Is India staring at 2013, all over again?

History does not repeat itself but it often rhymes. Anyone who lived through the 2011-2013 period in India, and is watching the country in 2026, will find the rhyme hard to ignore. The characters have changed, the specific allegations are different, but the underlying script — a government fatigued by its own longevity, an economy under external stress, and a restless youth looking for a new savior — feels strikingly familiar.

The Making of 2014

India came out of the Global Financial Crisis of 2008-2010 in far better shape than most of its global peers. But the relief was short-lived. The years 2011 to 2013 turned out to be among the most turbulent in India’s recent economic and political history.

The government of the day was under siege from a string of scam allegations — coal mine allocations, 2G spectrum, and Commonwealth Games spending were the most prominent among them. Charges of misgovernance and corruption piled up. The Supreme Court’s description of the CBI as a “caged parrot” of the government became a defining image of that period, capturing how deeply institutional credibility had eroded.

On the economic front, the taper tantrum in the West triggered a full-blown current account crisis in India. The government was simultaneously accused of policy paralysis, with key infrastructure projects stuck and important economic reforms deferred indefinitely.

The youth of the country, disillusioned with the establishment, took to the streets. An avowedly ‘idealist’ new party emerged out of that discontent and swept to power in Delhi. Even the allies within the ruling UPA coalition began quietly distancing themselves from the Congress party at its center.

Sensing the opportunity, the BJP in 2013 named Gujarat’s Chief Minister, Narendra Modi, as its prime ministerial candidate — projecting him as the leader who would rescue the country from the mess and carry it to new heights. In 2014, the regime changed.

Twelve Years Later, 2026

Fast forward to today, and the parallels are hard to miss.

India has just come through a war with Pakistan in 2025 and a major crisis in West Asia, emerging from both with relatively limited economic damage — not unlike how it navigated the Global Financial Crisis a decade and a half earlier.

But once again, the government is fending off a string of allegations — misappropriation of temple funds, repeated examination paper leaks, a lack of transparency around the use of the PM CARES Fund, poor quality of public infrastructure construction, and a controversial ethanol-blending policy. A Bombay High Court judge has strongly criticized the government and the Mumbai Police for suppressing dissent — an echo, however faint, of the institutional friction of 2013.

An ‘idealist’ party has captured power in Tamil Nadu. In Delhi, the youth is protesting again, this time under the banner of an unorganized, loosely structured group calling itself the Cockroach Janta Party. And on the economic side, the country has just been through a balance of payments scare, with the RBI and the government having to take strong, visible measures to arrest the decline of the rupee.

None of this means 2026 is a photocopy of 2013. The specific issues differ, the political actors are not identical, and the economy today is structurally stronger in several respects. But the pattern of a long-serving government facing corruption charges, an external account under stress, and a young population looking for a new political alternative is a pattern investors would do well to recognize.

Three questions to watch over the next year

With key state assembly elections scheduled for 2027, the next twelve months will be an important test. Investors should watch closely for three things:

·         Will the government turn more populist ahead of the 2027 state elections, at the cost of fiscal correction?

·         Will India witness a repeat of policy paralysis, where key economic and other reforms are once again deferred?

·         Will the government lean on tax concessions to pacify an agitated middle class, financing this by cutting back on capital expenditure?

If these fears materialize, financial markets are unlikely to take it kindly. A slippage on fiscal discipline, a pause in reforms, and a shift away from capex-led growth toward consumption sops would be read by markets as a repeat of exactly the mistakes that cost the previous regime its mandate. Valuations, already under pressure, would have little cushion left to absorb such a shift.

An investor’s takeaway

For investors, the lesson from 2013 is not that history guarantees a particular election outcome in 2029. It is that markets punish drift — drift on fiscal discipline, drift on reforms, drift on institutional credibility — well before the ballot box does. Portfolios built on the assumption that the current growth and capex cycle will simply continue uninterrupted may need to build in some room for disappointment over the next year. Quality businesses with strong balance sheets, and sectors less dependent on continued government capex or populist largesse, are better placed to absorb this uncertainty than those that are not.

Twelve years is long enough for a country to forget its own history, and short enough for that history to return wearing a slightly different costume. Whether 2026 turns out to be 2013 in disguise is a question only the next twelve months can answer. Until then, watch the fiscal arithmetic, watch the reform calendar, and watch the streets — they have a way of telling the story before the results do. 

 Choose your economic model

In the post-World War II era, two forces have driven economic development more than any other: real estate and exports. Together, they have transported most economies from underdeveloped to middle-income status over eight decades. Technology and productivity gains have played a critical but largely supporting role — improving export competitiveness and raising household affordability for property ownership.

Improvements in social outcomes — inclusiveness, sustainability, equity, and quality of life — have typically followed economic development with a lag, sometimes by decades. It is therefore reasonable to assess any country’s economic model against these two pillars: how well it has built exports, and how well it has developed real estate.

India’s experience on both counts is instructive — and incomplete.

Exports: A story that stalled

As India opened up its economy in 1991, exports began to rise noticeably. Growth then accelerated sharply from around 2004. Much of that momentum can be traced to the structural reforms of the NDA government under Atal Bihari Vajpayee (1998–2004) — aggressive privatization of core sectors, rapid build-out of industrial and trade infrastructure, and the development of engineering and technology capabilities, partly driven by the necessity of surviving international sanctions after the 1998 nuclear tests. Those compulsions produced competencies that later translated into genuine export strength in engineering, technology, and pharmaceuticals.

But after the Global Financial Crisis of 2008–09, the story changed. Exports stagnated. More telling, India’s exports as a share of GDP peaked around 2013–14 at roughly 25% and have been declining since. A sharp post-Covid recovery briefly arrested that trend, but the past three years suggest a resumption of the downward drift.

 

(These figures include merchandise exports, services exports, royalties, and technical fees.)

The structural issues are well known: weak manufacturing competitiveness, logistics gaps, a modest share of global value chains, and a services export base that is deep but narrow. None of these are easy to fix. But the data makes clear that post-GFC India has not been able to sustain the export-led momentum that most successful Asian economies relied upon.

Real Estate: Underdeveloped and under pressure

Granular data on real estate’s direct contribution to India’s GDP is not readily available. The broader category of “Financial Services, Real Estate and Professional Services” under the services classification shows that this group’s share of GDP rose from around 15% in the early 1990s to approximately 22–24% today — a significant structural shift.

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Much of that gain likely reflects financial services rather than real estate itself. A May 2026 KPMG report estimated real estate’s direct contribution to India’s GDP at approximately 7.3%. By comparison, most Asian economies see real estate contributing 13–15% of GDP — a gap that reflects how far India’s urbanization and housing development still have to go.

The enabling conditions for a strong real estate cycle have been present to varying degrees. Since 1991, average lending rates have fallen sharply — from nearly 19% at their 1992 peak to around 9% today — driven by sustained fiscal consolidation, better inflation management, and structural improvements in the current account. Lower rates, combined with rising employment, improving real wages, better connectivity, and expanded urban access, supported a strong real estate growth cycle through the 2000s and early 2010s.

That cycle has since lost momentum. Inflation has proved sticky, the current account remains structurally vulnerable, and real wage growth in the formal economy has slowed. Interest rates, while well below their historical highs, have stopped falling. Without a resumption of the structural improvements that drove the last cycle, the tailwinds for real estate are weaker than they were.​

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 The central question

This brings us to the harder question. If both pillars of the conventional post-war growth model — exports and real estate — are underperforming, what does India do?

One option is to double down: fix the structural constraints on exports, accelerate urbanization, and build the financial depth needed to sustain a larger real estate cycle. This is the well-tested Asian playbook.

The other option is harder to define but not trivial to dismiss. As I argued in a 2014 post on this blog (see Utopia: The Economic Solution), the Gandhian model — grounded in decentralization, labor-intensive production, self-reliance, and the primacy of the individual over capital — has attracted serious academic attention and is not without practical merit. The question is whether India has already travelled too far down the urbanization and integration path to reverse course, or whether elements of that framework can be selectively incorporated into a hybrid model.

Borrowing blindly from western models will not work in the Indian context. India’s economic model needs to reckon with a class structure, an employment challenge, and a rural civilizational inheritance that standard industrialization narratives do not address well. At the same time, a pure retreat to pre-industrial self-sufficiency is not a realistic option for a country of 1.4 billion people with legitimate aspirations.

The answer is likely somewhere in the middle — a model that aggressively rebuilds export competitiveness and develops real estate as a genuine engine of growth, while orienting its social architecture around decentralization, broad-based employment, and sustainability rather than pure GDP maximization.

The policy choice ahead

The data from the three charts above does not make a comfortable reading. Exports as a share of GDP have been falling for over a decade. Real estate is significantly undersized relative to India’s peers. Lending rates, while structurally lower than in the past, are not falling anymore. These are not cyclical problems. They are structural.

Policymakers cannot afford to wait for the globally tested model to reassert itself on its own. A deliberate choice needs to be made — either recommit to the conventional model with genuine policy urgency, or develop a credible alternative suited to India’s specific conditions. Muddling through, which has been the default, is not a strategy.

What that alternative looks like is a conversation India has not yet had at the level of seriousness it deserves.

Also read – Utopia: The economic Solution

 

Modi @ 12: The unfinished agenda of India’s development

What gets measured gets managed. What gets obscured gets inherited.

The completion of twelve years of the Narendra Modi-led NDA government has triggered a familiar debate. Supporters point to faster infrastructure creation, digitization of governance, improved tax compliance, stronger foreign policy visibility, record UPI adoption, rising formalization, and India’s emergence as one of the fastest-growing major economies.

Critics argue that beneath these achievements lie deeper structural weaknesses that have either persisted or worsened.

Both narratives contain elements of truth.

India today is larger, more digitally connected, and more visible on the global stage than it was in 2014. Yet the ultimate test of governance is not merely GDP growth or international ranking of GDP number. It is whether the country’s long-term developmental foundations have strengthened.

(I would like to make it clear that this is not an exercise in political partisanship. The purpose here is narrower and, in some ways, more demanding: to assess the domains where the record is objectively weak and the agenda remains unfinished.)

Human capital: The unfinished foundation

India’s most consequential competitive advantage is demographic: a large, young workforce that ought to be highly productive. Whether it will be, depends almost entirely on the quality of education and health systems built now. On this, the twelve-year record is mixed at the primary level and disappointing at the structural level.

Education

As per the Annual Status of Education Report (ASER) 2024 — approximately 50% of Class 5 students cannot read a Class 2-level text — a basic literacy failure at scale, after a decade of policy attention. Secondary education outcomes remain poor. Dropout rates among 15-16 year-olds average 8%, rising to 13% in Uttar Pradesh and 8.6% in Bihar. Teacher training, while expanded, remains syllabus-driven rather than competency-driven. The National Education Policy 2020, whatever its aspirations, has yet to produce measurable system-wide improvement at secondary and tertiary levels.

Public investment in education has consistently fallen short of the 6% of GDP target that NEP 2020 itself mandates. The structural deficit in higher education quality — as measured by India’s dismal showing in global university rankings — has not been meaningfully addressed.

Health

The trajectory on health outcomes shows improvement on legacy indicators: infant mortality has declined from approximately 40 per 1,000 live births in 2014 to 25 by 2023; the maternal mortality rate has improved to 80 per 100,000 live births (compared to 130 in 2014). These improvements reflect the continuation of long-run secular trends, aided by schemes like Janani Suraksha Yojana.

What has not improved is the structural commitment to public health financing. India’s public health spending continues to hover around 1.9% of GDP — well below the National Health Policy 2017 target of 2.5% by 2025. Critically, Union transfers to states for the National Health Mission dropped from 75.9% of the health budget in 2014-15 to just 43% in 2024-25 in real terms. The burden of healthcare costs on households remains severe: out-of-pocket expenditure accounts for approximately 48% of total health spending, pushing an estimated 63 million Indians into poverty annually due to catastrophic medical costs.

Ayushman Bharat is a genuine policy innovation, extending coverage to previously uninsured populations. Its operational effectiveness, however, remains contested — particularly the quality of care delivered and the adequacy of insurance payouts for complex conditions. Access to basic primary care, especially in rural areas, remains structurally underfunded.

The verdict on human capital is that incremental improvements have occurred, but the structural investment required to realize the demographic dividend has not been made. The 2030s will reveal the cost of this underinvestment.

Employment: The disputed ledger

No topic in Indian economic policy discourse is more contested — or more politically charged — than employment. Both the government’s triumphalist claims and the opposition’s ‘jobless growth’ narrative oversimplify a complex picture.

The data from the Periodic Labour Force Survey (PLFS) does show genuine improvement on several headline metrics. The Worker Population Ratio increased by approximately 9 percentage points between 2017 and 2023, implying a 26% rise in employment over the period. Youth unemployment fell from 17.8% in 2017-18 to 10% in 2022-23. Female labour force participation has increased, particularly in rural areas. The employment elasticity of GDP between 2017 and 2023 was approximately 1.11 — suggesting that every 1% increase in GDP was accompanied by a 1.11% rise in employment.

These are not fabricated numbers, and dismissing them entirely would be dishonest. However, the quality of employment created remains the central and largely unresolved concern.

The increase in employment is predominantly in self-employment, unpaid family labour, and informal agriculture — not in the organized manufacturing or formal services jobs that generate the quality of employment needed to absorb India’s approximately 12 million annual entrants to the labour force. The share of manufacturing in total employment has not meaningfully increased. India has not replicated the manufacturing-led employment transformation that propelled East Asian economies. EPFO payroll additions (a proxy for formal employment) remain modest relative to the scale of the workforce.

The absence of a population census since 2011 also introduces genuine uncertainty into employment data — a point that is more than a political talking point. The PLFS itself notes methodological limitations in capturing the full complexity of informal employment.

Assessment: The ‘jobless growth’ narrative is an overstatement. But the quality of employment — formal, productive, adequately compensated — has not kept pace with economic growth. This is not a failure unique to the Modi years, but twelve years of high growth should have delivered a more decisive structural transformation.

Energy security: The widening import gap

India’s energy vulnerability is the most under-discussed structural risk in the country’s economic story. Twelve years of a government that has consistently invoked energy security as a national priority have paradoxically left India more import-dependent than it was in 2014.

The data is unambiguous. Domestic crude oil production has fallen from 36.94 million tonnes in 2015-16 to 28.7 million tonnes in 2024-25 — a 22.3% decline. Simultaneously, crude oil imports rose from 202.85 million tonnes in 2015-16 to 243.22 million tonnes in 2024-25. India’s crude oil import dependence has increased from 84% in 2014-15 to approximately 88-90% in 2024-25. The annual crude import bill reached approximately USD 137 billion in FY2024-25.

The situation is made structurally worse by a depletion of domestic reserves. India’s proved crude oil reserves fell from 762.73 million tonnes in 2014 to 672.07 million tonnes — a 12% decline. Natural gas reserves fell more sharply, from 1,427 BCM in 2014 to 1,073 BCM in 2025, a 25% reduction. Despite opening the oil and gas sector to 100% FDI, India attracted only about USD 8.19 billion in upstream FDI between April 2000 and September 2024 — a rounding error by global exploration standards.

The renewable exception — A genuine achievement

The solar power story is, without qualification, a significant achievement of the Modi years. India’s installed solar capacity increased from just 3 GW in 2014 to approximately 130 GW by 2025 — a more than 40-fold increase. Overall renewable capacity grew from 76 GW in 2014 to over 233 GW in 2025. India now ranks third globally in solar capacity. This is real, meaningful, and strategically important.

The limitation, and it is a significant one, is that renewables’ share of actual electricity generation (~16%) remains well below their share of installed capacity (~50%), due to the intermittency problem and inadequate storage infrastructure. Coal-fired generation still accounts for over 80% of actual power produced. The structural energy vulnerability — particularly to Middle East geopolitics — therefore persists. The West Asia disruptions of early 2026 demonstrated this with painful clarity.

Crude import dependence (2014-15): 84%

Crude import dependence (2024-25): ~89%

Domestic production decline: -22.3% (2015-16 to 2024-25)

Solar capacity (2014): 3 GW

Solar capacity (2025): ~130 GW

Income and wealth inequality: The inconvenient numbers

India’s growth story has generated enormous aggregate wealth. The distribution of that wealth is a separate, and far less comfortable, conversation.

The top 10% of Indians hold approximately 57% of national income; the top 1% hold approximately 22%. The bottom 50% account for roughly 13% of national income. Wealth concentration is even more extreme: the top 1% own approximately 40% of total national wealth, while the bottom 50% hold just 3%. The wealth Gini coefficient rose from 81.2% in 2008 to 85.4% in 2018 and has remained elevated since.

The government has pointed, with some justification, to the Household Consumption Expenditure Survey of 2022-23 showing a Gini Index of 25.5 — a relatively low figure. This requires context: this is a consumption-based measure, not an income or wealth-based measure, and is not comparable to the income-Gini figures cited by most international institutions. The World Bank itself noted this distinction in its April 2025 Poverty & Equity Brief. Consumption surveys structurally understate the true inequality in income and wealth.

There is a legitimate discussion to be had about methodology. But the direction of travel is not seriously in dispute: labor’s share of national income declined from approximately 32% in the 1990s to roughly 22% by 2024, per ILO data. CEO pay rose 50% between 2019 and 2024, while worker wages grew by less than 1%. The billionaire class has expanded dramatically; Asia’s two wealthiest individuals are Indian. This has occurred during a period of strong aggregate GDP growth — which is precisely the point. Growth has not been distributionally neutral.

The government’s narrative on inequality leans heavily on poverty reduction data, which is real and significant. But poverty reduction and widening inequality can coexist — and in India’s case, they have.

Ecological vulnerabilities: Progress and denial

India’s ecological stress represents the compound interest on decades of growth-at-all-costs development — and the Modi government has managed this inheritance with mixed results.

Forests and Biodiversity

The global annual rate of net forest loss has declined from 10.7 million hectares (1990-2000) to 4.12 million hectares (2015-2025), reflecting global improvements in forest governance. India’s official forest cover figures show a modest increase in recorded forest area. However, independent analyses consistently note that the definitional inclusion of monoculture plantations and agroforestry distorts the picture. Net natural forest loss continues, biodiversity pressures remain acute, and forest clearances for infrastructure projects have been expedited rather than constrained under the current regime, including significant amendments to the Forest Conservation Act.

Water

India’s water stress is accelerating. The country accounts for approximately 17% of the world’s population but has access to only 4% of its fresh water. Groundwater depletion continues at alarming rates across the Indo-Gangetic plains and peninsular India. The Jal Jeevan Mission, which aims to provide tap water connections to all rural households, has achieved impressive connection numbers (over 80% coverage reported). Independent assessments, however, note significant gaps between connections and functional, quality water supply. The deeper structural challenge of aquifer depletion has not been addressed.

Air Quality

India contains 42 of the world’s 50 most polluted cities by PM2.5 concentration. Delhi’s air quality routinely reaches hazardous levels for months each year. The National Clean Air Program has set targets; measurable progress at the population level remains elusive. This is an area where 12 years of policy attention has yielded insufficient results.

Against these challenges, the renewable energy transition is a genuine bright spot. India’s commitments under the Paris Agreement have been largely honored, and the clean energy deployment trajectory is one of the world’s more credible energy transitions.

Institutional credibility: The slow erosion

Democratic health depends not only on elections — which India continues to hold — but on the credibility of the institutions that make those elections meaningful and that arbitrate between citizens and the state. This is where the twelve-year record raises the most serious concerns.

Judiciary

The formal independence of India’s judiciary is constitutionally guaranteed, and the Supreme Court has delivered important rulings that constrain executive power. But the perception of increasing politicization is not limited to partisan critics. Freedom House’s 2024 report notes that while the judiciary is formally independent, ‘courts have shown signs of increasing politicization’ and government judicial appointments have been considered political in nature by observers. Several high-profile Supreme Court rulings have been favorable to the ruling party on politically sensitive matters. The pace of judicial appointments and the government’s posture toward the collegium system have been sources of institutional friction.

Election commission and democratic institutions

The Election Commission of India has faced unusually sharp credibility questions during this period. Opposition parties, civil society organizations, and a growing body of expert opinion have raised concerns about the Commission’s assertiveness in enforcing the Model Code of Conduct evenhandedly. The 2024 Lok Sabha elections were considered broadly free and fair — the outcome itself was proof of that, with the BJP performing worse than projected. But the process, including VVPAT verification controversies and the appointment process for Election Commissioners, has drawn sustained scrutiny.

Press Freedom

The Reporters Without Borders World Press Freedom Index ranked India 159th in 2024 and 157th in 2026 — among the lowest-ranked democracies in the world. The methodology of this index is contestable, and the government has credibly argued that India’s 900+ television channels and thousands of print outlets constitute genuine media plurality. The concern, however, is structural: media ownership has consolidated dramatically. The acquisition of NDTV by the Adani Group in 2022 and the creation of JioStar through a Reliance-Disney merger have raised well-documented concerns about editorial independence in the concentrated ownership environment.

India has moved from ‘Free’ to ‘Partly Free’ in the Freedom House classification, a designation maintained since 2021. The V-Dem Institute classifies India as an ‘Electoral Autocracy.’ These designations are contested and carry Western institutional biases. But the direction of the trend — even adjusting for methodological limitations — is difficult to dismiss.

Law enforcement and the corruption paradox

Perhaps the most difficult section to write — and the most important for institutional credibility — concerns the use of investigative agencies and the government’s relationship with political corruption.

India’s Corruption Perceptions Index score was 36 in 2013 (when the Modi government inherited the UPA’s record). It stood at 38 in 2024 — a marginal deterioration that prompted the government itself to distance itself from the methodology. The government’s rhetoric has been consistently and emphatically anti-corruption. The substantive record is more complicated.

The Indian Express conducted an investigation in 2024 that documented 25 opposition politicians facing central agency investigations who crossed over to the BJP since 2014. Of these, 23 received reprieve — with three cases closed entirely and 20 stalled or placed in cold storage. In contrast, the same investigation noted that between 2014 and September 2022, 121 prominent political leaders came under the ED’s radar, of whom 115 were from opposition parties.

The pattern is not entirely new in Indian politics — the weaponization of investigation agencies predates Modi. But the scale and systematicity of the ‘washing machine’ phenomenon (as it has come to be called across party lines, including by a former BJP state president who first used the metaphor) is unprecedented. This is not partisan allegation; it is documented by the country’s most respected investigative journalism.

The corrosive effect on institutional credibility is twofold: it undermines the legitimacy of genuine anti-corruption action when it occurs, and it normalizes a transactional relationship between political loyalty and legal jeopardy. This is not a foundation on which rule of law can be built.

A government that came to power on an explicit anti-corruption mandate and has expanded the remit and resources of the ED must be held to a higher standard on this dimension. The ‘washing machine’ pattern represents a material failure against that standard.

Conclusion: The 12-year balance sheet

The Modi government’s achievements are real and should not be elided in an honest assessment. The physical infrastructure build-out, digital public infrastructure, formalization of the economy through GST and DBT, and the renewable energy transition are all genuine program successes.

But twelve years is long enough for structural failures to be owned. The human capital foundation — in education quality and public health investment — remains inadequate for the ambitions of a country claiming to be a future economic superpower. Energy import dependence has worsened despite ambitious rhetoric. Income and wealth inequality have increased materially, even as poverty has been reduced. Ecological stress is unaddressed at systemic scale. And the credibility of democratic institutions — judiciary, election commission, investigative agencies, and a free press — has declined by most independent measures.

The investment implications of this assessment are not trivial. An economy with deteriorating human capital quality, rising inequality, deepening energy import dependence, and weakening institutional credibility faces compounding structural headwinds that will eventually show up in growth sustainability, FDI attractiveness, and market valuations.

The next election cycle will offer a fresh mandate — to this government or to an alternative. The structural challenges catalogued here, however, are not election-cycle problems. They are generational ones, and they will require a generational commitment of political will and public resources that Indian politics, across all parties, has thus far found difficult to sustain.

Lessons from market cycles – Chapter 3

It was New Year's Eve 1999, the dawn of the new millennium. A close friend – a tech specialist at a top consulting firm – called to wish me a happy new year. He sounded unusually upbeat. When I asked why, he proudly said he had made a fortune in the stock market, his bonus was huge, and he had even taken loans for a luxury car and a bigger apartment. He had poured a lot into random "technology" stocks.

He urged me to jump in on a small tech company about to launch an ADR (American Depositary Receipt) on Nasdaq. Its price had shot from ₹15 to ₹85 in just six weeks. “It will hit ₹250 soon”, he said with total confidence.

I actually knew more about that company than he did. It was basically a shell – recently renamed from “XYZ Securities Ltd” to “XYZ Infosys Limited.” No real business, no employees, no assets. When I tried to warn him, he brushed me off: “You have no idea what's coming”.

That Diwali in 2000 turned out to be the darkest day of his life. He had lost everything – his job, savings, home, car, marriage, health, and his confidence. He moved back to his parents’ house carrying debt of over ₹70 lakh.

The run-up from December 1998 to February 2000 was one of the wildest periods in Indian stock market history. The Nifty50 index more than doubled (over 120% gain) in just 15 months, driven mostly by “new-age” tech, media, and telecom companies. Buzzwords like ICE (Information, Communication, Entertainment) and TMT (Technology, Media, Telecom) were everywhere.

To really understand the magnitude of madness, one needs to note the challenging backdrop:

Politically, India was unstable. From May 1996 to October 1999 – just 40 months – we had three general elections. Each produced hung parliaments and shaky coalitions of 20+ parties.

Economically, things were rough. GDP growth crashed to around 4.3% in FY98 (from 8% the year before). Consumer inflation averaged over 13% in 1998, peaking at nearly 20% in late 1998. The RBI jacked up its Bank Rate to 11% early that year, hiked repo rates sharply (up to 14% by mid-2000), and prime lending rates hit 13–14%. Riskier borrowers paid 15–19%.

Geopolitically, we fought the Kargil War with Pakistan in May–July 1999. Tensions with China rose too – India openly called China “Enemy No. 1”, and China backed Pakistan during Kargil.

Internationally, after India's nuclear tests in May 1998 (Pokhran-II), the US, Japan, and others slapped on economic, tech, and military sanctions.

Globally, the US Fed's easy money policies fueled a massive dot-com bubble. Tech companies with no profits or clear business models traded at insane valuations.

The Y2K scare created huge demand for software fixes. Indian IT firms sent thousands of engineers abroad to update old systems before January 1, 2000. Suddenly, every middle-class family wanted their kids to learn coding. Computer coaching centers popped up on every street. Wipro's Azim Premji briefly became one of the world's richest people (second at one point in early 2000). Infosys and TCS turned into household names.

Hundreds of companies slapped “Technology”, “Infosys”, “Media”, or “Communication” onto their names. Big business houses rushed to launch tech subsidiaries. Overnight, firms with zero tech know-how or real business popped up and soared to crazy prices.

Old valuation rules went out the window. People talked about “eyeballs” and “footfalls” instead of earnings. Just like Harshad Mehta in the early '90s, operators like Ketan Parekh manipulated stocks – especially a group called the "K-10" – luring everyday investors like my friend with hype and fancy jargon.

The bubble burst in February 2000. The Nifty gave back all those gains over the next 18 months. By September 2001, it was back to December 1998 levels. Most fake tech companies disappeared fast. Many big groups quietly dropped their IT dreams and refocused on core businesses.

The few solid players that survived the storm? They went on to make India a global IT services powerhouse and added real strength to our economy.

My lesson from this episode

Tech revolutions are disruptive and powerful – they eventually make economies and markets stronger. But not every investor has to jump in headfirst during the chaos. Sometimes the smartest move is to watch safely from the sidelines until the storm passes. There are always plenty of good opportunities once things calm down.

That experience with my friend still reminds me: When excitement drowns out common sense, step back. Real winners in stock markets are found with patience, not panic buying.

Also read

Chapter 1

Chapter 2

 

Is it a pause or break?

I completed my education and professional training in the early 1990s, just as India stood at the edge of profound change. The assassination of Rajiv Gandhi in 1991 had created a vacuum in the Congress party. P.V. Narasimha Rao led a fragile minority government through a perfect storm: a balance-of-payments crisis; two failed monsoons; the Gulf War spike in oil prices; double-digit inflation; a crippling fiscal deficit; the Harshad Mehta scam; and simmering insurgencies in J&K, Punjab, & the Northeast. Mandal reservations and the Ayodhya movement had polarized society; the 1992 demolition and subsequent Mumbai blasts shattered everyday calm.

In that crucible, Rao and Finance Minister Manmohan Singh launched the 1991 liberalization. Industrial licensing was slashed, the rupee was devalued by nearly 20% in two swift moves, trade was opened, foreign portfolio investment welcomed, and the foundations of modern capital markets laid. Within five years the economy was back on a higher growth path.

The 1996 election ended Congress rule and ushered in three years of political instability (Three general elections during 1996–99). Yet the reform momentum not only survived but accelerated. The United Front government deepened financial-sector and fiscal reforms. Vajpayee’s NDA (1998–2004) opened core sectors—telecom, power, roads, ports, oil & gas—to private and foreign players, launched the National Highways Development Project, announced the SEZ policy, conducted nuclear tests, and weathered sanctions and the dot-com crash. India emerged as a recognized IT powerhouse and strategic nuclear power.

The UPA years (2004–14) built on this foundation while adding a strong social dimension. Markets were opened further, NPCI was established (laying groundwork for later digital payments), and landmark rights-based legislation was enacted: RTI, MNREGA, RTE, NRHM, and the Food Security Act. Growth averaged over 8% for much of the period despite the 2008 global crisis, though a current-account scare in 2012-13 required swift RBI action.

When the NDA returned in 2014 under Narendra Modi, it inherited an economy recovering but scarred by the previous slowdown. Far from avoiding major reforms, the government completed and launched several of its own: the long-awaited GST (2017) created a unified national market; the Insolvency and Bankruptcy Code (2016) cleaned up NPAs; four Labour Codes rationalized archaic laws; corporate tax rates were cut; direct benefit transfers scaled massively via the JAM trinity; and UPI revolutionized digital payments. Infrastructure spending surged, Ease of Doing Business rankings improved, and schemes emphasizes on manufacturing were reinforced under Make in India and Production-Linked Incentives banners.

Growth has not been linear though. The 2016 demonetization and GST rollout caused temporary disruption; COVID-19 delivered a sharp contraction. Yet India has remained the fastest-growing major economy in most post-pandemic years. Recent quarters have shown strong rebounds, though challenges persist: uneven job quality (especially for educated youth), volatile foreign flows, a tight fiscal position, and rising aspirations of one billion young Indians.

I still believe we are witnessing a pause in our journey of growth, not a break. The institutional scaffolding built over three decades—open markets, digital public infrastructure, a resilient banking system—remains intact.

In my view, the next three years will be decisive. How the government sequences the next wave of reforms (land, labour, agriculture marketing, and trade openness), executes with consistency, and manages fiscal discipline will determine whether India’s growth story merely pauses or regains its full stride. The momentum built since 1991 has bent but not broken. With pragmatic course-correction, the best chapters may still lie ahead.

M7 + M2 that crushed Bihar’s opposition

Bihar assembly elections concluded last week with the incumbent NDA government registering an astounding victory, belying all expectations of anti-incumbency; a strong show by the opposition alliance (MGB); and a surprise by JSP (Jan Suraaj Party), floated by election strategist-turned-politician Prashant Kishor. Almost every exit poll and ground report got Bihar 2025 spectacularly wrong. The NDA’s landslide was not a wave — it was an annihilation.

In my view, the result was a foregone conclusion for anyone who looked beyond Twitter trends and Tejashwi’s viral reels. Numerous independent forecasters, reporters and experts, who claimed to have spent weeks “on the ground”, completely failed to assess the likely outcome of the elections.

The opposition alliance completely lacked seriousness, strategy and resources; notwithstanding the social media noise. The new challenger JSP lacked resources and credibility (was mostly seen as a BJP agent put up to cut into opposition votes). They were no match for the massive deployment of M7 (Meticulous planning, Men, Machine, Media, Money, Mandir and Modi) Force by the incumbent NDA. Besides, they managed the most relevant M2 (Muslim and Mahila) extremely well through tactically supporting AIMIM and offering cash to women, just ahead of elections. More than 100 MPs of BJP spent weeks campaigning in the hinterland. Several of the Chief Ministers of BJP ruled states held dozens of rallies across the state. NDA had appointed multiple booth agents several weeks in advance.

The opposition leaders, Rahul Gandhi and Tejashwi Yadav mostly resorted to gimmicks; and “hoped” for anti-incumbency to work in their favor. They could neither adequately highlight the failures of the incumbent Chief Minister (almost 20 years), nor present a coherent and credible agenda for development.

After this headline comment, I would like to share some of my impressions about Bihar, made during a short visit to the state.

·         The socio-economic milieu of Bihar is uncannily similar to the broader picture of India. For example, most educated youth are eager to migrate out of the state - NCR, Bengaluru and Mumbai being the most coveted destinations, just like the educated youth from “developed” states look to immigrate overseas. Most rich people have invested in real estate and businesses outside the state, just like rich people from Delhi and Mumbai buying real estate in UAE, Portugal, and UK etc. Most aspire to send their children to study in schools and colleges outside the state, just like people in other states aspire a “foreign degree” for their wards.

·         Migrated Biharis, who are well settled in other states make references to the rich culture, heritage and resource pool of Bihar, in the same manner as NRIs settled overseas, with no intent to return, invest or otherwise contribute to their cherished homeland.

·         Election in Bihar is a distinct, stand-alone spectacle event, totally disconnected from the regular life of the local populace. Most treat it like a once in five-year village fair, where artists from outside come and perform. They get a chance to feast and enjoy dance performances. In the end they vote for the best orchestra performance, and return to their routine life.

·         A disturbing chunk of Bihar’s wildly popular Bhojpuri music, cinema and ‘orchestra’ programmes revolves around double-meaning lyrics, voyeuristic camera angles and incest-themed humor that would be cancelled in many other states. A noticeable section of Bihar’s youth—especially in semi-urban and rural pockets—consume a worrying volume of low-quality, hyper-sexualized Bhojpuri content, which shapes attitudes and aspirations in ways that deserve deeper study. In most village orchestra performances (election rallies, puja pandals, marriages etc.) that I witnessed, and in several popular Bhojpuri music videos I watched, this was a common theme. This section of youth may be susceptible to get trapped in a PIT (addiction to Porn, Incest and Tobacco).

·         Liquor ban has helped several households. Particularly, women in these households are grateful to the administration for saving their families. However, implementation of the prohibition policy is definitely not commendable. The cases of spurious liquor, smuggling from neighboring states, and corruption in enforcement are not uncommon.

·         The biggest paradox of Bihar is that it has one of the most aware populations (socially, culturally, politically, and economically); but only a few seem to be exercising their rights. You may find farmers who can quote Amartya Sen on entitlement failure but will not protest when their PMAY house is delayed by five years and a ₹50,000 bribe is demanded. They have accepted corruption, non-performance, apathy, and indifference of administration as a fait accompli. Rhetoric during the festival of elections apart, it is hard to find people raising voice for their rights.

·         Rural housing and rural roads have been the best performing government schemes in Bihar, though it is not uncommon to hear complaints of corruption in these two programs also. Collapsing bridges, stolen roads, schools, primary health centers, etc. in Bihar are all part of the social media folklore.

Overall, my impression is that Bihar today is India’s most politically sophisticated state trapped in an economically prehistoric age. Until private capital sees profit, until a real entrepreneurial class emerges from within (not just Delhi-returned IAS officers’ sons), and until Biharis start punishing non-performance instead of rewarding freebies and identity, progress might remain incremental, corrupt, and cruelly slow.

 

Union Budget FY25 – Shaking the cart, adding uncertainty

 The final budget presented by the finance minister has shaken the market cart, and added material uncertainty to policy making. The efforts to minimize uncertainty after demonetization have thus been negated to some extent.

As has been the practice in the past few years, the budget speech of the finance minister materially diverges from the actual budgetary provisions. By changing the capital gain tax regime and mentioning that they are working on a new Income tax law, they have forced the stakeholders to build-in a higher degree of policy uncertainty and unmindful regulatory provisions in their business and investment plans. Claiming simplification while introducing new complications (e.g., more transactions under TDS/TCS) has been a hallmark of the taxation policy in recent years. Use of technology is invariably claimed as an achievement, as if there is an option.

The level of uncertainty could be gauged from the fact that the priorities outlined in this budget are materially different from the interim budget presented just five months ago

Regardless, there are some positive take away from this budget that need to be commended.

Positive take away

Land reforms including digitization of land records got prominent mention in the finance minister’s speech. The minister mentioned that “Land-related reforms and actions, both in rural and urban areas, will cover (1) land administration, planning and management, and (2) urban planning, usage and building bylaws. These will be incentivized for completion within the next 3 years through appropriate fiscal support.” Linking central assistance to lower stamp duty could be a material impetus to urban development.

Fiscal consolidation. The finance minister refrained from splurging the extra resources generated through higher dividend from RBI &, PSUs, and additional tax revenue. She utilized it to bring the fiscal deficit down to 4.9% (vs 5.1% in the interim budget). Even the new development projects announced for the key coalition partners (JDU of Bihar and TDP of Andhra Pradesh) are proposed to be funded by the loans from the multilateral agencies like World Bank etc., where the Central Government might provide guarantee. The commitment to bring the public debt on a declining path from next year is also commendable.

Savings for children. Allowing pension accounts for minor children is a positive step for developing the social security framework. Retirement planning from birth should benefit a large number of savers in participating in the golden age of Indian financial markets and accumulating a decent retirement corpus.

Abolition of Angel-Tax. Angel tax is levied on the capital raised via the issue of shares by unlisted companies from an Indian investor if the share price of issued shares is seen in excess of the fair market value of the company. The excess realization is considered as income of the company and is taxed accordingly. The finance minister has proposed to abolish this tax (Section 56 (2)). This is a welcome step as it has been causing hardship to innovators.

Rental housing for industrial workers. The finance minister proposed, “Rental housing with dormitory type accommodation for industrial workers will be facilitated in PPP mode with VGF support and commitment from anchor industries.” This scheme if implemented properly can be a major reform in labor migration, urban planning and ease of living for poor laborers.

Issues that need deeper scrutiny

Forcing private capex: The Economic Survey highlighted that the private sector has not adequately responded to the incentives for capex. It seems the government now intends to force the private enterprises to invest more money in building capacity and generating employment. The budget adopts a carrot and stick approach for that. On one hand, it provides support for hiring more fresher employees and skill them, and on the other hand it makes outflow of funds from companies difficult. After dividends, now buybacks are also made tax inefficient. The idea seems to “encourage” companies to invest in growing their businesses and reward shareholders through share price appreciation only.

New income tax law. The Direct Tax Code had been hanging on the taxpayers’ head for almost two decades. It was shelved a few years ago. However, the finance minister has revived the proposal adding uncertainty about the tax provisions.

Backdoor entry of Estate duty. The changes in the capital gain tax regime give an impression that the government is testing the introduction of a wealth transfer scheme (Estate Duty) in future. The effective capital gain tax on legacy assets (Large Real Estate, legacy precious metals, jewelry etc.) has been increased by taking away the indexation benefit. It is to be seen whether this effort is widened and deepened in the coming years.

Taxation of bonds. The tax on gains made on sale of unlisted bonds has been enhanced to the marginal rate of taxation. This brings bonds at par with bank fixed deposits. This is in tandem with the concerns expressed by the RBI on money being diverted away from bank deposits. On the positive side, this may provide impetus to development of retail debt market by encouraging companies to list their bonds.

Gold and financialization of the economy. Ever since the government embarked on the path of economic reform and liberalization in 1991, the emphasis of policy has been to achieve higher degree of the financialization of the Indian economy. Low level of financialization of economy has in fact been sold as an USP of Indian markets, for it offered huge growth potential. Lamenting higher degree of financialization of the Indian economy in the Economic Survey, raising effective tax on bonds and bringing duty of gold lower contradict this concept.

New rum in old bottles. The finance minister has presented many ideas as path breaking, while these are already running schemes and execution has been below par. For example, rural roads, mission for pulses and oilseeds, organic farming, horticulture, blue economy (shrimp etc.), Employment incentive and support for MSME (introduced during Covid), Skill India, Industrial Parks, etc.

Protection to local manufacturing cut. The finance minister has cut basic custom duty on mobile phone, mobile PCBA and mobile charger to 15 per cent, reducing protection for the local manufacturers. This should be kept in mind by the analysts who are assuming status quo on policy for many EMS players for decades while making earnings forecasts.

Union Budget 2004-25

The following are the key highlights of the final Union Budget for FY25

Budget priorities

1)    Productivity and resilience in Agriculture

2)    Employment & Skilling

3)    Inclusive Human Resource Development and Social Justice

4)    Manufacturing & Services

5)    Urban Development

6)    Energy Security

7)    Infrastructure

8)    Innovation, Research & Development and

9)    Next Generation Reforms

Key direct tax proposals

Corporate/firms Tax

·         For foreign companies the rate of tax reduced from 40% to 35%, on income other than income chargeable at special rates, specified in respective sections of Chapter XII of the Act.

·         Deduction under section 36(1)(iva) in respect of contribution to pension fund approved u/s 80CCD increased to 14% of salary from earlier 10% of salary, provided the employee concerned has chosen the new tax scheme.

·         Section 56(2)(viib) imposing Angel tax on companies is proposed to be abolished.

·         Payments to partners by way of salary, remuneration, commission, bonus and interest etc. to be liable for 10% TDS.

Personal taxation

·         Amount of standard deduction on salary income increased to Rs75000 from the present Rs50000 for assessees filing return under the new tax scheme. For family pension standard deduction under new scheme will be Rs25000 instead of Rs15000.

·         Any Tax Collected at Source from an employee to be adjusted in computation of TDS by the employer.

·         Tax collected at source for a minor can be claimed by the parent if the income of such minor is clubbed with such parent.

·         The entire amount received from tendering of share under a buy back will be taxed as dividend income. The cost of acquisition of shares can be claimed as capital loss that can be set off against capital gains as per the prevailing rules of set off. (applicable from 1 October 2024)

·         Rent from house property cannot be shown as business income. It must be shown separately under the head income from house property and taxed accordingly.

Rationalization of capital gains tax (applicable from 23^rd July 2024)

·         Holding periods for various assets reduced to two – 12 and 24months from the present three –12, 24 and 36 months.

·         Assets divided into three categories – Listed financial securities, Equity MFs & Business trust (e.g., REITS), and other assets. Listed financial securities, Equity MF and Business Trust held for less than 12 months shall be short term assets and otherwise long term. All other assets to be long term if held for more than 24 months.

·         Listed financial securities (STT paid), Equity MFs and Business Trust – STCG Tax would be 20%.

·         LTCG Tax for all other assets would be 12.5% without any indexation benefit. LTCG of upto Rs1,25,000 exempted from tax for Listed financial securities (STT paid), Equity MFs and Business Trust.

·         STCG Tax on all other assets would be the marginal rate of taxation.

·         Unlisted bonds, debentures to be taxed at the marginal rate.

·         Capital gain tax rates to be same for both Resident and Non-Resident assessees.

·         Gift of assets by assessees other than individual and HUF to be fully taxable.

Rationalization of TDS

·         Sale of more goods with sale price exceeding Rs10 lacs to be made liable to TCS.

·         Rs 50 lac limit for TCS on sale of property to be considered as total sale consideration and not the consideration per buyer, where there are multiple buyers.

STT rates

·         It is proposed to increase the said rates of securities transaction tax on sale of an option in securities from 0.0625% to 0.1% of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such “futures” are traded.

Others

·         Notice u/s 148 for reassessment can be issued only upto three years where income suspected to have escaped assessment is less than Rs50 lacs. In other case time limit would be six years.

·         Provisions for registration of charitable organization u/s 10(23C) and u/s 11 to 13 found overlapping. Accordingly, it is proposed to make section 11 to 13 the operational sections. Section 10(23C) will be used for transitory provisions only. The timeline for application for eligibility u/s 80G also rationalized.

·         New Vivaad se Vishwas 2024 Scheme to be launched.

·         Moveable foreign assets worth less than Rs20 lacs not to attract provisions of section 42 and 43 of Black Money Act. 

Key Budget features

Some key budget statistics

Fiscal Trends