Reimagining India’s energy security

Energy security has been one of the central concerns of Indian policy making for decades, and for good reason. Energy is the lifeblood of economic growth, and our inability to produce enough of it domestically has repeatedly shown up as strain on the country’s fiscal position and trade balance. Every time global oil prices spike, our import bill balloons, our current account deficit widens, and the rupee comes under pressure. This is not an abstract macroeconomic point — it eventually finds its way into fuel prices, inflation, and the fiscal room available to the government for other priorities.

Over the last decade, India has made genuine progress in building a renewable energy ecosystem. But when I look at the numbers, our dependence on imported fossil fuels remains overwhelming, and the high energy intensity of our growth model continues to shape and constrain our foreign policy and geopolitical choices — whether it is our relationship with Gulf oil producers, our purchases of discounted Russian crude, or how we navigate sanctions and shipping routes.

The execution gap

Some of India’s energy problem is structural. But a good part of it is about execution — and the data bears this out.

Crude oil production has been flat to declining for years. Domestic output has fallen from around 29.7 million tonnes in 2021-22 to about 28 million tonnes in 2025-26, even as consumption keeps climbing. As a result, our import dependence for crude has climbed to a record high — touching close to 89% in 2025-26, up from 85.5% five years earlier. India is now the world’s third-largest crude importer, and by some estimates is responsible for a quarter of all global oil demand growth over the last two years.

Natural gas tells a similar story of stagnation, followed by a partial recovery. Domestic gas production had been declining or flat for the better part of a decade before deepwater fields in the Krishna-Godavari basin brought some resurgence — output touched about 35 billion cubic meters in 2023, enough to cover roughly half our demand. But growth from here is expected to be modest, while LNG imports are projected to more than double by 2030, cementing our place among the world’s largest LNG importers.

Hydropower has barely moved the needle. Capacity additions have slowed to a crawl, and hydro’s share of our electricity mix has actually declined over the past decade as other sources — coal, solar, wind — have grown faster. In years of poor monsoon, hydro generation has fallen to multi-year lows, exposing how dependent this “renewable” source still is on rainfall.

Coal is the one fuel where India has genuinely scaled up domestic production — crossing the milestone of one billion tonnes in a single year for the first time, with output up by roughly 70-80% over the past decade. And yet we still import 20-25% of our coal requirement, mainly high-quality coking coal for steel-making and better-grade thermal coal that domestic mines cannot fully substitute. Even our biggest domestic energy success story still carries an import tail we haven’t managed to cut.

And then there is solar — the poster child of India’s renewable transition, and also the clearest illustration of “poor execution” in a different sense. India added a record amount of solar capacity in 2025, pushing installed solar capacity past 130 GW and non-fossil capacity past half of our total installed power capacity — a Paris Agreement milestone reached five years ahead of schedule. On paper this looks like a triumph. In practice, a meaningful share of this new capacity has had to be switched off. Grid operators curtailed roughly 2.3 terawatt-hours of solar generation in 2025 alone because the system simply could not absorb it — Rajasthan, our leading solar state, has seen curtailment cross 50% during peak sunlight hours in some months. The core problem is that we built generation capacity far faster than we built storage and grid flexibility: India’s battery storage capacity, at last count, was a fraction of a single gigawatt-hour — negligible compared to the scale of solar we have added. We built the tap before we built the tank.

Beyond Megawatts: What a holistic framework looks like

This brings me to what I think is the deeper issue: India’s energy conversation is almost entirely about generation. We debate gigawatt targets, auction results, and capacity additions. We rarely ask whether we are using energy well in the first place. A genuinely holistic energy security framework has to go beyond “how much can we generate” and ask “how little do we actually need to generate.”

Megawatts vs Negawatts. A unit of energy saved is worth more than a unit of energy produced, because saved energy avoids not just generation cost but also transmission, transportation and distribution losses along the way. Yet our incentive structures, our headlines and our policy attention overwhelmingly reward the “Megawatt” — new capacity commissioned — and barely acknowledge the “Negawatt” — demand that was never created in the first place. Efficiency doesn’t get a ribbon-cutting ceremony, but it deserves serious policy weight.

Living with nature, not just extracting from it. Our energy strategy treats nature purely as a source to be exploited — sun, wind, water, coal — rather than as a rhythm to live within. Shifting working hours to track daylight, dressing for our own climate rather than inherited colonial dress codes, and designing buildings for local climate rather than imported architectural fashion are not fringe ideas — they are low-cost, high-impact ways to cut energy demand at the source. Right now, most of this sits in the “nice to have” bucket rather than being part of how we plan cities and workplaces.

Reimagining industrial townships. Much of our energy demand — and our transport-related energy waste — comes from workers commuting long distances between where they live and where they work. Integrated, energy-efficient industrial townships, designed so the workforce doesn’t need to travel far, would cut transport energy use meaningfully while also improving quality of life. This needs to be a deliberate part of industrial policy, not an incidental outcome of land availability.

The water-energy nexus. Water and energy are tightly linked in India, more than we usually admit. Pumping groundwater, moving water through canals, and growing water-intensive crops in water-stressed regions all consume large amounts of energy. Rainwater harvesting, smarter crop choices suited to local water availability, and better irrigation infrastructure would reduce the energy footprint of our water systems — an angle that rarely features in energy security discussions, but should.

Public transport as an energy strategy, not just an urban amenity. Every private vehicle trip that could have been a bus or metro trip is, whether we frame it that way or not, an energy security decision. Improving last-mile connectivity, raising the comfort and reliability of public transport, and providing real incentives to use it are among the highest-leverage ways to cut transport energy demand — one of the fastest-growing components of our energy consumption.

Why this matters

None of this is to dismiss the real progress India has made — the coal production milestone, the solar capacity build-out, and the narrowing, if still incomplete, of overall primary energy import dependence, which has fallen from about 47% to 42% between FY17 and FY25. But the numbers also make clear that generation-side progress alone will not get us to energy security. Our oil and gas production is structurally constrained. Our hydro potential remains underexploited. Promotion of pumped storage is a step in right direction. And even our solar success is currently being partly wasted for want of storage and grid flexibility.

A holistic energy security framework has to treat demand reduction, climate-appropriate living, and efficient urban and industrial design as being just as central to energy security as the next gigawatt of capacity. Until Negawatts get the same policy attention as Megawatts, India’s energy security will remain a story of running hard just to stay in place.

 

The next round of QE might break something

Last week, I found myself doing the most boring kind of research an investor can do: comparing grocery receipts, gathered from friends, across four cities. A basic basket — some fruit, dairy, a few staples, nothing fancy. The bill ran close to US$90 in San Francisco; US$32 in Singapore; about US$25 in Johor Bahru, just across the Malaysian border, and US$21 in New Delhi. Singapore is one of the most expensive cities on earth; but San Francisco was still ~40% pricier than that, and more than four times pricier than Johor and Delhi.

Those grocery receipts are a better macro indicator than most of what crosses my desk. Because if you strip away exchange rates and just ask what a US dollar, a Singapore dollar, a Ringgit or a Rupee can actually buy, the picture of the US economy that emerges is very different from the one in the headline GDP numbers. And once you sit with that picture for a while, a few other things I’ve been tracking — household debt, the shape of Treasury issuance, and the politics at the Federal Reserve — start to line up into a story that should worry anyone holding US assets on autopilot.

The GDP number is flattering itself

US GDP is measured in nominal dollars, and consumption is about 70% of that number. But nominal dollars in an economy where a basic grocery run costs three to four times what it costs across large parts of Asia are not the same thing as real purchasing power. See the US output through the purchasing-power-parity lens, which economists use to compare living standards across countries, and a meaningful chunk of America’s GDP lead evaporates. It isn’t that Americans are producing that much more; it’s just that everything they buy is priced that much higher.

This matters because Washington keeps pointing to a 3% year-on-year inflation print as evidence that the inflation problem is basically solved. It isn’t. 3% this year sits on top of a price level that has already doubled or tripled relative to large parts of the world over the last few decades. A “controlled” 3% on an already-inflated base is not the same as price stability — it’s a slower march up a mountain you’ve already climbed most of. When your starting altitude is this high, the next few percentage points matter a lot more than the official narrative suggests.

The debt picture looks better than it is

The standard rebuttal to any US-fragility argument is the debt chart: household debt as a share of GDP has fallen from roughly 98% at the 2008 peak to around 70% today (or from about 86% to 62% on the narrower Federal Reserve measure). In real, inflation-adjusted dollars, total household debt is still just below its 2009 high. On the surface, that looks like a system that deleveraged responsibly.

Look under the surface and the story changes. The composition of that debt has shifted away from mortgages — which are secured, long-dated, and mostly held by higher-income, higher-asset households — into student loans and auto loans, which are unsecured or attached to rapidly depreciating collateral, and which are concentrated in the bottom two-thirds of the income distribution. That’s not a healthier balance sheet; it’s the same debt burden redistributed onto households with the least capacity to absorb a shock.

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And the shock is already showing up in the delinquency data. Student loan forbearance ended, and serious delinquencies jumped from under 1% to over 16% in a single year, with roughly one in ten dollars of student debt now 90-plus days past due. Credit card serious-delinquency flow is running near 7%, on balances carrying interest rates north of 22%. Auto loans have roughly doubled in dollar terms, stretched out to six- and seven-year terms on assets that lose value the moment they leave the factory, with negative equity now common. Put it together and the flow of debt going seriously delinquent across the household sector has nearly doubled year-on-year. That is not a slow-burn statistic — that is a system starting to crack at the load-bearing joints.

Why the next move is almost certainly more easing

Here is where the fiscal and monetary threads meet. The US Treasury has been quietly running its own version of quantitative easing by issuing an unusually large share of new debt — well over 80% — as bills with maturities under a year. That’s the fiscal equivalent of financing a house with an adjustable-rate mortgage instead of a thirty-year fixed: it looks cheap when short rates are low, and it becomes a rolling crisis the moment they aren’t. It works fine right up until it doesn’t.

Meanwhile, the buffer that used to absorb funding stress — excess bank reserves — has been drawn down. The last time reserves got this thin, in September 2019, the overnight repo market seized up and the Fed had to step in with emergency liquidity almost overnight. We are closer to a repeat of that than most portfolios are priced for.

Add the politics. Whoever ends up leading the Fed inherits an institution that is still majority hawkish, at a moment when the Treasury’s own borrowing structure and a fragile household sector are both quietly begging for lower rates and more liquidity. Any new chair with an inflation-hawk reputation has every incentive to hold the line as long as politically possible — partly on principle, partly to protect their own legacy — before the pressure becomes unavoidable. But the direction of travel is not really in question. Between an over-levered household sector, a Treasury that has to keep rolling short-dated debt, and a banking system running low on reserves, the destination is the same: more balance-sheet expansion, on a scale bigger than 2020 or 2008. The only real question is how much pain arrives in the gap between now and then.

The dangerous part is the gap, not the destination

This is the part that is genuinely hard to model, and it’s the part most investors are ignoring. Everyone can see the endpoint — easier money is coming, eventually, because the alternative is a funding crisis nobody in Washington wants to own. What’s much less certain is what happens in the interval between “everyone knows QE is coming” and “QE actually arrives.” That gap is where currency stress, bond-market air pockets, and credit events tend to live. History doesn’t move in a straight line from problem to solution; it moves through a chaotic middle where things break in ways nobody predicted, before policymakers are finally forced to act. Anyone who lived through 1997, 2000, or 2008 as an investor remembers that the crisis wasn’t the eventual policy response — it was the disorderly scramble that forced the response.

And if the policy response, when it comes, is aggressive — a real “super QE" rather than a modest top-up — the inflationary consequences could be severe. An economy already running elevated inflation on top of an inflated price base, hit with a large new wave of liquidity, does not necessarily settle back into 2–3% inflation. It can just as easily accelerate toward double digits, especially with a fiscal deficit that shows no sign of shrinking.

Why this time the social risk is not purely theoretical

Here is the part that doesn’t usually make it into investment commentary, but probably should. A generation of young Americans is coming of age with weak job prospects in traditionally high paying sectors, high living costs, record levels of unsecured consumer debt, and a wall of delinquencies already forming under their feet. Layer double-digit inflation on top of that combination, and you are not just looking at a market risk. You are looking at a social one.

Civil unrest as a tail risk for the US used to be the kind of thing you’d mention only half-seriously, a footnote in a scenario-planning deck. I don’t think it’s purely theoretical anymore. It doesn’t need to become the base case to matter — even a modest, non-trivial probability of serious social instability is the kind of risk that reprices currencies, sovereign spreads, and equity risk premia long before it shows up on the evening news. Markets are usually terrible at pricing tail risks like this until the tail starts wagging the dog.

What this means for how I’m positioning

None of this is a call to panic or to abandon US assets wholesale — the United States remains the deepest, most liquid capital market in the world, and that doesn’t change overnight. But it is a case for taking seriously a scenario the consensus is currently pricing at close to zero: a period of genuine monetary, fiscal, and social stress in the US, sitting between now and the eventual “everything gets easier” resolution. That argues for holding real assets and inflation hedges; for not over-extending duration into US paper on the assumption that rates only fall from here in an orderly way; and for treating US-dollar cash as a tool rather than a safe haven by default.

The lesson from every cycle I’ve watched — 1997, 2000, 2008 — is the same: the eventual policy response is rarely the dangerous part. The dangerous part is the disorderly stretch of road that forces policymakers into that response in the first place. We may be entering that stretch of road now, and it’s worth positioning for the possibility that it gets bumpier before it gets smoother.

 

The Balloon in the Dark Room

Yesterday’s post drew a wider response than I expected, and I am grateful for it. Most readers found the argument thought-provoking and timely; a smaller number found it unnecessarily alarming and short on substance. Both reactions are fair, and I want to address the second group directly rather than let the disagreement sit unanswered.

When the numbers stop explaining themselves

Every investing career eventually runs into a stretch where the spreadsheet stops being a reliable guide. Valuation models still produce an output, but the confidence behind the output erodes, because the inputs themselves — growth rates, discount rates, terminal assumptions — are being asked to do work they were never designed for. In those stretches, experienced investors tend to fall back on something closer to pattern recognition than arithmetic: a sense, built from having sat through a few cycles, that the character of the market has shifted even before the numbers confirm it.

My sense is that we are in exactly that kind of stretch. It is not a single data point driving that view; it is the accumulation of several stress signals appearing at the same time, each individually explainable, but collectively unusual.

The signals worth naming

Fiscal sustainability. In several major economies, government deficits and debt-servicing costs have reached levels that would once have triggered a sharp market response. Instead, they have been absorbed with surprising calm, largely because interest rate cycles and demand for sovereign debt have so far cooperated. That cooperation is not guaranteed to continue indefinitely.

Sticky inflation. Headline inflation has come off its post-pandemic peaks, but the underlying components — services, wages, shelter — have proven far stickier than central banks initially projected. This matters because it narrows the room policymakers have to cut rates aggressively if growth weakens, which is precisely the tool that has rescued markets in past downturns.

Stagnating growth. Several developed economies are showing growth rates that are positive on paper but weak beneath the surface — propped up by government spending, a handful of mega-cap companies, or one-off factors, rather than broad-based private investment.

Stretched growth valuations. A narrow set of companies, heavily concentrated in AI-linked infrastructure, is being priced as though its current growth trajectory extends cleanly for a decade or more. Multiples of this kind have historically required near-perfect execution to be justified, and near-perfect execution is a high bar over a long horizon.

Rising credit stress. Pockets of the credit market — leveraged loans, private credit, and select corporate sectors — are showing early signs of strain: widening spreads, downgrades, and refinancing difficulty. Credit stress is usually a leading indicator rather than a lagging one; it tends to show up before equity markets acknowledge a problem.

Geopolitics and trade. Tariff uncertainty, shifting alliances, and logistics disruption are adding a layer of unpredictability to corporate planning that did not exist to the same degree a decade ago. Supply chains built for efficiency are being rebuilt for resilience, and that transition is expensive and slow.

Volatility across unrelated assets. Semiconductor equities, silver, bitcoin, and the SpaceX IPO have each delivered sharp, painful drawdowns in recent months. What is notable is not any single move, but that the losses have appeared across asset classes that are not normally correlated — a sign that liquidity and risk appetite, not asset-specific fundamentals, may be the common thread.

AI’s unresolved business model. Artificial intelligence has genuinely disrupted several legacy industries, and that part of the story is real. What remains unproven is whether the AI buildout itself — the capital expenditure, the compute, the infrastructure — will generate a return that justifies its cost on any reasonable timeline. Disruption of others’ business models is not the same as having a durable one of your own.

The balloon in the Dark Room

None of these signals, on its own, is a crisis. That is exactly what makes the moment harder to read, not easier. It feels like a group of persons standing in a dark room holding pins in their hands, knowing there is a balloon somewhere above, without knowing which pin — or whose hand — will find it first. The probability that no pin ever finds the balloon is not zero. But it is not the base case either, and treating it as the base case is where I think the complacent reading of this market goes wrong.

Why this could be a combination, not a repeat

Markets rarely repeat a crisis exactly; they tend to borrow ingredients from more than one. My working view is that if a serious correction unfolds from here, it is more likely to resemble a blend of three earlier episodes than a clean replay of any single one.

2008 and 2000, combined. The 2008 crisis was fundamentally a credit crisis — leverage built on assets whose value was assumed rather than tested. The 2000 crisis was a story of capital pouring into business models that had not yet proven they could generate durable cash flow. The current AI investment cycle carries elements of both: enormous capital expenditure, increasingly financed with debt and vendor-financing arrangements, directed at business models that remain commercially unproven at scale.

1997 and 1998, revisited. The Asian financial crisis and the collapse of Long-Term Capital Management were both, at their core, stories of a strengthening US dollar exposing leverage and mispricing elsewhere in the system. A materially stronger dollar today would put similar pressure on precious metals and crypto assets, both of which have attracted significant speculative positioning over the past two years.

1987, echoed. Black Monday was less about a single fundamental trigger and more about mechanics: rising rates, unresolved trade and currency disputes, stretched valuations, and — critically — automated trading systems that amplified a decline rather than cushioning it. The scale and speed of algorithmic execution in markets today is far greater than it was in 1987, which means the mechanical amplification risk, if anything, is larger, not smaller.

A downturn that borrows credit stress from 2008, unproven business models from 2000, dollar-driven deleveraging from 1997, and mechanical amplification from 1987 would not look identical to any one of those events. It could plausibly be sharper and more disorienting than any of them individually, precisely because it would be arriving from several directions at once rather than one.

What the twelve months before every crash have in common

It is worth revisiting how each of these episodes felt in the twelve months before they began, because the emotional texture tends to rhyme even when the underlying causes differ. In 1996, 1999, and 2007, the dominant mood was not fear — it was irritation with anyone who raised the possibility of a top. Alan Greenspan’s irrational exuberance remark in December 1996 was widely dismissed at the time, and the market ran for several more years before the reckoning arrived. The same pattern held in 1999, and again in 2007, when concerns about housing and credit quality were treated as the fringe view rather than the mainstream one.

I do not think 2026 sounds meaningfully different from those years. The specific worry differs each cycle, but the response to the worry — dismissal, followed by irritation, followed eventually by recognition — has been remarkably consistent. That consistency is itself part of the argument, not a footnote to it.

A closing note

None of this is a prediction with a date attached, and it should not be read as one. It is a personal, opinion-based on reading of conditions that I believe warrant more caution than the current mood in markets reflects. Markets can, and often do, remain irrational for longer than any individual view accounts for, and I could simply be wrong. Regardless, I would like to be cautious and brace myself for the “reset”. Also, I completely respect the disagreement.

 

Getting ready for the “reset”

Shravan has just begun. In the Hindu calendar it is the month dedicated to Shiva, the ascetic among the gods, and across northern India devotees mark it by giving up ordinary comforts, keeping fasts, and walking long distances to fetch water from the Ganga to offer at their local Shiva shrine. Poets have long used the same month as a backdrop for separation and longing between lovers — a season built, in one way or another, around waiting for something to end so something else can begin.

That idea of an ending that clears the way for a beginning is what keeps pulling me back to one particular story from Hindu mythology. I have told it before, and I want to tell it again, because I think we are approaching another one of those endings — a serious reset in asset prices.

The Churning of the Ocean

The devas and the asuras — the gods and the demons — had been at war for so long that both sides were spent. Neither could win, and neither had anything left to fight with. Exhausted, they turned to Vishnu for a way out. His advice was unusual: stop fighting each other and churn the cosmic ocean together instead, using Mount Mandara as the churning rod and the serpent Vasuki as the rope. Whatever the ocean gave up, they would share.

The churning was long and violent, and the ocean did not give up its treasures gently. The first thing to surface was Halahala, a poison so potent it threatened to destroy everything before the churning had even produced anything of value. Shiva volunteered and swallowed it, holding it in his throat rather than letting it pass further. Only after the poison was contained did the ocean release what everyone had actually been hoping for: wealth, wish-fulfilling treasures, and finally Amrita, the nectar that grants immortality.

Vishnu made sure the nectar went to the gods alone, tricking the demons out of their share so the balance of power would not tip too far. The gods grew stronger — but the story doesn’t end there. In Puranic literature, whenever the gods grew careless or forgot the common good, they were beaten back and had to be rescued again, usually after a long stretch of humility, by Vishnu, Shiva, or the Mother Goddess. Power gained is never kept automatically; it has to be re-earned.

Why this isn’t just a story

I don’t think this is a tale meant only for a festival evening and then forgotten. It maps unusually well onto how societies actually respond to shared crises — a prolonged war, a pandemic, a depression. Faced with a problem too big for any one side to solve alone, people are forced into collaboration: vaccines get developed, institutions like the UN get built, deterrents and safety nets and global markets get put in place. That collaboration is the churning.

In economic terms, the churning shows up as the stretch that follows a downturn — the period of loose money, aggressive investment, and heavy borrowing that policymakers and businesses turn to once they’ve run out of other options. Everyone involved does things they would never do in calmer times. Capacity gets built at a scale that looks absurd in hindsight, and asset prices climb to levels no conventional model can justify. Markets call this a “bubble”. And exactly like the myth, a bubble produces both nectar and poison at once — except the poison, this time, isn’t shared equally. It’s the financial investors who tend to drink it, while the productive capacity that got built along the way — the factories, the roads, the networks — usually survives the bust and keeps paying dividends to society long after the investors who financed it have been wiped out.

India’s own growth is a good illustration. It’s hard to picture the country’s IT and services industry reaching global scale without the late-1990s technology bubble that funded it. The 2000s housing, road, power, and cement capacity built across the country owes a lot to the subprime credit boom in the West. And the cheap capital that has since flowed to Indian entrepreneurs traces back, in no small part, to years of quantitative easing after the global financial crisis. In every case, the capacity outlasted the bubble that financed it — even as many of the entrepreneurs and financiers who built it ended up considerably poorer.

AI as the current churning

The years since the global financial crisis have been marked by weak growth, low inflation, aging populations, and stretched government budgets — a problem the Covid-19 pandemic made considerably worse. The scale of research and, especially, debt-financed capital that has since gone into building out artificial intelligence looks to me like the same kind of churning: an attempt to force a solution to a problem no single company or government could solve alone.

If the pattern holds, both the nectar and the poison of this churning are close to the surface now. The nectar is real productivity gains — the AI applications that genuinely make businesses more efficient and profitable, and that will go on rewarding the companies and investors behind them for years. The poison is what tends to follow an investment cycle like this one: debt that several AI developers won’t be able to service, business models that turn out not to be financially viable, and job losses at the legacy companies AI displaces.

My own reading is that financial investors, in particular, should brace for the poison stage — the point where asset prices reset and the excesses built up over this cycle get worked out of the system. Putting a date on that is guesswork by nature, but if I had to name one, I’d say from the second quarter of 2027.

Also read

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Revisiting India’s consumption story

Over the past few years, and especially since the pandemic, a list of familiar global names has thinned out of India’s consumer landscape. Dulux Paints (AkzoNobel sold its India business to JSW Paints), MG Motor (whose Chinese parent SAIC is progressively ceding control to JSW Group), Harley-Davidson, Citibank’s and now Deutsche Bank’s retail banking franchises, Ford Motors, Metro Cash & Carry, the Disney-Star combine, and Oriflame have all either sold out, scaled down, or handed the wheel to an Indian partner. Holcim exited ACC and Ambuja Cement. And as I write this, Volkswagen is reportedly in advanced talks to give JSW Group majority control of its India operations.

Strung together like this, the list reads like a verdict: global capital is losing patience with India’s consumption story. I don’t think that verdict survives a closer look — but the list is still worth taking apart, because the reasons behind each exit tell a more interesting story than the headline count does.

Not all exits are the same

Put these names together and it may look like one trend. But actually, it is at least four different stories.

The first is genuine competitive loss in a market that has moved on. Harley-Davidson’s 2020 retreat from direct sales and the slow bleed of foreign retail banking — Citibank’s book to Axis in 2023, Deutsche Bank’s now headed to Kotak — belong here. In both cases, the economics of scale — dealer networks, branch footprints, distribution cost — favored domestic players who could out-invest and out-price the global brand. This is the closest thing to a real “local brands are winning” story, and it is real.

The second is regulatory and geopolitical, not consumption-driven at all. SAIC is diluting its stake in MG Motor primarily because Chinese capital has faced tightened scrutiny since the 2020 border standoff — not because Indian buyers have stopped wanting MG’s cars; the Windsor EV, in fact, has sold rather well. Reading MG into a consumption-story narrative is a category error.

The third is global portfolio rationalization that has little to do with India specifically. Ford’s 2021 exit was part of a worldwide restructuring that also closed plants in Brazil and elsewhere. Holcim’s sale of ACC and Ambuja was a cement conglomerate stepping back from a market it judged non-core to its European strategy — not a comment on Indian construction demand, which has stayed fairly resilient. Disney folding its India business into the Reliance-controlled JioStar venture mirrors what Disney has done to linear television everywhere as broadcast economics erode; Reliance, not the Indian consumer, is the reason Disney still has a seat at that table at all.

The fourth is a capital-and-control trade, not a retreat. Volkswagen’s reported talks with JSW are not Volkswagen leaving India — they are Volkswagen conceding, after twenty years and a stubborn sub-3 per cent market share, that it cannot fund the next EV cycle alone and needs a local partner who reads the price-sensitive Indian buyer better than Wolfsburg does.

The JSW thread

One thing this exercise turned up that I did not expect going in: JSW Group shows up on the buying side of an unusually large share of these stories — MG Motor, Dulux Paints, and now potentially Volkswagen. That is not proof of anything by itself, but it is a useful reminder that “global MNC exits India” and “India loses access to global capital and technology” are not the same sentence. In each case, an Indian conglomerate with balance-sheet strength is buying its way into precisely the categories — autos, EVs, paints — that are supposedly the casualties of a weakening consumption story. That is an odd thing to do if the underlying demand were actually disappearing.

What the FDI numbers actually say

If the consumption story were genuinely broken, I would expect the capital data to show it. It does not, at least not yet. Gross FDI inflows into India rose to roughly $39 billion in calendar 2025 per UNCTAD, DPIIT’s own FY26 numbers show a similar climb, and India’s ranking among global FDI destinations improved rather than slipped. One caveat is worth flagging honestly: UNCTAD’s tracking also shows the value of newly announced greenfield projects easing off its 2024 peak, which suggests investors are increasingly buying into existing India-scale platforms — the JSW pattern again — rather than building fresh capacity from scratch. That is a subtly different form of confidence, not necessarily a weaker one.

Where this leaves the consumption thesis

I don’t read this list of exits as evidence that India’s consumption story might be weakening. I read it as evidence that the story is maturing. The easy years, when any global brand could set up shop and ride a rising tide on its own, are behind us. What survives now is either a business with genuine India-specific scale economics, or one willing to share control and capital with a domestic partner who has already solved for the Indian price point. That is a tougher bar than it used to be — it is not the same as demand disappearing.

Investor takeaways

·         Don’t treat every foreign MNC exit as one signal. Ask why — competitive loss, geopolitics, global restructuring, or a capital/control trade each carries a different implication for India-facing businesses.

·         Watch the consolidators as closely as the businesses exiting. JSW and its peers are effectively buying discounted access to categories — autos, paints, EVs — that global capital still wants exposure to.

·         Track greenfield investment announcements, not just aggregate FDI inflows, for a cleaner read on fresh conviction versus capital simply changing hands.

·         The bifurcation thesis I have written about earlier — mass versus premium, with the middle squeezed — remains, in my view, a better explanation for these exits than a blanket loss of faith in Indian consumption.

Highways are about human lives, not cement & steel

A highway built only for speed, without regard for the land and the people it passes through, honors only half that duty. True development binds kilometers to the wellbeing of those who live alongside them.

Last week, a section of the Dehradun-Mussoorie Road caved in after overnight rain weakened the embankment beneath it. The road was shut, and hundreds of vehicles were stranded on both sides. This is the same hill road that now absorbs every additional vehicle the new Delhi-Dehradun Expressway sends toward Mussoorie, since the expressway itself terminates at Dehradun and goes no further.

This was not an isolated event, either. Just weeks earlier, a stretch built barely six months ago at Mussoorie’s Paani Wala Bend developed a large crack and began sinking, prompting a former legislator to allege negligence and demand an inquiry. Landslides and road damage in the Garhwal Himalayas are not new, but their frequency and severity have risen noticeably over the past decade.

Rapid deforestation for road widening, a sharp rise in vehicular traffic on wider roads, growing tourist and pilgrim inflows, and hurried construction of hospitality infrastructure to house them are all straining the fragile ecology of the region. This raises a pertinent question: is the impact-assessment process followed by governments and public authorities before approving and building infrastructure projects, especially highways and expressways, actually adequate?

The newly built Delhi-Dehradun Expressway is a useful case study. Inaugurated in April 2026 at a cost of roughly ₹12,000 crore, the six-lane, access-controlled corridor has cut travel time between Delhi and Dehradun from about six-seven hours to roughly two-and-a-half hours, and to Mussoorie from around seven hours to under four.

The government has projected that this faster connectivity will boost tourism and support industrial corridors around Dehradun. What I find missing from that projection is any visible reckoning with the fact that the expressway does not reach Mussoorie itself. Every vehicle it delivers to Dehradun in a fraction of the earlier time still has to funnel onto the very same unwidened hill stretch that collapsed last week. That is not a coincidental juxtaposition of two unrelated news items; it is a supply chain, with the expressway as the intake and the old Dehradun-Mussoorie Road as the choke point.

I say this carefully: last week’s collapse was triggered by rainfall saturating the embankment, not by traffic volume directly, and I do not want to overstate a mechanical link that isn’t there. But higher volume raises the stakes of every such failure, in how many people are stranded, how much pressure builds to keep a weakened road open, and how much rushed widening work gets done on unstable slopes to cope with the load. The two roads appear to have been evaluated, if at all, as though they belonged to two entirely separate projects under two separate agencies, rather than as one continuous journey for the traveler.

Part of the reason such downstream questions may never have been asked is structural. Under India’s (Economic Impact Assessment (EIA) Notification of 2006, many highways and road-widening stretches below defined length thresholds are exempt from a full environmental impact assessment. If that exemption applied here, then the absence of a study covering hotel capacity, sanitation load or the old road’s carrying capacity is not a gap in my research; it may be a gap the law itself permits. This would not be the first time Himalayan carrying capacity has been flagged as inadequately assessed before construction. The 2023 land subsidence in Joshimath, and the Supreme Court-mandated High-Powered Committee set up to review the Char Dham road-widening project, both arrived at the same underlying finding: that road-building in this terrain proceeded well ahead of any serious study of what the land and the towns at either end could actually absorb.

It is worth asking whether the following questions were part of the impact analysis for the expressway, and what measures were put in place to manage the consequent burden on regional ecology and local civic life:

·         How much will passenger and commercial vehicle inflow into Dehradun and Mussoorie increase, and is there adequate parking capacity to absorb it?

·         Was the additional load the expressway places on the existing, unwidened Dehradun-Mussoorie stretch modelled as part of the expressway’s own clearance, or was it treated as a separate agency’s problem because the two roads fall under different jurisdictions?

·         What is the likely impact of higher vehicle inflow and construction-linked deforestation on local air quality, and what mitigation measures, if any, are built into the road contract?

·         How many additional hotel rooms will be needed to house the increased tourist inflow, and do local regulations even permit new tourist accommodation at that scale?

·         What additional water supply, sanitation, sewerage treatment, garbage disposal and healthcare capacity will the higher tourist inflow require, and is augmentation of these civic amenities planned alongside the road itself?

·         How will the expressway affect local residents through higher land and home prices, increased transit traffic, and food and hospitality inflation, and who is accountable for measures to protect local affordability and traffic-handling capacity?

·         Is the road designed for safe traffic flow at every exit and interchange, particularly at points where a 100-120 kmph expressway meets local roads?

·         How will a high-speed, access-controlled expressway affect villages along its route whose residents are used to a slower pace of life, and what safety awareness and training do they need for themselves, their livestock and their property?

·         What systems exist for periodic safety audits and disaster management, including medical response and rapid evacuation in the event of a major accident, and has responsibility for these systems been fixed before the road opened to the public?

Despite genuine effort, I have not been able to establish whether the impact study for the Delhi-Dehradun Expressway addressed any of these points. I raise them not to oppose the project, but to draw the attention of policymakers, regulatory authorities and civil society to what I consider a critical gap in how highway development is planned and executed in ecologically sensitive regions.

At minimum, a corridor of this kind should require a mandatory downstream carrying-capacity study covering every connecting road it feeds traffic into, an independent post-construction audit rather than a one-time pre-approval clearance, and a single accountable authority spanning both the new expressway and the older roads it terminates into, rather than the current split between agencies.

Investor takeaways

Faster connectivity is a genuine tailwind for Uttarakhand-linked hospitality, real estate and consumption stories, but the pace of civic infrastructure build-out (water, sewerage, healthcare) is the real gating factor for how much of that tailwind converts into sustainable earnings.

Where a new expressway feeds traffic into an older, unwidened connecting road under a different agency, that jurisdictional seam is itself a risk; closures on the connecting stretch can strand demand the expressway was built to capture.

Recurring landslide-driven closures are a direct operating risk for logistics, tourism and construction companies with revenue tied to these corridors, and are worth factoring into weather-linked earnings volatility.

If regulators tighten carrying-capacity and post-construction audit requirements in response to episodes like Joshimath, future Himalayan infrastructure timelines and costs could extend; this is worth watching as a sector-wide execution risk, not just a single-project one.

 

Think about simpler solutions

We have a habit of ignoring simpler solutions for our problems and love to over complicate things. Energy security and air pollution are two specific issues where the policymakers have often ignored simpler and sustainable solutions and favored adhoc solutions, often with uncertain outcomes.

When petrol prices rise, we cut fuel taxes, burdening fiscal balance with economy wide ramifications. When crude oil prices rise, we worry about the import bill. When Delhi’s air turns unbreathable, we restrict traffic and close schools. When accidents climb, we call for stricter enforcement. Each problem gets its own emergency response.

One question, however, rarely gets asked: why do we engineer ordinary family cars to run at 200–240 kmph when the highest permissible speed on any Indian road is 120 kmph, on access-controlled expressways, with 100 kmph the norm on national highways?

This is not a question of engineering capability. Indian manufacturers can build fast cars. The question is whether a country that imports the bulk of its crude oil, battles severe air pollution, and records one of the world’s highest road-accident tolls should keep paying, in fuel, cost and emissions, for a top-speed capability its drivers are legally barred from using.

The case in numbers

Consider two hypothetical family cars of similar size and utility, one engineered for a 240 kmph top speed, the other purpose-built for 150 kmph. Directionally, the trade-off may look like this:​

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The distinction matters: this is not about bolting an electronic speed limiter onto an existing 240 kmph car. It is about designing the vehicle, from engine and transmission to tyres and aerodynamics, around a lower top speed from the outset.

Caveat

India’s fuel-efficiency and emissions norms (BS-VI, CAFE) are measured over standardized drive cycles, not top speed, so a car’s advertised maximum speed does not feed directly into its certified mileage; efficiency gains would have to come through the weight and drivetrain changes described, not from the speed cap itself. Second, high-performance engines are frequently shared across model variants and export markets, so the cost and engineering savings from a lower top-speed design would vary widely by manufacturer and platform, and are unlikely to be uniform across the industry. The reader should treat the table as a plausible order of magnitude for the direction of the argument, not as a verified engineering estimate.

Why pay for speed we cannot use?

An ordinary Indian family car can often exceed 180–240 kmph, well beyond the 120 kmph ceiling on our fastest roads, and beyond what most global markets permit. Even in the United States, the highest posted speed limit is 85 mph, about 137 kmph, on a single 41-mile stretch of State Highway 130 in Texas; most US interstates cap out at 70–80 mph.

A car engineered for 240 kmph is not simply a car with a bigger engine. Reaching that speed safely requires a stronger transmission, larger brakes, higher-speed-rated tyres, more sophisticated suspension and cooling, and greater structural strength. Each addition adds weight, and weight compounds fuel consumption. It is an expensive chain: more speed capability leads to more power, a heavier drivetrain, bigger brakes and tyres, and ultimately more fuel burned, on every single journey, regardless of whether that top speed is ever used.

The oil, pollution and safety angles

India imports roughly 85% of the crude oil it consumes, so every additional liter burned adds to the import bill, pressures the rupee and widens the current account deficit. Fuel-price policy gets debated in detail. The amount of fuel a given vehicle needs to burn in the first place gets far less scrutiny.

The same logic applies to pollution. Reactive, winter-only restrictions on traffic and construction treat a structural problem as a seasonal one. A lighter, more efficient vehicle fleet reduces emissions at source, every day of the year, not only when air quality crosses a threshold.

On safety, the physics is straightforward: kinetic energy rises with the square of speed, so high-speed crashes are disproportionately more destructive. A lower speed ceiling will not by itself curb reckless driving, but resources currently spent engineering unusable top-end performance could instead fund better brakes, more airbags, stronger crash structures and wider adoption of electronic stability control.

Performance need not suffer

A 150 kmph ceiling does not mean a sluggish car. Top speed and usable performance are different things. What matters on Indian roads is strong 0–100 kmph acceleration and confident overtaking in the 80–120 kmph band, not a theoretical capability twice the legal limit.

Policy levers, not a ban

A blunt speed cap is not the only option. Fiscal policy could nudge the market toward efficiency without dictating design: lower registration fees or GST for lightweight, fuel-efficient vehicles, insurance incentives for safer and lower-risk cars, and taxation more closely linked to vehicle weight and engine capacity. The aim is to let the market reward efficiency rather than horsepower.

Investor takeaways

·         The oil-import and current-account channel is the more durable investment link: any structural reduction in average vehicle fuel consumption reduces India’s crude import intensity over time, a theme relevant to INR trajectory and to companies exposed to the import bill.

·         Passenger-vehicle OEMs face a genuine strategic question on where to allocate engineering spend, high-performance variants versus efficiency and lightweighting, as regulatory and fiscal incentives evolve; this is a multi-year theme, not a near-term catalyst.

·         Ancillary segments tied to lightweighting, efficient braking systems and advanced driver-assistance technology stand to benefit disproportionately if policy shifts incentives in this direction; treat any related exposure as a slow-moving structural theme.

Progress, Peril and Robustness - 2

Continuing from yesterday (see Progress, Peril and Robustness – 1)

Investment implications

A BIS report provides a clear map of where systemic risk is building, and reading it is a useful discipline before you decide how much risk to carry and where. Here is how I would prefer to incorporate the four pressure points highlighted in the BIS 2026 annual report in my investment strategy.

Not assuming the disinflation trade is safe

Markets have priced in resumption of the disinflation path that was underway before the Hormuz shock. The BIS’s own work suggests otherwise — energy shocks of this size have historically produced inflation effects that outlast the shock itself by a year or more, and the mitigating factors this time (anchored expectations, looser labour markets) are real but not guaranteed to hold if the shock persists. My own view: don’t fully unwind inflation hedges just because oil has pulled back from its peak. Real assets, select commodity exposure and inflation-linked instruments may still be relevant in a diversified book.

Separate the technology story from the financing story

I remain a believer in AI as a genuine productivity technology — the BIS’s own task-level studies show real efficiency gains. What worries me is not the technology; it is the financing structure around it. Circular financing arrangements — where the same dollar of capital seems to be creating revenue for multiple related entities — are exactly the kind of opacity that precedes a repricing. The practical takeaway: be diversified within your AI exposure rather than concentrated in the handful of hyperscalers and their closest financing partners, and treat any single-stock AI position as a venture-style bet, sized accordingly.

Private credit is not free lunch

The report flags that direct lending funds have quadrupled their exposure to AI and IT borrowers over five years, often with similar pricing and tenor despite growing concentration risk. Retail investors who have moved into private credit funds chasing yield should understand that liquidity terms in these vehicles can become binding constraints exactly when you need liquidity most. This is a reminder to price illiquidity properly rather than treat the extra yield as a free lunch.

Expect more volatile sovereign bond markets, not fewer

The BIS’s description of a fragile fiscal-financial nexus, where bond market liquidity can evaporate quickly, is a structural reason to expect higher volatility in developed market sovereign bonds over the coming years — not a one-off event, but a recurring feature. For fixed income allocations, this argues for staying closer to the shorter and intermediate end of the curve, and being selective about duration bets even when yields look attractive, since the BIS itself flags that governments may increasingly need central bank backstops to keep these markets functioning smoothly.

Reading the global report through a domestic lens

None of the four pressure points above originate in India, but all of them touch us, and in ways worth spelling out separately.

·         Energy dependence is our biggest transmission channel. India imports the overwhelming majority of its crude, and the BIS’s own exposure analysis places India among the emerging economies most affected by Hormuz-related disruption scenarios. A sustained oil price premium — even a modest one, well short of the panic peak — shows up quickly in our import bill, the rupee and the fiscal arithmetic. This is not a new theme for readers of this blog; it is the same fiscal-currency link I have written about before, just now driven by a fresh external trigger rather than a domestic one. (Read here and here)

·         Our macro buffers are genuinely better than in past crisis episodes, but they are buffers, not immunity. Strong bank balance sheets, healthy capital ratios and steady domestic institutional flows into equities have absorbed shocks well so far. That is a real strength. But a BIS report that flags global inflation persistence and fiscal fragility as base-case risks, not tail risks, argues for treating our own resilience as a cushion to lean on, not a reason for complacency about valuations.

·         India’s IT services sector sits directly in the AI capex cycle’s crosswinds. A continuation of the hyperscaler spending boom is a tailwind for the sector through cloud migration and AI-enabled services demand. But the BIS’s own warning about the sustainability of that capex — debt-funded, concentrated, partly circular — means a sharp AI capex slowdown, should it materialize, would hit sentiment toward Indian IT stocks even though our companies are several steps removed from the actual financing risk. Worth distinguishing between the operating exposure (mostly indirect and manageable) and the sentiment exposure (which can move faster than fundamentals).

·         The dollarization risk the BIS discusses is low for India today, given capital account management, but it is worth watching over a longer horizon as stablecoin regulation evolves globally and domestic crypto/stablecoin adoption picks up at the margins. This is more a five-year theme than a this-year theme.

·         On fixed income, the domestic story is somewhat more comfortable than the global one — our own fiscal consolidation path has been more disciplined than many advanced economies’, and RBI’s recent Financial Stability Report corroborates that domestic financial stress remains low by historical standards. But global yield volatility, if it persists, will still spill into our markets through FPI flows and benchmark repricing, so treat domestic bond market calm as conditional on the external environment staying orderly, not as a given.

To conclude: India’s relative position within this report is a source of comfort, not complacency. The buffers are real, but the report is fundamentally about a world where shocks have become more frequent and financial systems have become more interconnected in ways that are hard to see until they matter. Being well-diversified, avoiding concentrated bets on any single global narrative — AI, energy, or otherwise — and keeping some genuinely defensive assets in the mix remains the right posture, regardless of how sound our own banking system looks on paper.

There is a line from the Gita that I keep returning to in years like this one: योगस्थः कुरु कर्माणि सङ्गं त्यक्त्वा धनंजय — perform your actions established in yoga, having abandoned attachment. The BIS report, at its core, is a document about attachment: to easy financial conditions, to a single technology narrative, to the assumption that resilience shown once will hold indefinitely. The investor’s job, as always, is to keep doing the work — reading, rebalancing, staying diversified — without becoming attached to any one story about how the world must unfold.

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Progress, Peril and Robustness - 1