the pillow, Turkish banks store some $80 billion of the metal in bank deposits and investment funds, while the central bank owns about $80 billion in reserves.

Slowed Rate Cuts

In a recent blog post, the central bank flagged that housing prices have risen markedly more in provinces with a higher share of gold deposits than elsewhere since the last quarter of 2023. When households use gold-related wealth to buy homes without relying on credit, “demand remains strong even amid tight financial conditions”, it said, calling this a “clear sign of a wealth effect”.

Asim Gursel, a gold shop owner in Istanbul, said that over the past year customers were increasingly selling gold to buy cars or first homes in a reversal from past practices when they were largely selling homes to buy gold.

The central bank cut its key rate to 40 per cent from 45 per cent on Thursday, its first reduction in over two years, but indicated that future cuts would depend on a sustained fall in underlying inflation.