Do it yourself

Several readers have commented on my yesterday’s post (“USD, Gold, Crypto and a mountain of $38trn debt”). Some agree that the “debt manipulation” theory was far-fetched, others argued that I was underplaying the seriousness of America’s fiscal overhang. Both reactions are valid. My intent, however, was not to trivialize the US debt issue, but to put it in its proper context — and to focus attention on the much larger transitions now underway in the global financial order. I would like to elaborate to convey my point in the right perspective. The Debt Problem Is Real — but Not New The US federal debt now stands around $38 trillion, or roughly 120% of GDP. That sounds alarming, but the ratio has hovered near that level for over a decade. The composition, though, has changed dramatically. After the dotcom bust, debt piled up in corporate and household balance sheets. After Lehman, it migrated to banks. Post-Covid, it has firmly shifted to the sovereign. In essence, the debt hasn’t disapp...

…continuing from yesterday. To assess the impact of the latest changes in tariffs on the Indian exports to the US, on investment strategy and make suitable changes to minimize the adverse impact on investment portfolios, it is important to understand the dimensions of the Indo-US trade, its elasticity to tariffs, and sustainability of tariffs on various merchandise. Given the southward sloping trajectory of the Indo-US strategic relations since 2018, it may also be relevant to speculate a worst-case scenario; and find ways to assimilate that into investment strategy. Dimensions of Indo-US trade (Important note: The figures given in the following discussions have been taken from various sources, including the WTO, US trade department and India’s department of commerce. At various places these are reported either for calendar year or financial year. In some cases, these are provisional numbers. There could be some mismatch in terms of CIF and FoB reporting. Besides, I have rounded ...

The US administration has announced imposition of 50% additional tariffs (25% reciprocal and 25% penal), over and above the regular/MFN tariffs that were already in place, on merchandise imports from India. Certain items, like pharmaceuticals, that are part of separate trade negotiations, and services are presently not part of the new tariff rates and continue to be charged at the extant rates. This level of tariff is indubitably concerning, as it makes numerous Indian MSME businesses, especially those exporting textile, leather goods, small components, jewelry, carpets etc., incompetitive; and in many cases poses an existential threat to the exporting entities. For several MSME the US market contributes a substantial part of their revenue; and these entities were enjoying some advantage over competitors due to lower MFN tariffs. They not only lose this advantage, but become materially incompetitive due to these tariffs. These reciprocal and penal tariffs, in my view, tantamount to...

It is a common adage amongst the financial market participants that “When America sneezes, the rest of the world catches a cold”. The origin of this belief is the global market turbulence in the aftermath of 1929 Wall Street crash. In the past 100 years, whenever the US economy or markets have faced any serious problem, most of the global economies and markets have witnessed elevated volatility and erosion in asset prices. The prime reason for this correlation of the US economy and markets has been the disproportionately large size of the US economy and markets; dominance of the US dollar in global trade; and over-reliance of emerging markets on the US for investment, development assistance and humanitarian aid. In the past couple of years, serious concerns have emerged about the sustainability of the US public debt and fiscal deficit. The overall GDP growth has been aligned to the average of the post global financial crisis (GFC) period. The efforts to accelerate growth have not yield...

The Reserve Bank of India holds US$702.78bn in foreign exchange reserves. In the popular macroeconomic analysis, especially in the context of the equity market. this piece of data is often used as one of the points of comfort by analysts. This data could be viewed from multiple standpoints. For example – Is it adequate to pay for the necessary imports in the near term , assuming the worst-case scenario of no exports could be made and no remittances are received. Currently, India’s monthly imports are appx US$67bn. However, a material part of these imports is crude oil and bullion. A part of the crude oil and bullion is re-exported after refining/processing. I am unable to figure out the precise net import number for domestic usage, but it would be safe to assume that about three fourth of US$67bn, i.e., US$50bn is for domestic usage. Allowing another 20% for “avoidable in emergencies” category of imports, we have appx US$40bn/month import bill payment obligations. By this benchmark we ...

  The Niti Aayog published a working paper titled “India’s Path to Global Leadership: Strategic Imperatives for Viksit Bharat @2047”, in April 2025. The paper presents a roadmap for India’s economic growth, encompassing sustainability, social inclusion, national security, and global leadership. The paper outlines a strategic framework for achieving the goal of a developed India by 2047, by focusing on four key tasks: (i) Economic Competitiveness and Growth; (ii) National Security and Stability; (iii) Global Partnerships and Strategic Influence; and (iv)Legal Reforms and Good Governance. The paper emphasizes that successful completion of these tasks will require collective effort, collaboration, and sustained commitment across all sectors of society, government, and industry. Summary of the working paper Four Strategic Pillars ·          Economic Competitiveness & Growth: streamline regulations, boost innovation (R&D, AI, sma...

Continuing from the last week ( View from the Mars – 4 ) For a small investor like me, whose investment spectrum is limited to the locally available instruments and opportunities, it is critical to assimilate the impact of the global events on the local economy and markets. A natural follow-up would be to assess if a change in investment strategy and asset allocation plan is required to factor in the impact of the global events. In most cases, the impact of global events is temporary and does not warrant any change in the investment strategy and/or asset allocation. However, some global events could have a lasting impact on the domestic economy and markets. Such events often require material change in the investment strategy and asset allocation. It is important to note that in the past three months, the world has not witnessed any event that was not widely anticipated. The shift in the US policy (fiscal and monetary) paradigm was widely anticipated and documented. The response of the ...