Thursday, June 26, 2025

First things first

 न चोरहार्यं न च राजहार्यं न भ्रातृभाज्यं न च भारकारी। व्यये कृते वर्धत एव नित्यं विद्याधनं सर्वधनप्रधानम्॥

(Not stolen by thieves, not seized by kings, not divided amongst brothers, not heavy to carry. The more you spend, the more it flourishes always. The wealth of knowledge is the most important among all kind of wealth.)

India stands at a pivotal moment in its journey to becoming a global economic powerhouse. With a young population, a burgeoning digital economy, accelerated clean energy transition, and an ambitious political leadership - the country has immense potential to enhance its participation in the global economy. However, there are several structural and systemic challenges that holding India back from realizing its full growth potential.

In my view, five critical issues that are holding India back are – (i) an inadequate education system; (ii) a feudal governance structure; (iii) a sluggish justice delivery system: (iv) a broken civic services delivery system; and (v) ostentatious social customs that push households to live beyond their means.

While each of these five deserves attention, the education system stands out as the most urgent area for reform. Because education is the root lever. A transformed education system could unlock India’s demographic dividend, drive innovation, and set the stage for sustainable growth. A reformed education system would not only address the skill gap but also have a cascading impact on India’s other challenges. Educated citizens are more likely to demand accountability, weakening feudal governance structures. Financial literacy gained through education could reduce the pressure to overspend on social customs. An empowered workforce would drive economic growth, enabling better funding for civic services and judicial reforms. In essence, education is the catalyst that can unlock solutions to India’s systemic issues.

Inadequate Education System

India’s education system is a paradox. It produces world-class engineers, doctors, and tech leaders, yet a significant portion of its population remains undereducated or unemployable.

In my view, India’s present education system fails to equip the majority of its population with the tools needed for a modern, dynamic economy; or for responsible citizenship. From primary to higher education, issues abound: outdated curricula, rote-based learning, minimal critical thinking, uneven access, poor teacher training, and a governance model that's often more bureaucratic than nurturing. Unfortunately, this system is not just failing students; it’s shortchanging the nation’s future workforce.

According to a 2023 report by the National Sample Survey Office, only 24% of India’s workforce has the skills required for formal employment. This gap is not just a statistic—it’s a structural barrier to growth. To unlock India’s potential, the education system needs a comprehensive overhaul in four key areas: content, delivery, institutional framework, and infrastructure.

Content: Quality, Suitability, Relevance, and Contemporariness

The current curriculum in many Indian schools and colleges is outdated, emphasizing rote memorization over critical thinking, creativity, or practical skills. Subjects like artificial intelligence, data science, and sustainability are rarely integrated into mainstream education, leaving students unprepared for the demands of the 21st-century job market. For example, a 2024 study by NASSCOM highlighted that 60% of Indian graduates lack the skills required by tech industries, despite India’s reputation as a tech hub. 

To address this, the curriculum must be revamped to include: 

·         Interdisciplinary learning: Blend STEM with humanities to foster well-rounded thinkers. 

·         Skill-based education: Focus on coding, financial literacy, and problem-solving to prepare students for real-world challenges. 

·         Global and local relevance: Teach global trends like climate change alongside India-specific issues like rural development. 

·         Regular updates: Establish a mechanism to revise curricula every 3-5 years to stay aligned with industry and societal needs.

Delivery System: Methods, Medium, Accessibility, and Evaluation

The way education is delivered in India often prioritizes quantity over quality. Classrooms are overcrowded, teaching methods are outdated, and access remains uneven, particularly in rural areas. The reliance on high-stakes exams encourages rote learning rather than understanding. 

Key reforms include: 

·         Modern teaching methods: Shift to experiential learning, project-based assignments, and flipped classrooms. 

·         Digital integration: Expand access to online platforms like SWAYAM, ensuring even remote areas have quality resources. 

·         Inclusive access: Subsidize education for marginalized communities and invest in mobile learning units for rural regions. 

·         Holistic evaluation: Replace exam-centric assessments with continuous evaluation systems that measure creativity, collaboration, and practical application.

Institutional Framework: Regulation, Governance, Industry Connect, and Ownership

The governance of educational institutions is often mired in red tape, with limited autonomy for universities and colleges to innovate. Industry-academia collaboration is weak, resulting in a mismatch between what students learn and what employers need.

Reforms should focus on: 

·         Regulatory overhaul: Simplify the regulatory framework under bodies like the NCERT, CBSE, UGC and AICTE to encourage innovation.

·         Public-private partnerships: Encourage industry investment in basic education as part of their CSR efforts to ensure affordable quality education for all.

·         Industry connect: Mandate internships, industry-led courses, and regular employer feedback to align education with market needs. 

·         Decentralized governance: Grant institutions greater autonomy to design curricula and hire faculty, fostering competition and excellence.

Infrastructure: Physical, Digital, and Teacher Training

India’s educational infrastructure is a mixed bag. While urban private schools boast modern facilities, many rural schools lack basic amenities like electricity or clean water. Digital infrastructure is improving but remains uneven, and teacher training is often neglected. 

Critical steps include:

Physical infrastructure: Invest in classrooms, libraries, and labs, especially in underserved areas. 

Digital infrastructure: Ensure high-speed internet and affordable devices for students and teachers. 

Teacher training: Implement mandatory, continuous professional development programs to equip teachers with modern pedagogical skills. 

EdTech scaling: Support startups and platforms that provide scalable, affordable digital learning solutions.

The Path Forward

The government’s National Education Policy (NEP) 2020 is a step in the right direction, with its focus on holistic learning, skill development, and digital education. However, implementation remains uneven. To truly transform the system, India needs: 

Increased investment: Raise education spending from the current ~4% of GDP to at least 6%, as recommended by the NEP. 

Public-private collaboration: Leverage private sector expertise while ensuring equitable access. 

Monitoring and accountability: Establish independent bodies to track progress and ensure reforms are implemented effectively.

India’s potential is undeniable, but its education system is a bottleneck that must be addressed urgently. By prioritizing reforms in content, delivery, institutional frameworks, and infrastructure, India can empower its youth, drive economic growth, and take its rightful place on the global stage.

Also read

Not worried about AI taking jobs

Wednesday, June 25, 2025

Strategy for Viksit Bharat @2047

 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.

Tuesday, June 24, 2025

Markets Hold Firm Amid Global Unrest: Signal or Setup?

The Indian stock market has once again demonstrated its remarkable ability to weather turbulent times. Despite significant geopolitical headwinds, including the Indo-Pak tensions in April 2025 and the escalating Iran-Israel conflict in June 2025, the benchmark Nifty 50 has shown resilience, recouping losses swiftly and even posting gains. Month-to-date (MTD) in June 2025, the Nifty 50 has its ground firmly , despite threatening news flow, a weakening rupee, and surging oil prices. Trading volumes on the National Stock Exchange (NSE) have surged, even as foreign portfolio investors (FPIs) are only marginal net buyers and promoter entities offloaded over 400 billion in shares. Meanwhile, domestic institutional investors (DIIs) have though accelerated their buying and providing support to the market.

One may argue that this tendency to quickly overcome geopolitical shocks isn’t new. Over the past five years, the Nifty 50 and Sensex have delivered annualized returns of 10-12%, navigating challenges like the COVID-19 pandemic, global inflation, and geopolitical tensions.

Notwithstanding, this resilience raises two important questions: (1) Has the market fully priced in the short- to medium-term impacts of these geopolitical and economic challenges? And (2) IS the current investors positioning aligned with this collective wisdom, or are they holding back, waiting for clearer signals?

1.    Has the market fully priced in the short to medium-term impact of the current geopolitical and economic conditions?

The market’s muted reaction to rising oil prices and geopolitical escalation suggests that participants may indeed be looking past the immediate risks. Historically, sustained oil prices above $90/barrel tend to spook emerging markets, especially net importers like India. Yet, the INR and benchmark yields have only weakened modestly, indicating a lack of panic among both equity and debt investors.

There is also precedent for such behavior. During the Russia-Ukraine conflict in early 2022, the Nifty corrected nearly 10% in a month before stabilizing as investors shifted focus to earnings resilience and strong domestic demand. A similar pattern appears to be playing out in 2025, as the market leans on India's improving macro fundamentals: GST collections remain robust (1.72 lakh crore in May), credit growth continues to trend above 16%, and manufacturing PMI remains in expansion territory.

It is worth noting that the USDINR has depreciated less than 1% MTD, driven by risk-averse sentiment and dollar demand from oil importers. Crude oil prices, a critical factor for India (which imports over 80% of its crude), spiked over 10% to $76-77 per barrel following the Iran-Israel escalation, raising concerns about inflation and the current account deficit. However, retail inflation remains at a six-year low of 2.82% in May 2025, bolstered by a favorable monsoon and RBI’s recent rate cut, providing a cushion against these pressures.

Overall, the market seems to be assigning a lower probability to these conflicts escalating into scenarios that could derail India’s domestic growth story. The base case appears to be a temporary disruption with limited spillover effects—at least economically.

A prolonged Middle East conflict could disrupt oil supplies through the Strait of Hormuz, pushing Brent crude to $120 per barrel, which would strain India’s fiscal balance and reignite inflation. Similarly, sustained FPI outflows, driven by high valuations or cheaper Asian markets like China, could cap upside. Still, the market’s ability to hold above key support levels (24,700 for Nifty) and the absence of strong selling pressure suggest that investors are comfortable with current price levels for now.

2.    Are market participants aligned with this view—or are they still waiting for more evidence?

Positioning data tells a mixed story. While domestic institutions (mutual funds, insurance companies) have stepped up their buying—net purchases exceeding ₹600 billion in June so farretail flows have plateaued. Systematic Investment Plans (SIPs) remain steady (20,900 crore in May), but net retail participation has softened somewhat in the derivatives and midcap space.

Moreover, futures & options positioning shows high open interest in index puts, suggesting that institutional players continue to hedge downside risks. Volatility, as measured by the India VIX, has edged up slightly (hovering around 14), indicating guarded optimism rather than outright bullishness.

Promoter selling—over 400 billion MTDfurther complicates the narrative. While such activity isnt uncommon ahead of Q2 fundraising or capital reallocation plans, it typically reflects either a valuation comfort zone or a strategic liquidity need. Given that this selling has not dented broader sentiment significantly, one could argue that other market participants are either confident in the underlying fundamentalsor are simply waiting for further clarity before making directional bets.

What does this mean going forward?

The current market resilience could very well be the product of a differentiated outlook: that India’s domestic story is strong enough to weather external shocks. But caution is clearly visible in the way participants are positioned—through hedges, elevated cash levels among HNIs, and selective buying rather than indiscriminate accumulation.

Until there is clarity on crude oil’s trajectory, the rupee’s stability, and the potential policy response from global central banks (especially the Fed’s July meeting), markets are likely to stay range-bound with a mild upward bias. Earnings upgrades in auto, banking, and infra sectors offer a supportive backdrop, but investors will want confirmation via Q1FY26 numbers before going all-in.

Conclusion

The collective wisdom of the market seems to have largely priced in current risks, but positioning suggests that investors are not fully aligned with this outlook—yet. Resilience, yes. Conviction, not quite. A ‘better than expected’ 1QFY26 performance could enhance conviction and pull the fence sitters in.

Thursday, June 19, 2025

Not worried about AI taking jobs


A famous fund manager recently expressed serious concerns about a “financial crisis” that is just about to hit the Indian middle-class households (see here). In a podcast with Mint, he said, “With household financial savings at a 50-year low and debt levels (excluding mortgages) among the highest globally, the country is dangerously unprepared for a looming wave of tech-driven job disruption.” He was apparently referring to the disruption created by the popularity of “Artificial Intelligence” (AI) in the global job market.

I have no disagreement with the analysis of this gentleman. In fact, to a large extent I do agree with his concerns. The fabled Indian middle class may indeed be facing an unprecedented crisis. However, I have my reservations about AI causing or accentuating this crisis. I firmly believe that this advancement in technology, just like all the previous ones, will definitely improve overall employment prospects, in particular, and quality of life, in general.

If anything, I see AI — like past technological leaps — as a net enabler. The threat isn’t AI; it’s how unprepared we are to adapt to it.

History is full of examples where transformative technology triggered fear, resistance, and dire predictions — most of which didn’t age well. For example, note the following developments.

·         In the 19th century, grave concerns were expressed about the adverse impact of using motorized vehicles. Concerns were raised about the potential dangers of motorized vehicles to horse riders and horse-drawn carriages, especially in terms of speed and noise. The British Parliament devoted significant time on debating (i) potential displacement of horse-related industries, such as carriage building and horse feed businesses; and (ii) the potential dangers of motorized vehicles to horse riders and horse-drawn carriages, especially in terms of speed and noise.

The Locomotive Act 1865 (Red Flag Act), a historical example of resistance to technological progress, was passed to impose strict speed limits (4 mph in the country, 2 mph in towns) and require a person to walk ahead of every motorized vehicle waving a red flag to warn horse traffic.

The Highways and Locomotives (Amendment) Act 1878 and the Locomotive on Highways Act 1896 eventually relaxed these restrictions, reflecting growing acceptance of motor vehicles.

·         Employees’ unions of Public Sector Banks in India went on a 10 days strike in early 1990s, when the government decided on computerization of banking operations to improve efficiency and scalability. Job security was their prime concern. By October 1993, unions reached a Computerization Settlement Agreement with the Indian Banks' Association (IBA). This agreement allowed for the gradual introduction of technology in PSBs, with assurances to protect jobs and involve unions in the process. By 1998, about 25% of PSB branches were partially or fully computerized, increasing to 50% by 2001. The adoption of Core Banking Solutions (CBS) and technologies like ATMs transformed Indian banking, improving efficiency and customer service. In the following two decades the banking network expanded at a record pace. The job opportunities created by the expansion were exponentially higher.

·         In the mid-1990s computerized trading platforms (first OTCEI and then NSE) were introduced in India. The traditional stock exchanges resisted the move, fearing that the people employed in the floor based open cry trading system will become unemployed and traditional stock brokers may not be able to adapt to the new technology. Within one decade, the stock markets in India had grown exponentially, creating a significantly higher number of job opportunities.

·         In the mid-1990s, Indian farmers, particularly through organizations like the Karnataka Rajya Raitha Sangha (KRRS), staged massive protests against India’s integration into the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT). The Uruguay Round of GATT concluded in 1994, leading to the establishment of the WTO in 1995. The AoA aimed to liberalize agricultural trade by reducing subsidies and trade barriers, which farmers feared would favor developed nations and multinational corporations. A 1993 rally organized by Vandana Shiva and others saw 500,000 farmers protest against GATT/WTO, highlighting fears of losing food sovereignty. Protests continued into 1995–1996, with farmers’ groups like KRRS and the Bharatiya Kisan Union (BKU) organizing marches, seed satyagrahas (non-violent resistance to save indigenous seeds), and public campaigns to demand India’s withdrawal from the WTO.

It was feared that Liberalized trade would flood Indian markets with cheap, subsidized imports from developed countries, undercutting local farmers. The government however managed to negotiate protections for Indian farmers, such as maintaining MSP and public procurement systems.

Advent of smartphones made several legacy products and technologies like camera and radio etc. redundant; but it democratized creativity and access. The market for music has grown several times, offering opportunity to millions of new performers who would have struggled to get noticed. Millions of enthusiasts have taken to photography, caricatures, dancing, acting, etc. People living in obscure corners of the country can easily access global audiences and markets for their products and talents.

“Artificial Intelligence”, in my view, will similarly democratize several professions, e.g., software development, designing, teaching, governance, farming, etc. It could enhance efficiency several times, just like the commercialization of internal combustion engines (ICE) and the internet did in the 20th century.

I am not oblivious of the fact that almost half of present-day jobs in developed economies could be at risk of automation, with similar risks in emerging markets like India, particularly in IT and service sectors. Nonetheless, I am not unnecessarily worried about this. But history shows these disruptions are often overstated, and adaptation creates more jobs than it destroys.

I am able to foresee millions of new business ideas and software applications coming out of ordinary households just like the entertainment reels (short video clips) are coming these days. Of course, there could be a pain period as the new job opportunities may emerge with a lag, while disruption may be immediate.

What actually worries me is the fast degenerating public school education system in India. The divide between quality private education (affordable for top 10% of the student population) and poor quality private and public education (availed by the 90%) is widening every year. This divide shall perpetuate the income and wealth inequalities in the country and prevent it from a democracy in the true sense. We may continue to remain a feudal society dominated by a few.

AI isn’t the villain; it’s a tool that can empower millions if we prepare for it. The real crisis is our failure to equip the next generation to seize those opportunities. More on that soon.

Wednesday, June 18, 2025

 Where did we lose our way?

Tuesday, June 17, 2025

Israel-Iran Conflict: Implications for India’s Economy and Markets

The Middle East is once again a tinderbox, with the escalating Israel-Iran conflict threatening to spiral into a broader global crisis. Unlike the recent Indo-Pak hostilities, which remained contained, this clash carries the potential to draw in multiple nations, disrupting global trade and energy markets. For India, which is heavily reliant on energy imports, the stakes are high. While India has reiterated its neutral stance, the ripple effects of a prolonged conflict could significantly impact its energy security, inflation, current account balance, INR exchange rate, fiscal stability, and overall economic growth prospects.

Thursday, June 12, 2025

The world urgently needs a revival of statesmanship

The recent violence in Los Angeles, California, stemming from protests against Immigration and Customs Enforcement (ICE) raids starting June 6, 2025, has evoked strong responses from global communities. The militarized response to what began as localized unrest has triggered a much wider debate, both within the United States and internationally. The deployment of 2,000 National Guard troops and the placement of 700 U.S. Marines on “high alert,” coupled with the use of tear gas, rubber bullets, and curfews, has drawn sharp criticism. This heavy-handed approach is not entirely unexpected, given President Trump’s experience with the 2021 Capitol Hill riot, which underscored his administration’s preference for forceful responses to civil unrest. The ensuing tension between the California state government, led by Governor Gavin Newsom and Mayor Karen Bass, and the federal government has raised further concerns about governance, human rights, and the risk of escalating conflict.

The global response has been swift and critical. The United Nations has called for de-escalation, urging U.S. authorities to avoid “further militarization” of the response to the LA protests and to uphold the right to peaceful assembly. Australian Prime Minister Anthony Albanese expressed concern over the handling of the unrest, particularly the use of rubber bullets. Canada, Ireland, Germany, and the Netherlands have issued travel advisories for their citizens visiting the U.S., citing risks of detention due to aggressive immigration enforcement. Amnesty International USA condemned the deployment of National Guard troops as an “unnecessary militarized reaction” aimed at “crushing dissent” rather than protecting communities. Human Rights Watch (HRW) framed the LA protests as part of a broader fight for human rights in the U.S., noting that ICE raids targeting sensitive locations like courthouses, schools, and workplaces have sparked nationwide demonstrations. The Economist described the U.S. administration’s response as appearing to “create confrontation” and fuel a “cycle of protest, violence, and repression” for political gain, rather than prioritizing order.

Notably, the U.S. is not alone in witnessing violent protests or militarized responses to civic unrest, particularly in recent years. Civilians have faced brutality in active war zones like Israel-Palestine and Russia-Ukraine; in terrorism- and gang-war-infested countries such as Pakistan, Sudan, Somalia, Syria, Lebanon, Colombia, Venezuela, Ecuador, Peru, South Africa, and Kenya; and in nations governed by non-democratic regimes, including Myanmar, Bangladesh, the Democratic Republic of Congo, and Haiti. In India also, ethnic violence and alleged state oppression in Manipur have led to civilian suffering, internet shutdowns, and persistent unrest. These cases highlight a grim reality: the use of force against civilians is a global phenomenon, often exacerbated by weak governance, conflict, or authoritarianism.

Yet, the phenomenon of violent protests and their suppression by force is not confined to the developing world or conflict zones. Developed democracies like Canada, France, the United Kingdom, Germany, the Netherlands, Ireland, Belgium, and Spain have also experienced significant civil unrest in recent years. The Allianz Risk Barometer 2025 identifies France, the UK, Germany, and Spain as global hotspots for protest and riot activity, with over 80,000 incidents recorded in 2024 alone. In France, protests over economic policies and immigration have frequently turned violent, while the UK has seen riots linked to immigration and political polarization. Germany and the Netherlands have faced farmer protests and demonstrations over energy costs, and Ireland has grappled with tensions over immigration policies. These parallels with the U.S. and Canada underscore a troubling trend: even stable democracies are not immune to the forces driving public discontent and violence.

In most cases, the catalysts for violent civilian protests are clear: restrictive immigration policies that limit labor mobility, economic stress inducers, e.g., unemployment, inflation, and unfair taxation, curbs on personal liberties such as religious freedom or reproductive rights, suppression of ethnic or religious minorities, and deepening political polarization. These issues, while diverse, share a common thread: they erode trust between governments and their citizens, creating fertile ground for unrest. The Los Angeles protests, sparked by ICE raids targeting immigrant communities, exemplify how policy decisions can ignite broader social tensions, particularly when met with disproportionate force.

In my view, the primary reason behind the rise in violent tendencies in recent times is the overwhelming dominance of divisive and parochial political agendas across the world. Statesmanship, a hallmark of much of the 20th century, has all but vanished from the global stage. The world once saw leaders like Franklin D. Roosevelt, Winston Churchill, Nelson Mandela, and Nehru, who, despite their flaws, prioritized unity, long-term vision, and humanitarian values over short-term political gains. Today, too many leaders are elected on platforms that amplify division, fear, and narrow self-interest. These leaders often lack a global perspective or a commitment to addressing the root causes of unrest—poverty, inequality, and injustice. Instead, they resort to populist rhetoric or militarized responses, further alienating their citizens and fueling cycles of protest and repression.

The absence of statesmanship is not just a leadership failure; it is a systemic crisis. Global challenges like climate change, migration, and economic inequality require cooperative, forward-thinking solutions, yet many leaders prioritize domestic political survival over collective progress. In the U.S., the LA unrest reflects a failure to bridge divides between immigrant communities and policymakers, exacerbated by a federal response that prioritizes control over dialogue. Similarly, in Europe, protests over immigration and economic policies highlight a disconnect between governments and their increasingly frustrated populations. Even in war-torn regions like Sudan or Myanmar, the lack of visionary leadership perpetuates cycles of violence and displacement.

To break this cycle, the world urgently needs a new generation of statesmen and stateswomen—leaders who can rise above parochial agendas and embrace a humanitarian approach to governance. These leaders must prioritize dialogue over confrontation, addressing the root causes of unrest rather than merely suppressing its symptoms. For instance, immigration policies could focus on integration and economic opportunity rather than punitive enforcement, as seen in the LA raids. Economic reforms could tackle inequality and inflation through inclusive growth, rather than austerity measures that disproportionately harm the vulnerable. Political polarization could be countered by fostering civic engagement and rebuilding trust in institutions, rather than exploiting divisions for electoral gain.

Moreover, the international community has a role to play in fostering statesmanship. The UN, regional organizations, and civil society must hold leaders accountable for human rights abuses and militarized responses, while supporting initiatives that promote peacebuilding and social cohesion. Grassroots movements, empowered by technology and global connectivity, can also pressure governments to prioritize the common good over divisive politics. Education and public discourse must emphasize empathy, critical thinking, and global citizenship, equipping future leaders to navigate an interconnected world.

The violence in Los Angeles, like unrest elsewhere, is a symptom of a deeper malaise: a world led by division rather than vision. The global outcry over the LA protests—whether from the UN, human rights groups, or concerned citizens on platforms like X—signals a shared desire for change. Yet, change will not come without leadership that transcends borders, ideologies, and short-term gains. The world urgently needs statesmen and stateswomen who can heal divides, inspire hope, and forge a path toward a more just and peaceful future. Only then can we move beyond the cycles of protest, violence, and repression that define our time.