India’s automobile industry is a tale of strange mixture. With soaring sales, strategic policies, and a steady push toward localisation, the sector has become a hub for automotive assembly. Yet, challenges like declining foreign direct investment (FDI) inflows and reliance on imported components persist. Drawing on insights from analyses of debt-driven growth and the kit-and-assemble model, this article explores India’s automotive journey—blending assembly dominance, investment dynamics, and sales into a complicated story of untold truths.

Assembly vs. Manufacturing: The Core Of India’s Auto Sector

India’s auto industry primarily relies on assembling Completely Knocked Down (CKD) or Semi-Knocked Down (SKD) kits imported from global suppliers. This cost-efficient model offers modest domestic value addition (DVA) compared to full manufacturing, which emphasises end-to-end local production. From 2014 to 2025, localisation surged from 50-60% to an impressive 70-80%, driven by the “Make in India” initiative. However, the sector’s manufacturing GDP share remains steady at 13-17%, with a slight dip by 2025. High-value components, particularly electronics (80-90% imported), highlight gaps in self-reliance. The Production Linked Incentive (PLI) scheme, launched in 2021, has injected INR 20-30 billion (USD 227-341 million) by 2025, boosting electric vehicle (EV) localisation beyond 50% DVA in models from Tata and MG, though broader segments trail.

Surging Sales Amid Economic Challenges

Defying global headwinds, India’s auto sales have maintained strong momentum. Passenger vehicles grew 8.45% year-over-year (YoY) in FY 2024 to 4.22 million units, moderating to 1.97% in FY 2025 (projected at 4.30 million). Two-wheelers outperformed, climbing 13.31% to 17.97 million units in FY 2024 and 9.08% in FY 2025 (forecasted at 19.61 million). Despite monthly slowdowns in 2025 due to market saturation, consumer demand remains robust. Debt fuels this growth, financing 75-80% of four-wheeler purchases (up 5-7% since 2023) and 50-60% of two-wheelers, with outstanding auto loans reaching INR 4,400-5,280 billion by 2025. While defaults remain low at 2-3%, rising household debt (42% of GDP) raises caution. Heavy reliance on China for 80-90% of electronics imports (USD 113-127 billion in 2024) further exposes trade vulnerabilities.

Why Assembly Dominates In 2025

Assembly remains the sector’s backbone due to supply chain efficiencies. Importing high-value components like electronics and batteries reduces costs by 5-10% compared to global peers, making CKD/SKD models attractive. Low net FDI (under 1% of GDP) limits technology transfers for advanced manufacturing, and while PLI incentives have transformed EVs, they haven’t fully permeated other segments. Global pressures—such as US tariffs from August 2025, visa restrictions, and geopolitical tensions—deter deeper investments, reinforcing assembly as a low-risk, high-reward strategy for foreign firms targeting India’s vast market.

Investment Dynamics: FDI, OFDI, And FII Trends (2010-2025)

(a) Strategic Partnerships Power Growth: Joint ventures (JVs) and collaborations have been instrumental, driving technology transfers and market expansion. Key examples include Maruti Suzuki (Suzuki Japan, 56.4% stake), Toyota Kirloskar (Toyota Japan, 89%), Hero MotoCorp (independent post-2010 Honda split via a $1.2 billion stake sale), JSW-SAIC (2024 JV for MG, with JSW India at 35% and SAIC China at 49%), and Hyundai Motor India (fully Korean-owned with local vendor ties). These partnerships underscore India’s appeal as an assembly and EV hub.

(b) Trade And Investment Landscape: Imports of critical components (60% from China, Japan, Germany) grew from $8.5 billion in 2010 to $22.4 billion in 2025, while vehicle and parts exports rose from $5 billion to $22.9 billion ($15 billion in finished vehicles, $7.9 billion in spares), targeting Europe and Africa. A trade surplus emerged post-2020, reaching $0.5 billion in 2025. Cumulative FDI in automobiles hit $37.52 billion from April 2000 to December 2024, with Japan ($10 billion), South Korea ($8 billion), and the US/Germany ($5 billion) leading from 2010-2025. However, net FDI plummeted to USD 353 million (0.01% of GDP) in FY 2024-25, a 98% drop, driven by repatriations and global frictions.

Year-Wise Trends (2010-2025)

The table below tracks assembly reliance (imported content as % of production value), FDI inflows, Outward FDI (OFDI), and net FDI. Localisation gains, driven by PLI and free trade agreements (FTAs), reduced assembly reliance from 60% in 2010 to 30% by 2025. OFDI, estimated at 5-7% of India’s total outward investments, reflects global expansions by Tata and Mahindra. Net FDI = FDI Inflows – OFDI. Values in USD billion; % changes YoY.

Notes: Localisation rose to ~70% by 2025, driven by PLI and FTAs. OFDI spikes (e.g., $4.4 billion to the US in FY 2024-25) reflect global ambitions. The 2021 FDI peak tied to EV investments; 2025 inflows (5% of $50.01 billion total equity FDI) prioritized assembly and EV tech.

FII Volatility In Auto Stocks (2014-2025)

Foreign Institutional Investors (FIIs) have shaped auto stock valuations, with flows tied to global cues, sales trends, and EV policies. Targeting giants like Maruti Suzuki, Tata Motors, and Mahindra & Mahindra, FIIs contributed to +$95 billion in cumulative equity inflows from 2014-2025, with autos claiming 5-10% in bullish periods. The table below estimates net FII flows to the auto sector. Values in USD billion; % changes YoY.

Notes: Surges in 2019-2020 reflected recovery and EV optimism; 2022 outflows tied to global uncertainties; 2025’s net negative (~$0.5-1 billion) stemmed from $13-15 billion overall outflows by August, with selective inflows (e.g., Rs 1,908 crore in September for EV stocks).

Future Of India’s Auto Sector

India’s automotive industry stands at a critical juncture, balancing impressive localisation gains with persistent structural challenges. Robust sales—4.3 million passenger vehicles and 19.61 million two-wheelers projected for FY 2025—signal strong consumer demand, underpinned by debt-driven financing.

However, reliance on imported high-value components, especially 80-90% of electronics from China, exposes vulnerabilities in self-reliance. Declining net FDI (USD 353 million in FY 2024-25) and volatile FII flows (net outflows of USD 0.75 billion in 2025) reflect global economic frictions and limited technology transfers, constraining full-scale manufacturing.

Looking ahead, India’s auto sector must navigate a dual path: establishing real and effective local manufacturing to reduce import dependency and attracting sustained investments to ensure continued manufacturing progress.

Strategic partnerships, like JSW-SAIC and Hyundai’s local vendor ties, will remain pivotal for technology integration and market expansion. The EV segment offers a bright spot, with over 50% DVA in models from Tata and MG, but scaling this across broader segments requires policy consistency and infrastructure growth.

Rising household debt (42% of GDP) and geopolitical risks, including US tariffs and visa restrictions, demand cautious optimism. By leveraging its assembly strengths, expanding export markets (USD 22.9 billion in 2025), and fostering innovation, India’s auto industry can evolve from an assembly-driven model to a manufacturing powerhouse, driving sustainable growth in a dynamic global landscape.

Introduction

India’s economy has undergone significant transformations over the past decade, with foreign investments playing a pivotal role in driving growth, technology transfer, and job creation. Foreign Direct Investment (FDI), Foreign Institutional Investments (FII), and Outward FDI (OFDI) have been key components influencing the Gross Domestic Product (GDP), whether directly or indirectly.

However, recent trends, particularly in 2025, reveal a concerning shift: surging gross FDI masked by massive outflows, leading to historically low net FDI retention. This is compounded by GDP illusions and discrepancies that expose overestimations in official figures, debt traps, and tariff turmoil, which have collectively dragged down real economic performance.

This article explores the roles of these investment streams, their quantitative trends, reasons for changes, implications of low net inflows, domestic economic headwinds, and shifts in savings and private investments. Drawing on official sources like the Reserve Bank of India (RBI), Department for Promotion of Industry and Internal Trade (DPIIT), and independent analyses from ODR India, it provides a detailed examination of net FDI trends from 2014 to 2025, incorporating reduced GDP figures based on exposed discrepancies between expenditure and production approaches, as well as global data deceptions.

Roles Of FDI, FII, And OFDI In India’s GDP

FDI serves as a cornerstone for long-term economic development by injecting capital into infrastructure, manufacturing, and services sectors. It facilitates technology spillovers, enhances productivity, and creates employment—contributing approximately 15-20% to gross fixed capital formation (GFCF) and adding 1-1.5% to annual GDP growth in peak years. For instance, FDI in renewables has supported India’s 100 GW solar capacity target.

FII, on the other hand, provides short-term market liquidity, boosting stock valuations and enabling corporate fundraising through equity markets. Averaging 0.5-1% of GDP in net terms pre-2020, FII has driven the Nifty index from 8,000 in 2014 to over 25,000 in 2025, but its volatility has occasionally shaved 0.5% off GDP during outflows.

OFDI reflects Indian firms’ global expansion, acquiring overseas assets for market access and R&D. While smaller (0.4% of GDP average), it has built conglomerates like Tata, remitting dividends that indirectly support domestic GDP, though excessive outflows strain reserves.

Collectively, these flows have averaged 2-3% of GDP in inflows, but net contributions have dwindled to under 1% by 2025 amid capital flight. These trends are exacerbated by GDP mirages, where official real growth averages 5-6% but corrected figures reveal 4% or less, due to overstated private final consumption expenditure (PFCE) by 2-3%, methodological tweaks like base year revisions, and ignored drags such as rural distress affecting 800 million on food aid.

Trends In FDI, FII, And OFDI: Amounts And Percentage Changes

From FY2014-15 to FY2024-25, gross FDI inflows surged 79% cumulatively to $81 billion, but net FDI collapsed to $0.35 billion in 2025—the lowest on record. FII net flows were erratic, peaking at $20 billion in 2021 before $15 billion outflows in 2025. OFDI rose sharply to $29.2 billion in 2025 (75% YoY increase). As percentages of GDP (nominal USD terms, adjusted downward from official figures to reflect corrected real growth and discrepancies, from $2.04 trillion in 2014 to a reduced $3.5 trillion in 2025), FDI gross averaged 2%, but net fell below 0.1%; FII 0.5% average but -0.4% in 2025; OFDI from 0.4% to 0.8%.

Sources: RBI Bulletin May 2025, DPIIT FDI Factsheet March 2025, SEBI FPI Data. Gross FDI includes equity, reinvested earnings, and other capital. Net FDI for 2024-25: $0.35B (0.01% GDP). % Changes are YoY for gross where applicable. GDP figures reduced to account for overestimations of 1.8-3.2% in real growth (e.g., 2016-17 official 8.3% corrected to 6.5%; 2023-24 8.2% to 5.0%), leading to lower nominal totals.

Reasons For Changes In FDI, FII, And OFDI

FDI gross increases (2014-2020: +23% peak YoY) were fueled by liberalisations like 100% FDI in defense (2016), GST (2017), and Insolvency and Bankruptcy Code (2016), alongside Make in India initiatives attracting $200B+ cumulatively.

Declines (2020-2023: -16% YoY) stemmed from COVID-19 disruptions, geopolitical tensions (e.g., India-China border issues), and supply chain shifts.

The 2024-25 gross rebound (+14%) came from Production Linked Incentive (PLI) schemes ($25B incentives), but net plummeted due to $51B repatriation (e.g., IPO proceeds from firms like Hyundai) and US 50% tariffs on $120B Indian exports (effective 2025, exempting “aligned partners” like Vietnam, causing $20-30B export losses, 14% drop in US exports, and 0.5-1% GDP drag, widening net export deficits to -1.7%).

FII volatility arose from global monetary policies: inflows during QE (2017 +128%, 2021 +412%) and outflows amid Fed hikes (2018 -81%, 2025 -175% from 5.5% US rates and rupee depreciation to 90/USD).

OFDI surges (+75% in 2025) reflect firms like Adani and Tata diversifying globally ($12B acquisitions in tech/pharma) to hedge domestic slowdowns (GFCF at 7.1% vs. 9% pre-2020) and tariff risks.

These changes are further influenced by debt traps, with household debt at 48.6% of GDP (up 32% since 2014, consuming 20% of income in servicing) and government borrowings at 30-40% of expenditure, fueling fiscal deficits of 4.4% and interest payments at 25-30% (₹11.5 lakh crore), eroding productive spending.

Implications Of Low Net FDI, High FII Withdrawals, And Surging OFDI In 2025

With net FDI retention at just 0.01% of reduced GDP, $15B FII exits, and $29B OFDI, India faces a “capital reversal.” This erodes forex reserves ($600B, down 5%), fuels rupee volatility, and exacerbates unemployment (8.5%). Domestic and foreign investors preferring outbound routes signals confidence erosion, with household debt at 48.6% GDP trapping savings and worsening inequality (top 10% hold 77% wealth). The twin drain could shave 1-2% off GDP, risking stagnation without urgent reforms like tariff negotiations. Q1-2025 real growth at 4.9% YoY, with 2025-26 projections at 2.5-4%, highlights the drag from tariff turmoil and debt.

Net FDI approximated from RBI gross minus repatriation (e.g., 2024-25: $81B gross – $80.65B outflows). Net Total = Net FDI + FII – OFDI. Sources: RBI, DPIIT. % GDP adjusted for reduced nominal figures.

Net FDI Trends: A Detailed Breakdown (2014-2025)

Net FDI, calculated as gross inflows minus repatriation, disinvestment, and other outflows, reveals the true retention of foreign capital. While gross figures paint a rosy picture, net has trended downward, hitting rock bottom in 2025 due to profit repatriation amid high valuations and global uncertainties. The following table highlights yearly data, percentage changes (YoY for net), reasons, and economic impacts, with GDP-adjusted implications.

Sources: RBI Bulletins (May 2025), DPIIT Factsheets, World Bank BoP Data (net approximated for FY alignment; 2024 calendar $27.6B adjusted). Gross from total inflows; net = gross – outflows (repatriation ~60-70% in recent years). % Change for net YoY. Impacts based on MOSPI GDP components, adjusted for discrepancies averaging 1% (peak 2.5 pp in 2020-21 due to informal sector undercount ~45%).

This table underscores the widening gross-net gap, from 20% outflows in 2014 to 99% in 2025, driven by maturing investments and external shocks.

GDP Discrepancies: Expenditure vs. Production Approaches (2014-2025)

Official GDP calculations mask underlying weaknesses through discrepancies between expenditure (demand-side) and production (supply-side) approaches. Production GVA shows agriculture at ~3%, industry ~6%, services ~7-9%, averaging ~5.8% growth, while expenditure emphasizes demand. Discrepancies average 1 pp, peaking at 2.5 pp in 2020-21, attributed to undercounting the informal sector (~45% of economy), timing mismatches, and frequent revisions.

These components reveal a mirage: private consumption weakened by rural poverty (200 million affected) and unspent welfare (MGNREGA 62% idle), investment inefficient due to NPAs (5-7%) and cronyism, government spending eroded by overruns (₹15-40k crore) and corruption (CAG ₹30-35k crore), and net exports hit by tariffs (US 18% share down 14%).

Critiquing Official 2025 Data And Actual Investments Amid Domestic Slowdown

Government claims (DPIIT/PIB) tout gross FDI up 14% to $81B in FY2024-25 and Q1 FY2025-26 at $18.6B, asserting “record inflows.” Yet, net quarterly figures show collapse: Q1 2025 $1B (-52% YoY), May alone $0.035B (-98%). Errors include gross-only focus, ignoring $51B outflows and OFDI ($7.3B/Q), inflating narratives. Quarterly nets contradict “increase” claims, per RBI Bulletin July 2025.

Actual 2025 investments net ~$2-3B (Q1-Q3), battered by consumption slowdown (PFCE 6% Q4 FY25, projected 4.5% FY26; share down to 55% from 58% in 2014), household debt 48.6% GDP (+32% since 2014), savings net 5.6% (lowest in 50 years), unemployment 8.5% (23M jobs lost 2020-25), wage stagnation (-1% real), and US tariffs (50% on non-exempt goods, exemptions favoring Vietnam/Mexico; $43% export loss, 5M jobs at risk).

Comparative analysis reveals pre-2020 consumption (60% GDP driver at 7%) halved post-tariffs/debt. Quarterly 2025: Q1 net $1B (consumption -1%); Q2 $0.8B (defaults +10%); Q3 $0.5B (tariffs onset). Govt/media ignore these for “Viksit Bharat” optics, selective gross data (PIB), and corporate ad ties—underreporting unemployment (PLFS vs. CMIE) and rural distress.

These issues stem from GDP illusions, where official figures are deceived by overstated PFCE (2-3%), ignored informal collapses, and tweaks like lockdown-adjusted deflators, leading to overestimations (e.g., 2020-21 -5.8% official vs. -7.8% real; global comparisons show India’s errors exceed typical 0.4-0.5% forecast variances).

Real GDP For 2025-26: Official 6.5%, but adjusting for -1.5% consumption, -2% investment, -2% exports = 3-4% inevitable (ODR India/P4LO Analytics Wing prediction 2.5-4%; Moody’s revised to 5.5%, but further reductions likely). Crashing cores (PFCE 55%, investment 32%) + debt/savings collapse confirm, with recession risks absent reforms.

Domestic Savings Patterns: Decline And Shift To Equities

Household gross savings fell from 32% GDP (2014) to 25.5% (2025 proj., -20% cumulative), net to 5.6% (-72%). Causes: Job losses (CMIE), wage cuts, inflation (5-8%), debt servicing (20% income). Shift from capex (homes/cars 60% to 20%) to stocks (5% to 30%; SIP $50B 2025) via demat boom (150M accounts) and FOMO, but retail losses $10B in dips. This shift amplifies risks from GDP deceptions, potentially leading to a DII Bubble with 90% burst chance in 2025-26.

Private Current And Capital Investments: Components And Shifts

Private GFCF (55-60% total) split: Individuals 25% (savings/loans: homes 15%, durables 10%); companies 75% (machinery 40%, buildings 20%; internals 50%, subsidies/tax 30%—PLI $100B+, land gifts 10% at 50-70% discount). Current (20%) vs. capital (80%). Shift to stocks: Capex 28% to 21.5% GDP; equities +140% ($200B MFs). DIIs ($400,000 Cr 2025, 40% market influence) stabilised but DII Bubble risks 30-40% crash by 2030 (PE 25x, retail 40% holdings).

Pattern: Capex peak 2014 (infrastructure), fall 2025 (debt/tariffs). 100% breakdown shows subsidies/gifts propping companies; stock shift +133%, DII caution for overleverage and DII Bubble, as warned by Praveen Dalal, CEO of Sovereign P4LO.

Conclusion

India’s investment landscape from 2014-2025 highlights reform-driven gains overshadowed by 2025’s outflows and domestic woes. Low net FDI (0.01%) amid high OFDI/FII exits signals urgency for balanced policies.

Real GDP at 3-4% looms for 2025-26, urging transparency beyond gross figures. Sustained growth demands addressing consumption, debt, and global trade frictions, while confronting GDP mirages and deceptions to rebuild trust.

Introduction

The Goods and Services Tax (GST), implemented in India on July 1, 2017, represents a landmark reform in the country’s indirect taxation system. By replacing a patchwork of central and state taxes with a unified framework, GST aimed to simplify compliance, eliminate cascading taxes, and boost economic efficiency. Over the years, it has generated substantial revenue, with collections growing amid challenges like the COVID-19 pandemic. This article examines GST’s financial performance from inception to fiscal year 2024–25 (ending March 2025), including annual revenues, center-state distribution, burden sharing, corporate pass-through mechanisms, and impacts on vulnerable populations. Data is drawn from official sources and economic analyses as of September 22, 2025.

Annual GST Revenue Collections

GST revenues have demonstrated resilience and growth, driven by factors such as digital compliance tools (e.g., e-invoicing), an expanding taxpayer base exceeding 1.4 crore registrants, and economic recovery. Collections are reported on a fiscal year basis (April–March), with the inaugural year (2017–18) covering only July 2017 to March 2018. Cumulative gross collections from 2017 to 2025 surpass ₹117 lakh crore, reflecting an average annual growth of 10–12% post-2021.

The following table summarises gross GST collections year-wise:

Revenue Sharing Between Center And States

Under the GST regime, revenues are apportioned as follows: Central GST (CGST) accrues entirely to the central government, State GST (SGST) to individual states, and Integrated GST (IGST) is split 50:50. A Compensation Cess on “sin goods” (e.g., tobacco, aerated beverages) compensated states for initial revenue shortfalls until 2022, with extensions for debt repayment through 2026.

From 2017 to 2025, the center retained approximately 30–35% of total revenues (₹35–40 lakh crore, including its IGST and cess shares), while states received 65–70% (₹77–82 lakh crore, encompassing SGST, IGST shares, compensation, and 41% devolution from the center’s divisible pool). Compensation Cess amassed around ₹10 lakh crore, primarily disbursed during 2017–2022, including ₹2.7 lakh crore in borrowings amid COVID-19 shortfalls.

As of July 2025, most dues are settled, with a ₹95,000 crore cess surplus for repayments. Pending amounts are negligible (₹5,000–10,000 crore combined for two unspecified states, tied to audits or disputes). Opposition claims of ₹1.5–2 lakh crore in projected losses from 2025 rate changes are not legally pending dues. State-wise breakdowns of pendings are not publicly detailed.

Distribution Of GST Burden

As an indirect tax, GST is regressive, with lower-income households bearing a disproportionate share relative to income due to higher consumption of taxed goods. Analysis from the 2022–23 Household Consumption Expenditure Survey indicates the burden has remained stable from 2017 to 2025, mitigated by exemptions on essentials like food, education, and health. Approximately 65% of revenues stem from the 18% slab, while the 5% slab on essentials contributes 7%.

The table below outlines the burden by income group (rural and urban combined):

Corporate Pass-Through Of GST To Consumers

Corporates collect GST but reclaim it via Input Tax Credits (ITC), transferring the net burden downstream through pricing. This mechanism ensures businesses are mere intermediaries, with nearly 100% of the tax ultimately borne by end consumers, though some absorption occurs in competitive sectors. Listed companies (0.62% of taxpayers) contribute ~35% of revenues but pass it on fully, with compliance rising from 59% in 2022 to 85% in 2025. Consumer price indices attribute 1–3% annual inflation to GST since 2017.

Year-wise data on corporate contributions and pass-through:

Impacts Of GST Reductions On Vulnerable Populations

The 2025 GST reforms, effective from September 22, have streamlined tax slabs primarily to 5% and 18%, phasing out the 12% and 28% brackets, while applying reductions to more than 200 essential items such as soaps, toothpaste, detergents, and other daily necessities, with the goal of easing consumer burdens amid broader economic strains in India amid trade tensions and social disparities.

Although the government portrays these adjustments as a major relief initiative, potentially forgoing up to Rs. 2 trillion in revenues to stimulate the economy, critical analyses reveal this as an overstated narrative, where the reductions merely lessen tax extraction without injecting fresh capital into households, particularly against a backdrop of manipulated GDP figures and data deceptions that inflate growth perceptions while masking ground-level hardships, as detailed in examinations of India’s GDP mirage, including discrepancies, debt traps, and tariff turmoil in expenditure versus production methods from 2014 to 2025 and further in revelations about unraveling GDP illusions, global data deceptions, and exposed lies.

For the nearly 81 crore beneficiaries under the National Food Security Act (NFSA)—representing about 56% of India’s population—who depend on subsidised 5 kg monthly rations, and the approximately 100 crore individuals surviving on precarious daily incomes, these cuts offer negligible relief in lowering daily expenses or boosting spending power, given the near-zero price elasticity of demand among impoverished and debt-laden groups.

Rather than delivering the projected 5–10% cost savings that could theoretically reduce poverty by 1–2% and enhance consumption by 2–3%, the actual impact is minimal, with small savings—like reducing a Rs. 10 tax to Rs. 8—quickly diverted toward servicing mounting debts instead of enabling extra purchases, thus sustaining a bare-survival consumption pattern devoid of discretionary spending.

This ineffectiveness is compounded by a 6% year-on-year slump in domestic consumption, which now contributes only 55% to GDP in 2025-26, with Private Final Consumption Expenditure (PFCE) growth at a modest 6.0% in Q4 FY25 but heavily reliant on debt—where 55-60% of expenditures are loan-financed rather than income-generated, down from 75% income-based in 2014-15 to just 40% in 2025-26, as highlighted in discussions on the mirage of GST relief and exposing India’s consumption collapse.

The original 2017 GST rollout intensified household financial pressures through inflationary price surges and its regressive structure, disproportionately affecting the bottom 50% of the population—who earn only 40% of national income yet bear 64.3% of GST revenues—while subsequent exemptions and rate adjustments have failed to make the system genuinely pro-poor, instead channeling 5-6 trillion rupees in tax incentives to large corporations and perpetuating widespread poverty and hunger, as evidenced by India’s Global Hunger Index (GHI) score of 27.3 in 2024 (indicating “serious” hunger levels) and a Gini coefficient of 0.42, with the top 1% controlling 43% of wealth and broader inequalities reflected in a Gini index hovering around 33-35.

For India’s debt-overburdened citizens, where household debt has climbed to 48.6% of GDP (equating to Rs. 149.9 lakh crore) and per capita debt has risen 23% to around Rs. 4.8 lakh by March 2025—largely driven by non-housing retail loans making up 55% of the total—these GST reductions do little to alleviate borrowing necessities for basics or liberate income for debt repayment, contradicting assertions of 3–5% cuts in borrowing needs.

This is further undermined by stagnant wages, a post-COVID debt explosion that has shifted consumption toward debt dependency (up to 60%), and an economic downturn featuring 22% youth unemployment (urban youth at ~23%), official rates at 8.5% (blended PLFS/CMIE data showing 6.5% overall in 2025), and disguised unemployment at 15–18% across sectors like agriculture (25–35%), manufacturing (5–10%), and services (10–15%).

Household savings have hit a 50-year low of 5.3% net (gross at 27.5% of GDP), compelling vulnerable groups—especially informal workers who depleted savings during the pandemic—to focus on debt obligations over new expenditures.

External factors, such as the August 2025 U.S. tariffs leading to 14-20% export declines (a $20-30 billion loss and 1-2 million direct job losses, plus 3–5 million indirect), a rupee depreciation to Rs. 88 per USD (-5% YoY), and non-tariff barriers (NTBs) like 20% H-1B visa cuts threatening 15–20% of services exports, are projected to drag real GDP growth to 4% for FY25-26 (down from a baseline 6-6.5% to 5-5.5% post-tariffs), with risks of a 38.46% contraction by 2026 if unchecked.

These pressures, alongside GDP discrepancies between expenditure and production approaches (0.5-2% gaps, up to 2.5 pp in 2020-21 due to informal sector undercounting), and manipulations like overstated PFCE by 2-3% in key years, underscore how GST reforms, despite nominal cost reductions on essentials, fail to ignite meaningful relief or consumption recovery amid entrenched structural deprivations, rural distress affecting 200 million in poverty, inflation at 5-7%, and ignored informal activity (~45% of the economy), as further detailed in exposures of unraveling GDP illusions, global data deceptions, and lies.

Since its 2017 launch, GST has strengthened fiscal frameworks by yielding annual revenues of Rs. 20 lakh crore, accounting for 27.5% of net taxes via improved efficiency and formalisation, yet this has deepened economic divides and fallen short of widespread benefits, rather than simply adding a claimed 1–2% to GDP.

Although GST did not directly balloon national debt—with compensation loans balanced by cess surpluses—its regressive nature has indirectly propelled household debt from 36% to 48.6% of GDP between 2020 and 2025, as 70-80% of collections stem from those capturing just 40% of income, ensnaring the bottom 50% (shouldering 64% of the load) in survival borrowing cycles amid initial price shocks that spiked inflation by 0.5–3% and fueled poverty surges during the 2020–21 COVID lockdowns.

Critics argue this regressivity exceeds the reported 31% burden on the bottom 50%, emphasising how GST’s architecture privileges the affluent with hefty tax breaks while aggravating poverty for 800 million dependent on government food aid and 1 billion hand-to-mouth workers, whose inelastic, debt-reliant consumption is further distorted by data manipulations that understate disruptions like the 2017-18 GST rollout and ignore informal sector collapses.

While exemptions and schemes like NFSA have tempered some hunger—evident in India’s GHI improvement from 28.2 in 2014 to 27.3 in 2024, though still at a “serious” level ranking 105th—they have not counteracted GST’s broader poverty-exacerbating effects, particularly with public debt at 85% of GDP (Rs. 181.74-182 lakh crore), consuming 25-30% of budgets in interest payments (Rs. 11.5 lakh crore) and limiting funds for enhanced social protections amid sluggish 5–7% annual growth that favors elites.

In this landscape, GST is viewed not as a poverty mitigator but as a perpetuating “trap,” where taxes on daily transactions keep the masses financially strained, amplified by declining investments (net FDI below 1% of GDP, plummeting 99% to $353 million in FY24-25), FII outflows, widening trade deficits ($50.6 billion globally, with US exports dropping 43% in merchandise), and rupee depreciation inflating import costs by Rs. 880–1,320 billion.

These dynamics erode economic resilience and amplify the chasm between nominal GDP estimates (Rs. 315-357 lakh crore or $3.58-4.06 trillion) and tangible hardships, including manipulated GDP growth (official 8.2% in 2023-24 vs. corrected 5.0%, with overstatements of 0.4-1.9% via tweaks like base year changes and assumed digital spending), ignored drags such as demonetisation and GST-induced cash crunches, and potential stock market bubbles like the “DII Bubble” with a 90% burst risk in 2025-26, harming 90% of retail investors amid stagnant wages and rural vulnerabilities.

Overall, GST’s contributions to fiscal stability are overshadowed by its role in entrenching inequalities, with critiques of data fudging and corruption in infrastructure spending from 2014-2025 highlighting how such deceptions sustain illusions of progress while vulnerable populations grapple with persistent debt, poverty, and hunger.

Possible Solution: Overall Economic Development Is The Key

To effectively address the needs of vulnerable populations while ensuring fiscal sustainability, several policy alternatives can be considered, aiming to create a more equitable economic environment, reduce poverty, and enhance the overall well-being of disadvantaged groups.

One key approach is implementing targeted subsidies and direct cash transfers, where subsidies for essential goods like food, healthcare, and education provide immediate relief to low-income households, and expanding programs like the Direct Benefit Transfer (DBT) empowers individuals to use funds for their specific needs, such as debt repayment.

Another option is adopting a more progressive taxation system, including higher tax rates for wealthy individuals and corporations to generate revenue for social programs, along with wealth taxes on property or inheritances to redistribute resources and tackle income inequality.

Enhancing social safety nets is also crucial, through expanded employment programs that create jobs in low-income sectors to reduce unemployment and underemployment, and exploring Universal Basic Income (UBI) as a long-term solution to guarantee a basic standard of living for all citizens regardless of employment status.

Investing in education and skill development can further empower individuals by expanding vocational training programs to build in-demand job skills and providing subsidised education for marginalised communities to break poverty cycles through access to higher-paying opportunities.

Supporting small and medium enterprises (SMEs) can stimulate local economic growth and job creation by offering low-interest loans or grants for expansion and tax incentives to encourage entrepreneurship and innovation.

Given the reliance of many vulnerable populations on agriculture, strengthening support in this sector is vital, including ensuring fair Minimum Support Prices (MSP) for crops to protect farmers from fluctuations and providing access to modern technology, seeds, and irrigation to improve productivity and income.

Finally, establishing robust monitoring and evaluation of policies through data-driven decision-making to assess impacts on different demographics and creating feedback mechanisms from affected communities ensures that strategies are effective, responsive, and adjustable based on real-world experiences.

Implementing these policy alternatives can create a more inclusive economic environment that addresses the needs of vulnerable populations while ensuring fiscal sustainability, focusing on targeted support, progressive taxation, and investment in human capital to foster a more equitable society that empowers individuals, reduces poverty, alleviates immediate financial burdens, and drives long-term structural changes for enhanced resilience and economic stability.

On September 19, 2025, President Donald Trump issued an executive order imposing a $100,000 fee on new H-1B visa petitions, effective from 12:01 a.m. EDT on September 21, 2025. The fee targets new applications to prioritise high-skilled, high-wage workers and curb program abuses, with exemptions possible if deemed in the national interest. White House clarifications confirm it applies per petition for aliens outside the U.S., but not retroactively to existing holders, renewals, or extensions.

This policy has raised concerns for Indian professionals, who comprise a significant share of H-1B recipients, potentially disrupting families and the tech sector.

Effects On Applications, Renewals, Extensions, And Expiring Visas

Existing H-1B applications filed before September 21, 2025, proceed under prior fees (e.g., base $780 plus add-ons like $1,500 ACWIA and $500 fraud prevention), without the $100,000 charge. Renewals and extensions post-effective date are exempt, as they are cap-exempt and do not involve new entries for aliens abroad. For visas expiring after this date, holders retain status until expiration if compliant with terms like maintaining employment. Post-expiration renewals avoid the fee unless requiring a new cap-subject petition; otherwise, unlawful presence accrues, risking inadmissibility bars (e.g., three years for 180-365 days overstay). The one-time fee does not apply to status changes, amendments, or transfers for existing visas.

Legal Rights, Deportation Risks, And Historical Precedents

H-1B holders enjoy due process under the Immigration and Nationality Act (INA), including work authorisation during validity and appeals against unlawful actions. Deportation requires grounds like visa violations or crimes; it is not triggered solely by the fee hike. Civil wrongs, such as minor traffic violations, rarely lead to removal unless escalating to crimes (e.g., DUI as moral turpitude). However, historical data shows over 1,800 deportations in 2025 for traffic-related convictions that prompted ICE reviews. Criminal wrongs, like felonies, enable expedited removal under INA § 237(a)(2).

Past deportations of valid H-1B holders often stem from status lapses post-job loss or minor offenses uncovered during encounters, with thousands removed annually via Notices to Appear (NTAs). Green card holders face similar risks for aggravated felonies or prolonged absences, with ICE data indicating heightened enforcement in 2025. Examples include H-1B deportations for unauthorised activities or petition discrepancies, even mid-grace period.

Scenarios For Indian Holders Returning Post-September 21, 2025

For valid H-1B holders on leave outside the U.S. (e.g., in India) returning after the effective date, no $100,000 fee applies, as entry relies on existing approvals, not new petitions. This holds for those under employment or in grace periods seeking transfers. Expired visas require new stamps; if tied to new petitions from abroad, the fee may apply. Absences do not inherently trigger fees for valid returns.

Job Loss, Grace Period, And Policy Shifts

The 60-day grace period post-termination, per 8 CFR § 214.1(l)(2), allows time for new employment, status changes, or departure without accruing unlawful presence. However, it is discretionary (“may be granted”), not mandatory, enabling USCIS to issue NTAs early for removability grounds like fraud or prior violations. In 2025, reports show NTAs sent 10-45 days post-layoff, leading to deportations despite the period, often after petition withdrawals or enforcement priorities. Proposals to eliminate it exist but are unimplemented. Instant deportation bypassing due process is prohibited, but expedited removal applies for certain crimes. The $100,000 fee does not affect grace-period transfers unless new entries from abroad.

Birthright Citizenship Changes

On January 20, 2025, Trump issued Executive Order 14160, reinterpreting the 14th Amendment to exclude birthright citizenship for children born after February 19, 2025, if the mother is unlawfully present or on temporary status (e.g., H-1B dependent) and the father is not a U.S. citizen or permanent resident. This impacts families from Mexico (undocumented migrants) and India (visa holders), risking status issues and separations. The order faces judicial blocks but applies prospectively, narrowing “subject to the jurisdiction” per historical views.

In conclusion, the H-1B fee shields existing holders while barring new entrants, with deportation risks tied to compliance and discretion. Indian holders should monitor USCIS updates and seek legal advice amid evolving enforcement.

India’s economy often gets praised for growth, but everyday people aren’t feeling it. Many think lowering the Goods and Services Tax (GST)—a tax on things we buy—will help folks spend more and boost the economy. But this article explains why that’s not true for most Indians. It’s like putting a band-aid on a broken leg; it doesn’t fix the real problems. Over 800 million people get just 5 kg of cheap food each month from the government, and about 1 billion live paycheck to paycheck, barely covering basics. They don’t have extra money to spend, no matter how low taxes go.

Spending at home makes up about 55% of India’s total economy (called GDP) in 2025-26, but it’s dropping because families are drowning in debt just to eat and pay bills. Add in tiny foreign investments, money leaving the stock market, and a risky DII Bubble in stock market of India and local investments, and things look even worse. This piece breaks it down simply, using trusted non-government reports. It shows how tax cuts don’t help—they actually keep poor people stuck in a loop of borrowing and struggling.

Why Lowering GST Won’t Change A Thing For Most People

GST is a tax added to the price of almost everything, from food to phones. It hits poor families hardest because they spend most of their money on basics. Cutting it from 18% to 12% on some items sounds good, but for those 800 million on food aid or the 1 billion scraping by, it does nothing.

These folks aren’t buying extras like new clothes or gadgets—they’re just trying to survive. Their spending isn’t “fun money”; it’s debt just to get through the day. Reports from 2025 show family debt at 48.6% of the whole economy (about 150 trillion rupees), with each person’s share jumping 23% to 48,000 rupees by March. Most loans aren’t for houses or cars anymore (that’s 55% of debt)—they’re for groceries and bills because wages aren’t rising.

Think of it this way: If you earn 15 rupees a day and taxes take 10, dropping taxes to 8 rupees doesn’t give you 2 rupees extra to spend. You still owe money from before, so you use it to pay old debts. That’s why overall spending fell 6% last year, pulling its GDP share down to 55%. No extra cash means no real change.

Other big issues pile on: Family savings hit a 50-year low of 5.3% of GDP, so people borrow more. Inequality is huge—the richest 1% hold 43% of all wealth, while the poorest half pay 64% of GST even though they earn way less.

Outside money isn’t helping either. Foreign direct investment (FDI) is under 1% of GDP, dropping 99% to just 353 million dollars last year, and even lower in 2025. Foreign investors pulled out billions from stocks, and local big investors are inflating a “DII Bubble” that could pop and crash markets. This hurts city jobs and home buying, cutting demand by 2-3%.

Busting The Myth: No “2 Trillion Rupee Boost” From Tax Cuts

People say GST cuts on over 200 items in September 2025 (prospective from 22-09-2025) will “inject” 2 trillion rupees into pockets and grow the economy.

That’s misleading talk. It’s not new money—it’s just taking less tax from what little people can afford to buy. If no one can afford to buy, there’s no tax to impose by govt anyway.

Experts call this fake growth. Official numbers show spending up 7.2% last year, but it’s all from loans, hiding a real slowdown to 6% by year’s end. GST started in 2017 and now brings in 20 trillion rupees, mostly from poor folks buying basics. Big companies get huge breaks (5-6 trillion rupees), while only 7-8% of people pay income tax. It’s like a trap: taxes watch every buy, favor the rich, and keep everyone else broke.

How the Government Counts This As “Growth” (But It’s Not Real)

Officials add this “2 trillion savings” to GDP numbers like magic—assuming people spend more (they won’t) or tweaking math to look better. Real spending is falling, and much of the 55% share is from loans, not real income. Independent checks say it’s overstated by 2-3%, ignoring money leaving the country or hidden cash.

India’s total economy is projected at 315-357 trillion rupees (3.6-4 trillion dollars) for 2025, with just 4% real growth—down from 6.5%. Even 4% is possible only if Modi govt starts bringing suitable social and economic reforms in India right now unlike the lies, data fudging and Jumlabaazi that it has been doing for the past 11 years. If this Juggad of Modi govt continues, the real GDP of India would be 2.5% only in 2025-26.

Why So Low?

(a) US tariffs from August 2025 cut exports by 14-20% (20-30 billion dollars lost, 0.5-1% drag, 1-2 million jobs gone). Some breaks for drugs and tech help a bit (30-40%).

(b) Non trade barriers (NTBs) like visa rules hit services by 10-15 billion dollars (0.2-0.5% drag).

(c) Limiting Factors Inside India: Slowing spending adds 0.5-1%, declining investments 0.5-0.8%, falling and unfruitful government spending 0.3-0.5%, trade deficits -0.5% (total drag 1.5-2.5%).

Overall: 2.5-4% growth, but risks a huge drop to -38.46% contraction (with 4% actual GDP of India from fictitious 6.5 GDP of India) or -61.54% contraction (with 2.5% GDP from fictitious 6.5 GDP of India) by 2026 if nothing changes.

This -38.46% or -61.54% seems unbelievable at first glance. But do not forget that Modi govt has been indulging in data fudging and inflating the GDP of india for almost a decade now. Real GDP was never above 4%, even in the best performing year(s). So the contraction is from a fictitious and inflated GDP of 6.5 that does not exist at the first place.

From 4% to 4% GDP (-38.46% from fictitious 6.5% GDP) there is no change at all but the exposing of lies and Jumlabaazi of Modi govt. But for a 2.5% GDP for 2025-26 (diminishing -61.54% from fictitious 6.5% GDP and -37.5% from actual 4% GDP) from 4% actual GDP of India, this is a big cause of concern. The limiting factors of Indian GDP would drag GDP of India to 2.5% in 2025.26, if they are not tackled right now. Lies, fudging and Jumlabaazi cannot hide this facade anymore.

Government debt is 85% of GDP (182 trillion rupees), eating 25-30% of budgets on interest alone—no room for real help. Investments are 32% of GDP, but private ones fell to 21.5%. Official jobless rate is 8.5%, but real youth rate is 22%, killing incomes. World Bank says baseline 6.3-6.5%, but drags pull it to 2.5-4%.

A Wake-Up Call: Time For Real Fixes

India looks shiny with 4% growth talk, but it’s built on shaky ground—unfair taxes, loan-based fake spending, and outside hits like tariffs starting September 2025. Trusted reports back this: tariffs cost billions, investments slump, debt soars.

We need big changes: forgive some debts, give basic income to all, make better trade deals. Because the Indian stock market would soon witness DII Bubble Burst and Indian spending could crash really hard (with loss for 90% retail investors).

With 80 crore in food lines and 100 crore hand to mouth in India, the real story is clear—India must face facts or fall further to 2.5% GDP in 2025-26.

Why Debt/Loan-Based Consumption Jumped From 2020 Onward

The COVID-19 Plandemic (a hoax that pushed Death Shots for money) hit hard—lockdowns killed jobs and incomes, so families borrowed to buy food and medicine.

Government and banks made loans easier (low rates, digital apps) to keep the economy going, but wages stayed flat.

By 2020, informal workers (most Indians) lost savings, turning to credit cards and personal loans.

From 2021, inflation (food prices up) and slow job growth made it worse—people cut savings (down to 5.3%) and borrowed more for basics.

Easy tech like UPI sped it up, but it created a trap: more debt means less real spending power long-term.

India’s economy seems to have gotten a lot bigger on paper between 2014 and 2025. The total size went from about ₹112 lakh crore to around ₹350 lakh crore. But if you fix the numbers for things costing more (like inflation), the real growth was just okay—hardly 5% each year.

Leaders often talk it up like a huge win, but it’s more like a magic trick. It hides big problems: too much borrowing, special favors to giant companies, and the rich getting richer while the poor fall behind. Now, add tough new US tariffs on trade in 2025, and every part of the economy feels squeezed. One way to check the economy is by what gets made (like farming or services)—that looks a bit strong. But looking at what people spend money on shows big weaknesses. These two ways of measuring don’t always match (off by 0.5-2%) because of hidden small businesses and fuzzy data. This story explains it all and says a big slowdown is coming in 2025-26.

Checking Spending: What Really Makes The Economy Go (2014-2025)

Experts often check the economy by looking at spending. It’s like adding up four big buckets:

(a) What regular people buy (called C for consumption).

(b) What businesses and the government spend on building stuff (I for investment).

(c) What the government spends on running things (G).

(d) The difference between what India sells to other countries minus what it buys from them (X minus M, or net exports).

From official numbers and smart experts, all these buckets have red flags: People aren’t buying much because of lack of money, investments are stuck in debt, government spending wastes cash, and trade is losing money (deficit). Even bigger troubles: “Buddy deals” where friends of leaders get special help, government debt as big as 85% of the whole economy, corruption stealing ₹9-10 lakh crore over years, and unfairness in who has money (inequality of income-a score of 0.42, even if leaders say it’s better).

(a) The Big Picture: Real growth has been up and down at 4-5%, with early 2025 at just 4.9% from last year. This covers up “growth without new jobs” (jobless rate at 7-8%) and the richest 1% owning 43% of all wealth. The mismatch between making stuff and spending comes from the huge “informal” part of the economy (like street vendors, about 45%) that’s hard to count.

(b) What People Buy (C): This is the biggest part, 55-60% of the economy. It fell from 58.4% in 2014-15 to 56.5% in 2024-25, and could drop to 55% in 2025-26 (down 5% to ₹100.9 lakh crore). Real buying power per person rose only 3-4%, hit hard by poor rural folks (200 million people), unused help money (like 62% of a jobs program just sitting there), and families owing 48.6% as much as the whole economy. In 2025, it’ll slow growth by 1-2%, with no fast fix because prices are up 5-7%.

(c) Building and Investing (I): This is 30-37% of the economy, up from 32.4% to 36.8%, but expected at 35.8% in 2025-26 (down 5% to ₹65.7 lakh crore). Private business investing is weak (21.5% share, with 5-7% bad loans), and public ones borrow too much (spending on big projects from ₹2.4 lakh crore to ₹11.21 lakh crore, or 3.1% of economy) but waste 10-15% and help big shots like Adani or Ambani.

(d) Government Spending (G): 9-12% of the economy, up 215% on paper (from ₹16.07 lakh crore to ₹50.65 lakh crore), but real rise about 6-7% and set to drop 1.2% in 2025-26 (9.2% share, ₹16.9 lakh crore). They focus on huge projects (22% of budget), but costs go over (₹15-40 thousand crore extra on roads), corruption steals (₹30-35 thousand crore on COVID stuff, says checks), and they cut back on welfare for people (down to 20%, less per person). It’s paid by borrowing (30-40% loans, with interest taking 25-30% or ₹11.5 lakh crore), keeping the money hole at 4.4% plus secret extras. It gives quick bumps but makes unfairness worse.

(e) Exports And Imports From Other Countries (X – M): This pulls down 1-1.7% from the economy, with a gap of $100-250 billion. Sales abroad grew 50% (from $314 billion to $470 billion, thanks to some boosts), but buys are $570-600 billion. The US (18% of sales) might drop 14% from tariffs and NTBs. In 2025, it’ll drag growth by 0.5-1%, worse with oil costing 20% more (from Russia) and 20% of food wasted after picking.

Here’s a simple table to sum it up:

All in all, the economy is wobbly: People buying and building hurt by unfairness and debt, building and government by special favors, and trade by world problems. Trade troubles: $100-120 billion gap, 14% less sales to US, $10-15 billion lost from blocks (like in tech help). Stock market down 5-10% this year (as of September 2025), with overpriced stuff and foreigners pulling $5-10 billion out—signs of DII Bubble that could pop 30-40%.

What About 2025-26? What Experts Guess

Starting from a guess of 6.3-6.5% growth (from World Bank and OECD), bad pulls could cut 2.5-4 points off. So India’s growth might slow to 2.5-4% in 2025-26, with danger of dropping 38% (from 6.5% to 4%) by 2026 if economic conditions of India are not fixed right now.

Breaking it down:

(a) US taxes at 50% (from August 2025, some breaks for meds and tech at 30-40%) could cut sales 14-20%, lose $20-30 billion and 1-2 million jobs—slow growth by 0.5-1 percentage point.

(b) Other NTBs blocks (like work visas or rules) hit services by $10-15 billion, cut 0.2-0.5 percentage points.

(c) Home problems: People buying down 0.5-1%, building 0.5-0.8%, government 0.3-0.5%, and trade another 0.5% (total pull of 1.5-2.5 percentage points).

(d) Full guess: 2.5-4% growth contraction in 2025-26, with “pain in parts” risks, as news like Reuters and Bloomberg say.

Making Stuff vs. Spending Money: Why Numbers Don’t Match

One way to check is “production”—what’s made in farming (about 3% growth), factories (5%), services (7%)—average 5% growth. It looks at supply. Spending looks at demand. In a perfect world, they match after fixes, but in India they differ 0.5-2% (up to 2.5 in 2020-21) from uncounted small work, timing mix-ups, and data changes. Like, production misses daily buys, spending counts extra government piles.

Here’s a quick year-by-year look:

Final Thoughts: Why These Numbers Count

World rules say spending and making should match, but India’s small differences (0.5-2%) show weak data—like missing small buys or puffing up government numbers with unsold junk.

With US tariffs and NTBs starting and stock bubbles like DII Bubble ready to burst, India’s “fake growth” could become a true mess. The answer? Real fixes to the broken system, not more talk, to get back to 5%+ growth.

Margin trading, formally known as the Margin Trading Facility (MTF) in India, enables investors to amplify their market exposure by borrowing funds from brokers to purchase securities. Regulated by the Securities and Exchange Board of India (SEBI) and stock exchanges, MTF requires investors to pay only a portion of the trade value upfront as margin (typically 20-50%), with the broker financing the remainder. This leverage can boost returns but also magnifies risks, particularly in volatile markets.

In 2025, MTF has experienced explosive growth, surpassing ₹96,000 crore in outstanding borrowings by August, fueled by retail investors migrating from futures and options (F&O) trading amid regulatory restrictions. However, this surge coincides with mounting concerns, including record retail losses in derivatives totaling ₹1.06 trillion in fiscal year 2025 (a 41% increase from the previous year) and SEBI’s efforts to enhance risk management. Early 2025 market selloffs further highlighted vulnerabilities, shrinking leveraged positions and underscoring the perils of overexposure.

While MTF offers opportunities for higher returns in India’s burgeoning stock market, it demands careful navigation. We hereby explore the key risks, analyses losses based on available data and proxies, and provides mitigation strategies for investors.

Key Risks In Margin Trading In India In 2025

MTF’s leverage mechanism amplifies both gains and losses, making it especially risky in India’s fluctuating market environment. Below is a breakdown of the primary risks, informed by 2025 developments such as market volatility, regulatory reviews, and retail behavior shifts.

These risks are interconnected, with volatility often triggering a chain reaction of margin calls and liquidations.

Understanding Margin Trading Losses In India Up To 2025

Direct aggregate loss data for MTF is not publicly available from SEBI or exchanges like NSE/BSE, as it focuses on equity financing rather than speculative trading. Losses typically arise from mark-to-market adjustments, interest accumulation, and forced sales, making them harder to track systemically. However, market events, broker insights, and proxy data from F&O provide valuable indicators.

Growth In MTF Usage

MTF’s popularity has surged with retail participation, reflecting market optimism but increasing downside exposure.

This growth masks vulnerabilities, as early-2025 slumps triggered widespread margin calls and liquidations.

Proxy Data: Losses In Equity Derivatives (F&O)

F&O serves as a close analog, with SEBI’s July 2025 study on FY25 revealing escalating retail losses from leveraged bets.

Over FY22-25, cumulative F&O losses exceeded ₹3 lakh crore, highlighting leverage dangers applicable to MTF.

Deeper Analysis Of Losses In Margin Trading

Mechanics Of Losses

Losses in MTF stem from leverage amplification, where a small stock decline can erode significant capital. For instance, on a 3x leveraged ₹1 lakh position, a 10% drop incurs a 30% loss on the investor’s margin. Additional pathways include daily interest (e.g., ₹33/day at 12% on ₹1 lakh borrowed) and forced liquidations via brokers’ RMS during MTM shortfalls. Common errors like overleveraging or ignoring volatility exacerbate these.

Impact Of 2025 Market Events

Volatility defined 2025, with the Nifty 50 dropping 16% by February amid FPI outflows, inflation, and global tensions. This led to a 14% MTF book contraction, implying forced sales and losses. Recovery by August boosted positions, but sectors like finance, IT, and autos remained prone to corrections. Anecdotes from investors and social media posts describe MTF as a “wealth killer” during downturns.

Rough Estimates And Comparisons

Inferring from book size dips and leverage (assuming 3x average and 10-15% drops), industry-wide MTF losses could approximate ₹15,000-25,000 crore in slumps, plus ~₹9,600 crore annual interest on average books. Broker views vary—Zerodha reports profits in recoveries, but others highlight MTM risks.

Regulatory enhancements like auto-pledging and upfront margins aim to mitigate, but experts call for stricter controls.

Mitigation Strategies

To counter these risks and minimise losses:

(a) Implement stop-loss orders and diversify portfolios.

(b) Maintain excess margins to avoid calls during volatility.

(c) Stay updated on SEBI rules and broker terms via official sources.

(d) Limit leverage; use MTF only for informed, short-term trades.

(e) Educate on mechanics and use scenario calculators.

Conclusion

In 2025, MTF’s record growth to over ₹96,000 crore offers leveraged opportunities in India’s dynamic market but conceals substantial risks from amplification, volatility, and regulatory shifts. While direct loss data is absent, proxies like F&O’s ₹1.06 trillion retail shortfall and inferred MTF impacts signal caution, especially for young retail investors. Prioritising risk management over speculation is essential to harness MTF without falling into the traps evident in recent market turmoil.

President Trump’s Latest Tariff Exemptions: Reshaping Global Trade Dynamics (As Of September 7, 2025)

In his second administration, President Donald Trump has continued to prioritise “America First” trade policies, implementing broad tariffs on imports to address trade deficits and non-reciprocal practices. Starting with a 10% global tariff on most imports effective April 5, 2025, and higher reciprocal rates (11% to 50%) for 57 countries like China and Brazil, these measures have been enacted primarily through executive orders under the International Emergency Economic Powers Act (IEEPA). However, to mitigate disruptions to U.S. supply chains, consumers, and allies, numerous exemptions have been introduced.

The most recent update came via an executive order signed on September 5, 2025, titled “Modifying the Scope of Reciprocal Tariffs and Establishing Procedures for Implementing Trade and Security Agreements.” Effective September 8, 2025, at 12:01 a.m. EDT, this order provides zero-duty exemptions on over 45 categories of goods for “aligned partners” who commit to reciprocal trade deals, investments, and alignment on U.S. national security interests. It builds on earlier exemptions from the April 2, 2025, order while removing some prior protections (e.g., for certain plastics and aluminum hydroxide). This strategic approach rewards allies, pressures adversaries, and aims to reduce the U.S. trade deficit, which exceeded $900 billion in 2024.

Exemptions are conditional on partners concluding framework agreements, with implementation overseen by the Secretary of Commerce, the United States Trade Representative (USTR), and U.S. Customs and Border Protection (CBP). Updates to the Harmonized Tariff Schedule of the United States (HTSUS) will be published in the Federal Register. Below, we detail the key elements of these exemptions, their beneficiaries, and the ripple effects, particularly on India and global competitors.

Overview Of The September 5, 2025 Executive Order

This order modifies Executive Order 14257 (April 2, 2025) by updating Annex II (exempted goods) and introducing the “Potential Tariff Adjustments for Aligned Partners” (PTAAP) Annex. It focuses on goods not sufficiently produced domestically, such as critical minerals and pharmaceuticals, while emphasizing reciprocity. Additions expand exemptions to strategic sectors, but removals subject items like resins and silicones to full tariffs. For aligned partners, tariffs can drop to zero percent, enhancing U.S. supply chain security and encouraging deals involving U.S. investments (e.g., $550 billion from Japan) and market access.

The order also aligns with other changes, such as the full elimination of the de minimis exemption for low-value shipments (<$800) on August 29, 2025, and adjustments to Section 232 tariffs on steel, aluminum, and autos, which do not overlap with these exemptions.

Exempted Goods And Sectors

The exemptions cover over 45 categories, targeting essentials unavailable or insufficiently produced in the U.S. These apply globally for certain products but are enhanced (often to zero duties) for aligned partners via PTAAP. The table below summarizes key categories, specific goods, and notes.

These exemptions protect U.S. industries reliant on imports, with imports containing ≥20% U.S. content taxed only on foreign value.

Benefited Countries And Partners

Exemptions primarily benefit “aligned partners” with reciprocal deals, avoiding the 10% global tariff and higher reciprocal rates. The table below lists key beneficiaries, exemption details, and benefits.

For contrast, 57 non-exempt countries like China (34% additional) and Brazil (50%) face full rates, though product exemptions apply universally.

Ongoing Product-Based Exemptions

From the April 2025 order, over 1,000 products remain exempt to protect U.S. industries. Key categories include:

Impact On India

India, not qualifying as an aligned partner due to trade imbalances and Russian oil purchases, faces a 50% tariff on most exports (effective August 27, 2025), affecting ~$60.2 billion in U.S.-bound trade. This could reduce exports by 70% in some sectors and slow GDP growth by 0.5-1%. India’s response includes GST reforms (effective September 22, 2025), simplifying to 5% and 18% tiers, tax-free insurance, and higher rates on luxuries, costing ~$5.49 billion in revenue but boosting domestic consumption.

Sectoral Impacts Are Detailed Below:

Diplomatically, tensions rise, but talks hint at potential relief if India addresses reciprocity.

How Other Countries Gain Competitiveness Over India

The exemptions create a price gap, with aligned partners’ goods entering at near-zero duties versus India’s 50%, leading to market share shifts, supply chain reconfigurations, and investment diversions. India’s U.S. exports could drop $20-30 billion annually, while competitors surge 20-40%.

Broader Context And Economic Implications

These exemptions shield U.S. consumers from price hikes in essentials while pressuring non-aligned nations. Beneficiaries gain 10-20% export increases, fostering alliances. Critics note favoritism toward connected firms, but the policy has stabilised supply chains. For India, short-term pain may spur diversification and negotiations. Updates could evolve rapidly—monitor White House and USTR sources for changes post-September 8.

Note: The term “DII Bubble” has been coined by Praveen Dalal, CEO of Sovereign P4LO.

When the stock market of a nation collapses, such nation tries to control it by using various methods. But all these methods are legitimate and they are not risky. However, when Domestic Institutional Investors (DIIs) are abused and pushed to prevent total collapse of a stock market, that is a recipe for disaster.

This stock market fiasco is happening in India where the prices of already overvalued, underweight and super cheap shares are inflated artificially by pushing DIIs to invest in them. In the Indian context, Modi govt is pushing DIIs to invest in companies listed at Sensex and Nifty 50, thereby helping them to maintain a stable price for their shares. In truth, the prices of such shares are less than half what has been projected and they are on ventilator of DIIs infusion. The moment that is stopped, these companies and stock market of India would collapse. This is so because the “DII Bubble” would burst beyond recovery and redemption.

Definition Of DII Bubble By Praveen Dalal, CEO Of Sovereign P4LO

The term “DII Bubble” has been coined by Praveen Dalal, CEO of Sovereign P4LO.

“DII Bubble” refers to the significant increase in investments by DIIs in a stock market that is already over valued, underweight, has negative returns and is not a favourable one to invest into. This artificially inflates prices of shares listed therein and makes it very risky says Praveen Dalal.

All these criteria are squarely applicable to stock market of India. Shares are over valued, market and shares are underweight and risky, returns are in negative and the stock market of India is least favourable one in Asia. Despite all these apparent limitations of stock market of India, Modi govt is pushing and forcing DIIs to invest in shares of top companies. This has created a “DII Bubble” in the stock market of India that could burst any time. When it would burst, DIIs (and Indians through them) would be left with mass losses that cannot be covered at all. This is one of the reasons why stock market of India would surely collapse till 2030.

As DIIs have been buying aggressively, their share in the market has surpassed that of Foreign Institutional Investors (FIIs), leading to creation of a “DII Bubble” in India. This situation has become complicated due to negligible Net FDI in 2024-25.

Gross FDI inflows reached $81 billion in FY24-25 (up 14% YoY), but net FDI was near-zero due to $29.2 billion OFDI and $51.5 billion repatriation. For August 2024 (latest comparable), inflows were $6.39 billion (peak month), while outflows were $3.35 billion—highlighting a balanced but outflow-heavy dynamic.

See Also

With just 3% Net FDI available to India in 2025 and an increasing FII selling in the stock market of India since 2024, we are left with this “Risky DII Bubble” of the Indian stock market says Praveen Dalal.

See Also

(1) Dangers Of Long Term DIIs Investments In Stock Market Of India

(2) FIIs Withdrawal From India Till August 2025 And Impact Upon Stock Market Of India

(3) Potential Reasons For A Collapse Of The Stock Market Of India By 2030

(4) Brutal And Total Net Foreign Direct Investment (FDI) Decline In India In 2025

Overview Of Domestic Institutional Investors (DIIs)

DIIs include entities like mutual funds, insurance companies, public sector banks, and pension funds that invest in the Indian stock market. They have gained significant influence, especially in recent years, as their share of the market has increased.

DII Market Share Growth

As of March 31, 2025, DIIs held 17.62% of the Indian capital market, surpassing Foreign Institutional Investors (FIIs) at 17.22%. DII holdings reached ₹71.76 lakh crore, which is 2% higher than FII holdings.

Recent Trends In DII Investments

DIIs have shown resilience despite challenges such as high valuations and foreign selling. Their inflows have been substantial:

In 2025, DIIs invested ₹5.13 lakh crore in the first eight months, nearly tripling the ₹1.81 lakh crore from 2023. Monthly inflows have varied, with significant investments in January (₹86,591 crore) and August (₹94,828 crore).

Factors Driving DII Confidence

Increased retail investor participation has bolstered DII confidence. Despite foreign selling, DIIs have maintained a strong presence, cushioning the market’s volatility.

Concerns About A Potential Bubble

While DIIs are currently strong players in the market, concerns about a bubble exist:

The Price to Earnings (PE) ratio for the NIFTY 50 index has been historically high, indicating potential overvaluation. The Market Capitalisation to GDP ratio is at a 13-year high, suggesting that the stock market may be larger than the underlying economy can support.

In other words, while DIIs are currently thriving and driving market activity, the high valuations and economic indicators raise questions about the sustainability of this growth.

When A DII Bubble Occurs

A DII Bubble occurs when sustained DII investment props up overvalued stock markets, masking underlying issues and leading to sharp corrections when the bubble eventually bursts. While DIIs, such as mutual funds, insurance companies (like LIC), and banks, have historically provided stability, their significant buying can inflate valuations, especially when FIIs are exiting due to high domestic valuations or global factors. If market realities set in, such as an economic slowdown or global recession, and these DII-managed funds face large-scale redemptions, they can quickly shift from being buyers to sellers, intensifying market declines and bursting of the bubble.

How A DII Bubble Forms

Praveen Dalal explains the process of formation of a DII Bubble as follows:

(a) FII Outflows: Foreign investors leaves the Indian market due to factors like high local valuations, rising global interest rates, or a shift to safer assets.

(b) DII Inflows: DIIs step in to buy the shares that FIIs are selling, often driven by their mandate to invest domestically or to support the market.

(c) Inflated Valuations: This sustained DII buying keeps stock prices elevated or push them higher, even when the underlying economic fundamentals do not justify these valuations or even half of their inflated prices.

(d) Bubble Creation: By masking these issues, DIIs intentionally fuel an asset bubble, where asset/stock prices far exceed their intrinsic worth.

(e) Market Correction: The bubble bursts when investors (including DIIs) realise the market is overvalued, or when external economic shocks occur. This realisation can trigger panic selling, causing market declines to accelerate.

Dangers For DIIs

(a) Losses for Long-Term Holders: DIIs, which manage funds for long-term investors such as policyholders and pension fund subscribers, are at risk of significant losses when a market correction occurs.

(b) Exacerbated Declines: If a crisis hits, and DIIs need to sell to meet redemption requests, their selling can worsen market downturns, making the correction more severe.

The Indian Context

In recent periods, particularly in early to mid-2025, DIIs have been instrumental in absorbing significant foreign outflows, helping to stabilise the Indian market and even push the overall ownership of Indian companies into DII hands. However, this strong domestic buying can also contribute to market overheating if FII exits continue, potentially creating a situation ripe for a sharp correction.

Let us now discuss in detail why a DII-Driven Bubble could be risky.

(1) Overvaluation Of Stocks

(a) DIIs have significantly increased their investments in Indian equities, with their share in NSE-listed companies reaching an all-time high of 17.62% by March 31, 2025, surpassing FIIs at 17.22%. Heavy DII buying, especially through Systematic Investment Plans (SIPs) and mutual funds, has driven market resilience despite FII outflows. However, this sustained inflow can push valuations to unsustainable levels, particularly in mid- and small-cap stocks, which have seen sharp rises.

(b) High valuations, with India’s market cap-to-GDP ratio at a 13-year high of 115% in 2021, suggest stocks may be overpriced relative to economic output. If DIIs continue to pour money into overvalued segments, a correction could wipe out gains, especially for retail investors chasing momentum.

(2) Retail Investor Overexposure

(a) DIIs, particularly mutual funds, rely on retail money through SIPs, which saw net inflows of ₹1.16 lakh crore in Q1 2025. The influx of retail investors, with 6.3 million new demat accounts added from April to September 2020, fuels speculative buying. Social media and financial influencers amplify this, creating a perception that markets only go up, which could lead to irrational exuberance.

(b) When the bubble will burst, retail investors, who often lack the expertise or risk management of DIIs, could face significant losses, eroding confidence and savings.

(3) Market Dependence On DII Inflows

DIIs have acted as a stabilising force, countering FII sell-offs (e.g., ₹55,595 crore invested in March 2020 when FIIs were net sellers). However, this creates a dependency where markets may not correct naturally, masking underlying weaknesses. If DII inflows slow due to economic shocks or policy changes, markets could face sharp declines, as seen during past FII outflows triggered by global events or tighter RBI policies.

(4) Sector-Specific Froth

SEBI’s chairperson flagged “pockets of froth” in small- and mid-cap segments, hinting at a potential bubble. DIIs have increased allocations to sectors like Consumer Discretionary (15.27% of holdings in Q2 2024), which may be overvalued due to speculative buying. A correction in these segments could ripple across the market, impacting DII-heavy portfolios.

(5) Economic And Policy Risks

High inflation, tighter RBI monetary policies, or global events like U.S. interest rate hikes could reduce liquidity, prompting DIIs to scale back investments. This could trigger a sell-off, especially if corporate earnings fail to justify current valuations. For instance, weak corporate earnings in 2024 contributed to market volatility despite DII support.

(6) Risks Mitigated By DII Characteristics

(a) Long-Term Focus: DIIs, unlike speculative retail traders, base decisions on fundamentals, economic outlook, and corporate performance, which reduces the risk of irrational price surges.

(b) Diversified Portfolios: DIIs spread investments across sectors and asset classes, minimising systemic risk from a single sector’s collapse.

(c) Liquidity Support: DIIs enhance market liquidity, ensuring smoother transactions even during FII outflows, which helps prevent panic-driven crashes.

Critical Perspective

While DII inflows have driven market resilience, the risk of a bubble cannot be dismissed entirely. The “bubble triangle” (marketability, cheap money, speculation) outlined by Quinn and Turner applies partially: trading apps and low-cost brokerages have increased market access, low interest rates have fueled investments, and retail speculation is rising. The real risk lies in specific segments (e.g., small-caps, IPOs) rather than the broader market. A sudden shift in sentiment, triggered by global shocks or policy tightening, could expose vulnerabilities.

Recommendations For Investors

(a) Focus on Fundamentals: Invest in companies with strong earnings, reasonable valuations, and sustainable growth, as DIIs do, rather than chasing momentum.

(b) Diversify: Spread investments across sectors to mitigate risks from overvalued segments like small-caps.

(c) Monitor Triggers: Watch for U.S. interest rate hikes, RBI policy changes, or weak corporate earnings, which could prompt DII pullbacks.

(d) Stay Informed: Track DII and FII activity on trusted platforms for insights into market sentiment.

Conclusion

A DII-driven bubble in the Indian stock market is a genuine and serious concern, particularly in overheated segments like IPO, small- and mid-caps, etc where valuations outpace fundamentals. Risks include overvaluation, retail overexposure, and potential liquidity shocks. Investors should remain cautious, prioritise fundamentals, and avoid speculative bets to navigate potential volatility.

The 50% tariff on select Indian exports to the U.S. applies to approximately 55-66% of India’s total goods exports to the U.S. This affects labor-intensive sectors such as textiles, gems and jewellery, garments, footwear, furniture, industrial chemicals, shrimp/seafood, carpets, and leather. Exemptions include pharmaceuticals, petroleum products, and certain electronics/semiconductors (though some face separate tariffs at lower rates like 25% for aluminium and steel). This has already caused significant loss for India.

See Also

Impact Of 50% Tariff By United States Upon Exports Of India To US

However, this did not stop the increasing imports by India from U.S. Despite 50% tariff by U.S. upon Indian exports, India continued to import U.S. goods that too in more quantity than before. It seems Modi is committed to decrease the trade surplus of India from U.S. and increase the trade deficit with U.S. in 2025-2026.

See Also

After discussing the imports and exports position of India after the imposition of 50% tariff on Indian goods, let us discuss about the non-trade and non-tariff barriers upon Indian services that have already been imposed by U.S. and some more are in pipeline.

Alternatives To Tariffs For Services That May Be Imposed On India By United States In 2025

Substitutes for tariffs on services can include regulatory measures, trade agreements, and subsidies that promote domestic service industries without imposing direct taxes on foreign services. These alternatives aim to enhance competitiveness and protect local markets while facilitating international trade.

Understanding Tariffs And Their Impact

Tariffs are taxes imposed on imported goods, making them more expensive than domestic products. While tariffs are common in trade for goods, services are typically not subject to tariffs in the same way. Instead, countries may use other methods to regulate or protect their service industries.

Alternatives To Tariffs For Services

(a) Regulatory Standards: Countries can implement regulatory standards that foreign service providers must meet to operate domestically. This can include licensing requirements, safety standards, and quality controls.

(b) Subsidies: Governments may provide financial support to domestic service providers to enhance their competitiveness against foreign services. This can help lower costs and improve service quality.

(c) Trade Agreements: Bilateral or multilateral trade agreements can facilitate the exchange of services by reducing barriers and establishing mutual recognition of qualifications and standards.

(d) Investment Restrictions: Limiting foreign investment in certain service sectors can protect domestic industries. This can include restrictions on ownership percentages or operational control.

(e) Intellectual Property Protections: Strengthening intellectual property rights can help domestic service providers protect their innovations and maintain a competitive edge against foreign competitors.

(f) Technology Transfer Restrictions: Technology transfer restrictions can protect domestic services while not giving any leverage or advantage to foreign service providers.

So, while tariffs are not typically applied to services, various alternatives exist to protect and promote domestic service industries. These methods can help maintain competitiveness without the direct financial burden that tariffs impose on consumers.

Non-Trade And Non-Tariff Barriers Upon Indian Services By United States And Total Losses For India In 2025

From January to September 2025, the United States imposed several restrictions and measures affecting Indian services, particularly in the areas of visa policies and immigration enforcement. Below is a detailed summary of the key restrictions based on available information:

(1) Visa Restrictions On Indian Travel Agencies Facilitating Illegal Immigration

(a) Date: Announced on May 19, 2025

(b) Details: The U.S. State Department imposed visa restrictions on owners, executives, and senior officials of travel agencies based in India accused of knowingly facilitating illegal immigration to the United States. These measures were part of a broader effort to dismantle human smuggling networks. The restrictions were enacted under Section 212(a)(3)(C) of the Immigration and Nationality Act, which denies admission to individuals believed to have serious adverse foreign policy consequences. The restrictions applied even to those eligible for the U.S. Visa Waiver Program.

(c) Impact: The exact number of individuals or agencies affected was not disclosed due to visa record confidentiality. The U.S. Embassy in India emphasised ongoing efforts to identify and target those involved in illegal immigration, human smuggling, and trafficking operations. This policy aimed to deter illegal migration and hold facilitators accountable.

(2) Changes To U.S. Visa Policies For Indian Applicants

(a) Date: August 1 to October 1, 2025

(b) Details: The U.S. Mission in India introduced several changes affecting visa applicants:

(c) August 1, 2025: Adults were required to collect passports in person, and third-party collection was discontinued. For minors, a hard-copy consent letter signed by both parents was mandated, with scanned or emailed copies deemed invalid. An optional home/office passport delivery service was available for ₹1,200 per applicant.

(d) September 2, 2025: The Interview Waiver Program (Dropbox) was significantly narrowed, requiring in-person interviews for renewals across visa categories such as H, L, F, M, J, E, and O. Age-based exemptions for interviews were largely removed.

(e) October 1, 2025: A $250 Visa Integrity Fee was introduced for most non-immigrant visas as a refundable security deposit under strict conditions, with plans to index it to inflation from 2026. Additionally, students faced increased social media screening, and there was a potential shift from “duration-of-status” to fixed stay periods for student visas.

(f) Impact: These changes increased the administrative burden and costs for Indian visa applicants, particularly those seeking renewals or student visas. Applicants were advised to book interviews early, budget for additional fees, and ensure social media consistency to avoid complications.

(3) Travel Alerts And Restrictions

(a) Satellite Phones And GPS Devices: On January 13, 2025, the U.S. Embassy in India issued a travel alert noting that satellite phones and certain GPS devices are prohibited in India without prior authorisation. This restriction indirectly affected services involving travel and communication, as Indian authorities could seize such devices.

(b) Security and Travel Advisories: While not directly targeting Indian services, U.S. travel advisories issued in 2025 (e.g., June 18, 2025) highlighted increased caution due to crime, terrorism, and civil unrest in certain Indian regions, such as Jammu and Kashmir and northeastern states. These advisories could impact Indian tourism and related services by discouraging U.S. travelers or imposing restrictions on U.S. government personnel travel.

(4) Context Of U.S.- India Relations

(a) The U.S. actions were part of broader immigration enforcement policies under President Donald Trump’s second term, which began in January 2025. Discussions between U.S. Secretary of State Marco Rubio and Indian External Affairs Minister Subrahmanyam Jaishankar in January 2025 addressed migration issues, indicating diplomatic engagement alongside these restrictions.

(b) The U.S. Embassy in New Delhi repeatedly warned Indian nationals against overstaying their authorised period in the U.S., citing risks of deportation and permanent bans. This messaging targeted individuals and agencies involved in immigration-related services.

(5) Explanatory Notes

(a) The available information does not explicitly detail restrictions on Indian services beyond travel agencies and visa-related policies. For instance, there are no specific mentions of trade restrictions, sanctions on Indian IT services, or other economic measures targeting Indian industries in the provided timeframe.

(b) The focus on illegal immigration suggests a targeted approach rather than a broad restriction on all Indian services. However, these measures could indirectly affect Indian travel and consultancy firms involved in visa processing or immigration services.

What Is The Loss For India In USD Due To Non-Tariff Restrictions By US Upon Indian Services In 2025

India faces significant economic challenges from US non-tariff barriers (NTBs) on its services sector, particularly in IT and business process management (BPM), where visa restrictions like H-1B caps, denials, and processing delays limit the movement of skilled professionals. These restrictions are considered “non-trade” or non-tariff measures under global trade rules, as they affect Mode 4 of services trade (presence of natural persons). Based on various reports, the estimated loss to India in 2025 from such U.S. restrictions on Indian services is approximately $7 billion in foregone exports and related revenue. This figure accounts for reduced onsite service delivery, project delays, and higher costs for Indian firms due to visa denials and tighter immigration norms.

Background On U.S. Non-Tariff Barriers On Indian Services

(a) Key Barriers: The US imposes restrictions through H-1B visa caps (limited to 85,000 per year, with India receiving about 70-80% of approvals historically), higher denial rates under certain administrations, wage requirements, and additional fees (e.g., the $250 visa integrity fee introduced in 2025). Data localisation rules and cybersecurity requirements also indirectly impact Indian IT firms by increasing compliance costs.

(b) Impact Mechanism: Indian IT companies rely on sending professionals to the U.S. for onsite work, which accounts for 20-30% of revenue in many contracts. Restrictions force firms to hire locally (at higher costs) or offshore more work, reducing efficiency and competitiveness.

(c) Context In 2025: With heightened trade tensions and potential policy shifts, denial rates for H-1B extensions have risen to 5-10% (from 2% in prior years), affecting thousands of applications. This has led to project cancellations and lost contracts, especially in tech hubs like Silicon Valley.

(d) Sources: Estimates draw from various sources, which highlight how US NTBs add 10-15% to operational costs for Indian exporters.

Overall Indian Services Exports To The U.S.

India’s services exports to the US are dominated by IT and BPM, making up over 60% of total services trade. The total value of Indian services exports to the US in 2024 was $41.6 billion, with projections for 2025 showing growth to around $45-50 billion absent restrictions. However, NTBs could reduce this by 10-15%, contributing to the $7 billion loss estimate.

Notes:

(a) Data derived from USTR reports and RBI statistics. Projections assume 10% baseline growth; losses based on NASSCOM estimates of visa-related disruptions affecting 15% of onsite revenue.

(b) The $7 billion loss includes direct export reductions ($5.5 billion) and indirect costs like compliance and lost productivity ($1.5 billion).

Breakdown Of Losses By Type

The $7 billion loss can be broken down by the specific impacts of US restrictions. Visa denials alone affect around 10,000-15,000 Indian applicants annually, each representing $150,000-$200,000 in potential revenue per year for Indian firms.

Notes: Opportunity costs are calculated based on historical data where 20% of potential deals were lost due to visa issues (per NASSCOM surveys). Compliance costs have risen 20% in 2025 due to new rules.

Mitigation Strategies For India

To offset these losses, India is pursuing:

(a) Bilateral talks to ease visa norms under the US-India Trade Policy Forum.

(b) Diversification to markets like Europe and Asia, where IT exports grew 15% in 2025.

(c) Domestic reforms, such as skilling programs to reduce reliance on onsite work.

(d) Potential retaliation, like increasing tariffs on U.S. services imports, though this risks escalation.

If restrictions intensify, losses could rise to $10 billion by 2026.

There is limited direct data available specifically detailing domestic consumption trends in India from January to September 2025. However, several sources point to a broader context of declining domestic consumption during this period, driven by multiple economic and structural factors. Below is a synthesis of the available information, focusing on the decline in domestic consumption and its causes, with projections and insights where applicable.

Key Points On Domestic Consumption Decline (January–September 2025)

(1) Evidence Of Consumption Decline

(a) Private Consumption Share Of GDP: Domestic consumption, which accounts for approximately 60–61% of India’s GDP, has shown signs of weakening. Private consumption dropped from 58.1% of GDP in FY22 to 55.8% in FY24, reflecting a downward trend that likely continued into 2025.

See Reasons Why Domestic Consumption Is Declining In India

(b) Quarterly Data: Private consumption growth slowed to 6.0% year-on-year in the October–December 2024 quarter, marking the weakest expansion since October–December 2023, suggesting a potential continuation of subdued growth into early 2025.

(c) Decoupling From GDP: Since March 2023, consumer spending has decoupled from national output, indicating a structural decline in consumption relative to overall economic growth.

(d) Sector-Specific Indicators: Declines in automobile sales and fast-moving consumer goods (FMCG) revenues further illustrate weakening consumer demand. For example, domestic aviation traffic dropped by nearly 3% in July 2025 compared to July 2024, reflecting seasonal and structural factors like reduced airline capacity.

(2) Factors Driving The Decline

(a) Inflation And Purchasing Power: Rising inflation, particularly in food prices (averaging above 8% due to weather-related issues), has eroded consumer purchasing power, especially for lower-income groups. This has led to a shift toward essential spending over discretionary items.

(b) Unemployment Monster Of India: Unemployment in India has increased significantly across all segments. Whether it is IT, e-commerce, startups, private companies or any other segment, there are only news of layoff and no new employment and recruitment. Govt jobs have gone for the past 5 years and all we have is lies and empty promises of Modi govt.

See Also

The Great Unemployment Monster Of India Is Engulfing Indian Youth

(c) Stagnant Wage Growth: Real wage growth for urban Indians has remained stagnant, falling below the 10-year average, limiting spending capacity.

(d) Increased Savings And Debt: Post-pandemic household debt and rising interest rates have prompted urban consumers to prioritise savings and loan servicing over spending.

See Also

(i) Household Debt And Domestic Consumption In India In 2025

(ii) Household Debt-To-GDP Ratio In India In 2025

(e) Economic Uncertainty And Consumer Confidence: Increased uncertainty about future income has led to cautious consumer behavior, with urban households cutting back on expenditures after a post-pandemic spending boom.

See Also

(i) Indian Economy Is In Very Bad Shape And Soon Stock Market Of India Would Collapse Completely Says Praveen Dalal

(ii) Indian Economy Is A Gig Economy And Economy Of NWO Puppets And Govt Buddies

(f) Structural Issues: Long-term challenges, such as a large informal workforce, volatile incomes, and failure to create a robust domestic market, have contributed to a chronic consumption demand crunch.

(g) Government Spending Pullback: A reduction in government expenditure, a key economic driver in recent years, has further dampened demand.

(3) Sectoral And Regional Variations

(a) Rural vs. Urban Consumption: While rural demand showed signs of revival in 2025, urban consumption faced constraints due to income stagnation and inflation. The share of food expenditure in rural areas dropped to 46.4% in 2022–23 from 53% in 2011–12, while non-food expenditure rose to 53.6%. Urban areas saw food expenditure decline to 39.2% and non-food rise to 60.8% over the same period, indicating a shift in spending patterns.

(b) Specific Sectors: The decline in sugar consumption (from 25.10 LMT in September 2024 to an allocated quota of 23.5 LMT for September 2025) suggests cautious demand despite upcoming festivals. The aviation sector’s passenger drop in July 2025 also points to reduced discretionary spending.

(4) Government Response And Policy Measures

(a) Tax Cuts To Boost Consumption: In August 2025, the government announced plans to slash consumption taxes by October, moving most items from 12% and 28% GST slabs to 5% and 18%, aiming to stimulate demand. These cuts, implemented from September 22, 2025, are expected to boost sales of FMCG and consumer electronics.

However, in the absence of purchasing power of Indians and a cautious approach of Indian consumers, reduction in GST would not have any effect. 100 crore Indians cannot spend any money on anything beyond basis necessities. There is nothing that tax or GST can do in such a situation says Praveen Dalal.

(b) Monetary Policy: The Reserve Bank of India (RBI) implemented a 100-basis-point rate cut over three consecutive meetings by June 2025, aiming to drive credit growth and consumer spending.

(c) Budget 2025 Focus: The Union Budget 2025 emphasised boosting consumption through tax exemptions and fiscal measures while maintaining fiscal prudence, targeting a fiscal deficit of 4.4% of GDP for FY 2025–26.

(5) Projections And Outlook

(a) Forecasted Consumer Spending: Total consumer spending in India is projected to remain sluggish and it may even decline despite tax and GST concessions. Modi govt has failed to shown any proof of actual and overall economic development. India is facing acute poverty, hunger, unemployment, slowing domestic consumption, stock market crash, collapse of small businesses and MSMEs, negative effects of 50% tariff by United States, etc.

See Also

Impact Of 50% Tariff By United States Upon Exports Of India To US

(b) Corporate Earnings: Corporate earnings of Indian companies are already low and with 50% tariff by U.S. they would plunge further in 2025. This is not an encouraging factor but a very disturbing and discouraging factor for Indian consumers, forcing them to save more and spend less says Praveen Dalal.

(c) Economic Growth: Economic growth and GDP of India may hit badly due to global issues and geo-political factors, especially tariffs. Labour intensive industries of India are already hit hard by 50% tariff and many have closed their business and laid off their employees. With a focus upon selective economic fields like IT, electronics, pharmaceuticals, oil and gas, heavy machinery, etc, Modi govt has sacrificed small businesses and MSMEs with 50% tariff says Praveen Dalal.

(d) Stock Market Debacle: Stock market of India is under continuous pressure and it has totally failed to provide profits to investors. In fact, as on date, the stock market of India is considered to be worst one in Asia to invest in. It is accepted by many experts that the situation would remain negative till 2030 and there is little hope for the revival of Indian stock market. Occasional highs may be witnessed due to optimistic news but they would fade away soon when they would face the ground realities of India says Praveen Dalal.

See Also

(i) Potential Reasons For A Collapse Of The Stock Market Of India By 2030

(ii) Dangers Of Long Term DIIs Investments In Stock Market Of India

(iii) Total FIIs Withdrawal From India Till August 2025 And Impact Upon Stock Market Of India

India would be lucky to hit even 5% GDP in these circumstances says Praveen Dalal.

Conclusion

Domestic consumption in India from January to September 2025 continued to face downward pressure due to inflation, stagnant wages, economic uncertainty, and structural challenges. Policy interventions like tax cuts and monetary easing aim to reverse this trend, with early signs of rural demand revival offering some optimism. However, comprehensive data for the exact period is sparse, and the decline appears to be part of a broader, ongoing trend rather than a sharp, isolated drop.

It is safe to conclude that domestic consumption in India would continue to decline in 2025-2026 unless there is a bigger, better and overall development of India says Praveen Dalal.

The 50% tariff on select Indian exports to the U.S. (a combination of the initial 25-26% reciprocal tariff imposed in April 2025 and an additional 25% punitive tariff effective August 27, 2025) applies to approximately 55-66% of India’s total merchandise exports to the U.S. This affects labor-intensive sectors such as textiles, gems and jewellery, garments, footwear, furniture, industrial chemicals, shrimp/seafood, carpets, and leather. Exemptions include pharmaceuticals, petroleum products, and certain electronics/semiconductors (though some face separate tariffs at lower rates like 25% for aluminium and steel).

Based on available data, the actual impact on exports during January to September 2025 is limited because the full 50% tariff only took effect in late August. However, the initial tariff from April contributed to a noticeable decline in overall exports starting then. Projections from various reports indicate that exports in the affected sectors are expected to decline by 70% due to the 50% tariff, potentially reducing their value from about $60.2 billion to $18.6 billion annually. Overall Indian exports to the US could fall by 43% in the coming year, but for the specific period of January to September 2025, the cumulative decline in affected exports is estimated at 25-35% from the pre-tariff peak (March 2025), based on monthly trends and early tariff effects, with further drops anticipated in September data once available.

Monthly Exports From India To The U.S. (January To July 2025)

Data is sourced from US Census Bureau and Indian Ministry of Commerce reports (in USD billion; August and September data not yet released as of September 3, 2025). Note the peak in March before the initial tariff, followed by a steady decline.

Cumulative exports from January to July 2025: approximately $64.31 billion. If August exports (pre-tariff for most of the month) are estimated at $7.5-8.0 billion and September at $6.5-7.0 billion (accounting for full tariff impact), the total for January to September could be $78-79 billion, reflecting a ~25% decline from a projected no-tariff baseline of ~$100 billion (extrapolated from FY25 trends).

Also See

(1) Estimated Exports By India To United States From January To September 2025

(2) IPhone Exports From India To The United States In 2025

(3) Monthly Imports By India From The United States (January To July 2025)

See Here

Countries Substituting/Replacing India For Tariffed Items

The high tariffs make Indian goods less competitive, leading U.S. buyers to shift sourcing to lower-tariff or tariff-free alternatives. Key countries benefiting include:

(1) Vietnam: Gaining in textiles, garments, footwear, and electronics (e.g., shirts costing $12 vs. India’s tariff-inflated $16.40).

(2) Bangladesh: Replacing in apparel, textiles, and shrimp/seafood (e.g., shirts at $13.20).

(3) Mexico: Benefiting from USMCA advantages in textiles, auto components, and furniture.

(4) China: Despite its own tariffs, competitive in chemicals, jewellery, and textiles (e.g., shirts at $14.20).

(5) Turkey: Taking share in carpets, textiles, and jewellery.

(6) Pakistan and Nepal: Emerging in textiles and leather goods.

(7) Guatemala and Kenya: Niche gains in apparel and seafood.

These shifts could become permanent if tariffs persist, as competitors lock in supply chains. For example, US shrimp imports from India may drop significantly, with Bangladesh and Vietnam filling the gap due to lower costs.

Related Stories

(1) Export, FDI And FII Losses To India Due To 50% Tariff By U.S.

(2) Defense Imports Agreements Between India And United States In 2025

(3) Pharmaceuticals Manufacturing Is Shifting To U.S. In 2025

(4) Reasons Why Domestic Consumption Is Declining In India

(5) Cotton Production In India And Impact Of U.S. Tariff Upon Indian Cotton Agriculture

The value of iPhone exports from India to the United States in 2025 is not fully detailed for the entire calendar year in this article, but available data allows for an informed estimate based on specific periods and trends.

Key Data Points

(1) Fiscal Year 2024-25 (April 2024 to March 2025): Apple exported iPhones worth $17.47 billion (Rs. 1,50,000 crore) from India in FY25, with approximately 75% of these exports directed to the U.S., equating to $13.1 billion (Rs. 85,880 crore).

In the first quarter of FY25 (April to June 2024), iPhone exports were valued at $4.4 billion, with 97% going to the U.S., or roughly $4.27 billion. This includes $3.2 billion by Foxconn alone from March to May 2025, with 97% ($3.1 billion) shipped to the US.

A record $2.33 billion was exported in March 2025 alone to build US inventory.

(2) First Half Of 2025 (January To June 2025): iPhone exports surged by 53% year-over-year, crossing 20 million units, with over 75% of export volumes (approximately 15 million units) destined for the U.S. The value of Indian-made smartphones shipped to the U.S. in this period was $9.35 billion, with iPhones dominating due to Apple’s significant share.

Specifically, in April 2025, iPhone shipments to the US rose 76% year-on-year, reaching approximately 3 million units valued at roughly $1.5 billion (based on an estimated average price per unit derived from annual figures).

(3) April To July 2025: Apple’s iPhone exports rose 63% to $7.5 billion, contributing to India’s total smartphone exports of $10 billion in this period. Assuming 75-97% of these were US-bound (consistent with earlier trends), the value to the US was approximately $5.63 billion to $7.28 billion.

Estimation For January To September 2025

(a) January To March 2025: As part of FY25, exports to the US were likely around $4.5 billion, based on the quarterly record of $6.4 billion in Q4 FY25 (January to March 2025), with 75% directed to the US.

(b) April To June 2025: Approximately $4.27 billion, as noted above for Q1 FY25.

(c) July To September 2025: No specific monthly data is available and we cannot estimate based on earlier months trend due to 50% tariff and potential removal of tariff exemptions.

Total Estimate (January to September 2025): Combining these, iPhone exports to the US likely ranged from $9 billion to $11 billion at most.

Full-Year Estimate For 2025

Assuming a slower growth rate in the second half due to an existing 50% US tariff and removal of exemption from semiconductors and other electronic equipment by U.S., exports for July to December could not conservatively align with the first half’s monthly average. So export to U.S. would be significantly impacted from September to December 2025, especially when Trump has hinted on retaining 50% tariff and putting new ones on pharmaceuticals, furniture, semiconductors, electronic items, etc in near future.

Thus, a full-year estimate for 2025 could be $13 billion, though tariffs and removal of exemptions may reduce this to around $10 billion to $11 billion if export growth slows.

The estimates account for Apple’s dominance in India’s smartphone exports (75% of total smartphone exports) and the high proportion (75-97%) directed to the US, driven by tariff advantages over China (10% tariff for India vs. 55% for China). But now India is facing a 50% tariff and a very potential threat of removal of tariff exemptions, this would severely curtail India’s export of iPhone to U.S. from September 2025 onwards says Praveen Dalal.

Tariff Exemptions

Currently, iPhones exported from India to the U.S. are exempt from tariffs due to existing exemptions for semiconductor-powered devices. However, this situation could change if the exemptions are lifted in the future. The exemption for iPhones are temporary and could change if the U.S. reviews its tariff policies, particularly concerning semiconductors.

If the exemptions are lifted in the future, iPhones manufactured in India could face higher prices compared to those made in other countries like Vietnam or China. The U.S. Commerce Department is currently reviewing sectors deemed vital to national security, which may affect future tariff decisions.

There is no direct data in the provided references for India’s exports to the United States specifically from January to September 2025. However, some sources provide partial or related information that can help piece together an estimate or context for this period.

Key Points from Available Data:

(1) Quarterly Data (January to March 2025): From January to March 2025, India exported goods worth $27.7 billion to the United States, as reported by the United States Census Bureau. This figure is from a source indicating a strong first quarter, with a record high of $11.2 billion in March 2025 alone.

(2) Annual Context for 2024-25: For the fiscal year 2024-25 (April 2024 to March 2025), India’s total merchandise exports to the US were approximately $86.5 billion, with a trade surplus of $41.2 billion. For April to November 2024, India’s exports to the US were reported at $52.95 billion, covering major sectors like engineering goods ($12.33 billion), electronic goods ($6.79 billion), drugs and pharmaceuticals ($6.34 billion), and gems and jewelry. These figures suggest that the remaining months (December 2024 to March 2025) contributed significantly to the annual total, with December 2024 alone recording $7.017 billion in exports.

(3) Challenges Due to Tariffs: Starting in April 2025, the US imposed a 26% additional tariff on Indian goods (excluding pharmaceuticals, semiconductors, and certain energy products), which could impact export performance in later months of 2025. A report projects a $5.76 billion decline in India’s merchandise exports to the US for the full year of 2025 due to these tariffs, particularly affecting sectors like electronics, seafood, and gold.

An additional 25% tariff was imposed in August 2025 due to India’s purchases of Russian oil, bringing the combined tariff to 50% for affected goods, potentially threatening $48.2 billion in exports.

Estimation For January To September 2025

Since exact monthly data for January to September 2025 is unavailable, we can make an informed estimate based on the quarterly data and annual trends:

(a) The first quarter (January to March 2025) contributed $27.7 billion.

(b) For April to September 2025, no specific monthly breakdown is provided, but we can extrapolate from the April to November 2024 figure of $52.95 billion over 8 months, which averages roughly $6.62 billion per month. Assuming a similar monthly export rate for April to September 2025 (6 months), exports could be approximately $39.72 billion (6 months × $6.62 billion). However, this assumes no significant disruption from the April 2025 tariff hikes.

(c) Adjusting for the reported tariff impact, a 6.41% decline in exports for 2025, which could reduce the monthly average slightly. If we conservatively estimate a 5% reduction due to tariffs, the monthly average might drop to around $6.29 billion, leading to approximately $37.74 billion for April to September 2025.

Total Estimate For January To September 2025

Combining the first quarter ($27.7 billion) with an estimated April to September ($37.74 billion), India’s exports to the US from January to September 2025 could be approximately $65.44 billion. This is a rough estimate, as tariff impacts and sector-specific exemptions (e.g., pharmaceuticals and electronics) could alter the actual figures.

Key Sectors

Based on data for 2024-25, the major export categories to the US include:

(a) Engineering Goods: ~$12.33 billion (April-November 2024), though expected to decline in 2025 due to tariffs.

(b) Electronic Goods: ~$6.79 billion (April-November 2024), though expected to decline in 2025 due to tariffs.

(c) Pharmaceuticals: ~$6.34 billion (April-November 2024), largely exempt from additional tariffs, but tariffs may apply soon and expected to decline once tariffs are implemented.

(d) Gems and Jewelry: ~$6.28 billion (April-November 2024), projected to significantly decline in 2025.

(e) Textiles: ~$3.32 billion (April-November 2024), though expected to decline significantly in 2025 due to tariffs.

The estimate is speculative due to the lack of specific monthly data for April to September 2025 and the unpredictable impact of US tariffs. The actual value could be lower if tariff effects are more severe or higher if India mitigates losses through trade negotiations or diversification.

Investing through Domestic Institutional Investors (DIIs), such as mutual funds, insurance companies, and pension funds in India, can carry certain risks when held for the very long term, particularly in scenarios where Foreign Institutional Investors (FIIs) are consistently exiting the market. This dynamic has been evident in the Indian stock market in 2025, where FII outflows have been significant, often countered by DII inflows. Below, we will break down the key reasons why this can be dangerous, based on market analyses and reports. These risks stem from structural, economic, and behavioral factors rather than any inherent flaw in DIIs themselves.

(1) Potential For Unsustainable Market Support: DIIs often act as a buffer by buying stocks when FIIs sell, preventing immediate crashes and providing short-term stability. However, this “propping up” is not always sustainable over the long term. DII inflows largely come from domestic retail savings (e.g., via SIPs in mutual funds). If prolonged FII exits lead to market downturns, retail investors may panic and redeem their holdings, forcing DIIs to sell assets at a loss. This creates a vicious cycle of amplified selling pressure, eroding long-term portfolio values.

For example, in early 2025, DIIs injected over ₹1.2 lakh crore to offset FII withdrawals of ₹1.5 lakh crore, neutralising much of the impact on large-cap indices. But if redemptions spike due to volatility, DIIs could turn from buyers to sellers, exacerbating declines.

(2) Risk Of Overvalued Markets And Bubble Formation: When FIIs exit en masse—often due to high Indian valuations, global interest rate hikes, or shifts to safer assets like U.S. treasuries—the market may be left overpriced. DIIs continuing to invest can mask these issues, inflating a bubble that bursts over time. Long-term holders (e.g., in DII-managed funds) face the danger of sharp corrections when reality sets in, such as economic slowdowns or global recessions.

For example, FIIs have cited India’s high valuations and better risk-adjusted returns elsewhere (e.g., China or US bonds at 4-5% yields) as reasons for leaving. This leaves behind “overpriced assets in a high-risk market,” signaling potential long-term economic concerns.

(3) Reduced Market Liquidity And Exit Challenges: FIIs provide significant liquidity to the Indian market through their large-scale trading. Their prolonged exits reduce overall market depth, making it harder to buy or sell stocks without significant price impacts. For long-term DII investments, this means positions could become illiquid during stress periods, leading to forced sales at unfavorable prices or prolonged underperformance.

For example, FII holdings dropped to 16% of the market in 2024 from a peak of 20%, with continued selling reducing liquidity further. This makes the market more vulnerable to shocks, especially in mid- and small-cap segments, which saw over 20% plunges in 2025 despite DII support.

(4) Equity Supply Overhang And Limited Upside: Persistent FII selling, combined with increased IPOs, Offers for Sale (OFS), and promoter exits, creates a flood of equity supply. DII inflows may absorb this supply without driving meaningful price appreciation, capping long-term returns. In extreme cases, this leads to stagnant or declining valuations, eroding the benefits of long-term holding.

For example, 2024 saw record-high equity supply, which could absorb most DII inflows and limit market gains in the near to medium term. This “perfect storm” of DII surge, FII shuffle, and promoter exits reshapes ownership but heightens volatility risks.

(5) Broader Economic And Geopolitical Signals: FII exits often reflect deeper issues like geopolitical tensions, currency depreciation (e.g., rupee weakening 3% in 2024), or global risk aversion. Relying on DIIs ignores these warnings, potentially exposing long-term investments to systemic risks such as inflation, slower growth, or policy changes. While DIIs promote domestic stability, over-dependence can delay necessary market adjustments, leading to larger corrections later.

In summary, while DIIs have reduced India’s dependence on FII inflows and provided a counterbalance (e.g., holding market stability despite $800 billion in FII equity exposure), long-term reliance on them amid FII exits can lead to hidden vulnerabilities. Investors should diversify, monitor fundamentals, and not assume DII support is indefinite.

Predicting a full collapse or rise of any stock market, including India’s, is highly speculative and depends on numerous unpredictable factors like global events, policy changes, and economic shifts. India’s market has shown resilience historically, but based on current trends, analyses, and expert discussions as of September 2025, several risks could contribute to a prolonged downturn or crash extending to 2030. These include structural weaknesses, external pressures, and internal policy challenges.

Below, we outline key potential reasons, drawing from economic reports, market data, and discussions. Note that a “collapse” here refers to a sustained bear market with significant value erosion (e.g., 50%+ drop in indices like Sensex or Nifty), not total failure.

(a) Massive Foreign Institutional Investor (FII) Outflows And Capital Flight: FIIs have been net sellers in India for much of 2025, withdrawing over ₹2.75 lakh crore since October 2024, driven by higher returns in U.S. Treasuries, global uncertainties, and India’s high taxes on capital gains.

Total FIIs Withdrawal From India Till August 2025 And Impact Upon Stock Market Of India

This has eroded market liquidity by 40%, exacerbating falls in indices. If U.S. interest rates remain elevated and emerging markets like India face competition from China or Southeast Asia, outflows could persist, starving the market of foreign capital. Projections suggest that without reversal, this could lead to a 30-50% market cap wipeout by 2030, similar to past emerging market crises.

(b) Slowing GDP Growth And Weak Corporate Earnings: India’s GDP growth slowed to 5.4% in Q3 FY25, the lowest in recent years, amid declining capital expenditure (capex), falling consumption, and stagnant income growth.

Foreign Direct Investment (FDI) Outflow (OFDI) From India In 2025

Corporate earnings for Nifty companies grew only 5% YoY in December 2024 quarter, far below expectations, with sectors like banking showing weakness. If growth remains below 6% annually—due to factors like high inflation, poor monetary policies, corruption draining fiscal resources—the market could enter a prolonged stagnation. By 2030, this might result in a feedback loop where low earnings trigger further sell-offs, potentially halving market values as seen in historical slowdowns.

Satyanashi Modi And Modi Ka Gang Have Doomed India And Are Fooling Moronic Indians Says Praveen Dalal

(c) Geopolitical Risks And Trade Wars: Escalating U.S.-India trade tensions, including Donald Trump’s proposed 50% tariffs on Indian exports, could severely impact sectors like IT, pharmaceuticals, and manufacturing, which rely on U.S. markets.

Export, FDI And FII Losses To India Due To 50% Tariff By U.S.

Combined with ongoing India-China-Pakistan tensions and global conflicts, this might reduce exports and foreign investment. If tariffs persist or escalate into a full trade war by 2027-2030, India’s economy could face a 1-2% GDP hit annually, leading to a stock market rout as investor confidence evaporates—potentially mirroring the 2008 global crisis effects on emerging markets.

(d) Overvaluation And Speculative Bubbles In Mid- And Small-Cap Stocks: Despite recent corrections, mid- and small-cap indices remain overvalued with PE ratios exceeding 30-40, far above historical averages and even NASDAQ peaks.

FDI And FII Withdrawals In India Increased Significantly In 2025

This froth, fueled by retail investors and SIP inflows, has created a bubble vulnerable to popping if earnings do not catch up. Historical patterns from books like “Mania, Panics, and Crashes” show such valuations often precede crashes; if retail money dries up amid losses (already ₹16.97 lakh crore erased in early 2025), a cascade of selling could drive indices down 40%+ by 2030.

(e) Rising Inequality, Declining Consumption, And Social Fragmentation: With 100 crore Indians facing spending constraints, consumer demand—half of GDP—is under pressure from stagnant wages, high inequality, and wealth concentration among oligarchs.

Household Debt And Domestic Consumption In India In 2025

Reasons Why Domestic Consumption Is Declining In India

This could lead to a vicious cycle of lower sales, job losses, and reduced investment. If social divisions along caste or religious lines worsen, as some analyses predict, it might hinder unified economic reforms, prolonging stagnation into 2030 and triggering market collapses akin to those in unequal economies like pre-2001 Argentina.

(f) Regulatory And Policy Missteps By SEBI And Government: Increased taxes (e.g., hikes in STT, STCG, LTCG), restrictive F&O rules, and frequent regulatory changes have eroded trust, prompting FII exits and reducing market participation.

Foreign Institutional Investments (FIIs) Withdrawal From India In 2025

Allegations of fraud and over-interference by SEBI, combined with corruption and ease-of-doing-business issues, could deter long-term investment. Without policy reversals, these factors might amplify downturns, leading to a structural bear market lasting years.

(g) Global Recession And External Shocks: Fears of a U.S. recession, rising oil prices, and currency depreciation (rupee weakening) could spill over, as seen in 2025’s market dips.

Rupee Crashes To Record Low Breaching The 88-Per-Dollar Mark

If a global slowdown hits by 2027-2030, India’s export-dependent economy might contract, causing a stock market crash with losses up to $1 trillion and more.

In summary, while optimistic forecasts project India’s market reaching $10 trillion by 2030 with strong growth, these risks—rooted in current data—could lead to a collapse if unaddressed. Diversification, monitoring global cues, and policy reforms might mitigate this.

In recent years, India’s outward foreign direct investment (FDI) to the United States has seen significant growth, with investments reaching approximately USD 29.2 billion in FY 2024-25. Major Indian companies are increasingly establishing operations in the U.S., focusing on sectors like manufacturing and technology, reflecting a broader trend of expanding global presence.

India’s outward FDI to the U.S. has been substantial and growing, driven by Indian companies seeking market access, technology, and strategic advantages, particularly in the IT and Services sectors. The U.S. is a key destination for these investments, though the specific volume fluctuates annually. Indian firms use Mergers & Acquisitions (M&A) to enter the U.S. market, reflecting a broader trend of Indian companies expanding their global footprint to achieve a global reach and access new markets and technologies.

Foreign Direct Investment (FDI) Outflow (OFDI) From India In 2025

Overview Of India’s Outward FDI To The United States

India’s outward Foreign Direct Investment (OFDI) to the U.S. represents a significant portion of its global expansion strategy, driven by Indian firms seeking access to advanced technology, larger markets, and supply chain diversification. The U.S. is one of the top destinations for Indian OFDI, alongside Singapore and the UAE, accounting for approximately 15% of India’s total foreign assets held by Indian entities as of March 2025 (cumulative basis). Data on monthly OFDI by destination is compiled and released by the Reserve Bank of India (RBI) in its monthly bulletins, typically with a lag of 1-2 months. As of August 29, 2025, the latest official RBI data covers up to July 2025, with August figures expected in the October 2025 bulletin.

Preliminary estimates for August 2025, based on sequential trends and RBI’s quarterly patterns, indicate continued growth in US-bound investments, particularly in sectors like information technology (IT), pharmaceuticals, and manufacturing.India’s total OFDI surged 75% year-on-year to $29.2 billion in FY 2024-25 (April 2024–March 2025), with the US contributing around $4.4 billion (15% share), up from $2.9 billion in FY 2023-24. This growth reflects Indian companies’ focus on acquisitions and greenfield projects in the U.S. to leverage its innovation ecosystem and counter geopolitical risks.

However, net FDI into India remained low at $0.4 billion in FY 2024-25 due to high repatriation ($51.5 billion) and outflows.

Brutal And Total Foreign Direct Investment (FDI) Withdrawal From India In 2025

Key Trends In India’s OFDI To The U.S. For 2025

(a) Annual Context (FY 2024-25): US-bound OFDI rose by ~52% to $4.4 billion, driven by equity investments in tech and healthcare. Key players included Tata Consultancy Services (TCS), Infosys, and Dr. Reddy’s Laboratories, focusing on R&D and acquisitions. Sectors like IT services (40% share), pharmaceuticals (25%), and manufacturing (20%) dominated. According to UNCTAD’s World Investment Report 2025, India’s overall outward FDI reached $24 billion in calendar year 2024 (up from $14 billion in 2023), with the U.S. as a top destination, ranking India 18th globally in outward FDI flows.

(b) Quarterly and Monthly Breakdown: RBI data shows monthly US-bound commitments averaging $300–500 million in early 2025, with a focus on equity and loans. For April–June 2025 (Q1 FY25-26), US outflows totaled ~$1.2 billion, up 20% YoY, influenced by U.S. policy incentives like the CHIPS Act for semiconductors.

(c) August 2025 Specifics: Preliminary estimates place US-bound OFDI at approximately $450 million for August 2025, a 10% rise from July’s $410 million. This is extrapolated from RBI’s July 2025 bulletin trends (5–10% sequential growth) and ongoing deals in renewables and digital services. Equity likely accounted for $150 million (e.g., IT acquisitions), loans ~$120 million, and guarantees ~$180 million. The U.S. share in total August OFDI ($3.65 billion) was ~12%, below Singapore’s 30–40% but ahead of the UAE’s 10%. Notable activity includes Aditya Birla Group’s $50 million manufacturing center in Texas (announced May 2025, with August disbursements).

Monthly OFDI to the US (USD Million, Actual and Estimated for 2025)

The table below summarises RBI-reported monthly OFDI to the U.S. (in millions USD) for select months in 2024–2025, with an estimate for August 2025 derived from trends (e.g., 10–15% YoY growth and US’s consistent 12–15% share in total OFDI). Data reflects financial commitments (equity + loans + guarantees).

Factors Influencing August 2025 OFDI To The U.S.

Positive Drivers

(a) Market Access and Technology: Indian firms like Infosys and Wipro invested in U.S. data centers and AI firms for client proximity and tech transfer. August saw disbursements for Microsoft’s $3 billion AI/cloud partnership in India, with reciprocal U.S. investments.

(b) Sectoral Focus: IT/pharma led (~65% of US flows), with manufacturing rising (e.g., semiconductors under U.S. incentives). UNCTAD notes India’s 20% increase in greenfield announcements to the U.S. in 2024, focusing on EVs and batteries.

(c) Policy Support: Liberalised ODI norms (up to 400% of net worth) and US-India iCET (Initiative on Critical and Emerging Technology) boosted flows. The India-US BIT negotiations (ongoing as of August 2025) aim to enhance protections.

Challenges

(a) Geopolitical and Economic Factors: US tariff threats (e.g., 50% on Indian imports) and high interest rates increased costs.

(b) Currency Volatility: INR depreciation (~5% vs. USD in August 2025) raised remittance costs, though U.S. investments provide USD revenue streams.

(c) Regulatory Hurdles: US CFIUS (Committee on Foreign Investment in the United States) reviews delayed some deals, but approvals rose 15% for Indian investors in 2025.

Comparison With Other Destinations And Global Context

(a) US vs. Other Destinations: The US ranked second in India’s OFDI (15% share) behind Singapore (24%), per RBI’s March 2025 data. In August 2025 estimates, US ($450M) trailed Singapore ($1.1B) but exceeded UAE ($365M).

(b) Cumulative Foreign Assets: U.S. ($2.33T equivalent, 15%), vs. Singapore ($2.33T, 24%).

(c) Global Ranking: India’s total outward FDI ranked 18th globally in 2024 ($24B, up from 23rd in 2023), per UNCTAD. US-bound flows positioned India among top 10 emerging market investors to the U.S., focusing on semiconductors/basic metals.

(d) Inflows vs. Outflows To/From U.S.: While U.S. is a major source of inbound FDI to India ($70.65B cumulative to March 2025, 10% share), outward flows to the U.S. highlight bilateral reciprocity. Net bilateral flows favored the US in 2025 due to India’s expansion.

(e) Projections for Rest of 2025: RBI forecasts 15–20% YoY growth in total OFDI to $35B in FY25-26, with US share at 15–18% (~$5.5B annually), driven by AI/renewables. UNCTAD projects modest global FDI recovery in 2025, benefiting India-US ties amid U.S. tariff policies.

For official August 2025 figures, check RBI’s October 2025 bulletin at rbi.org.in.

Foreign Direct Investment (FDI) outflow, also known as Outward FDI (OFDI), refers to investments made by Indian residents (companies, individuals, or entities) in foreign countries through equity, loans, or guarantees. This includes establishing subsidiaries, acquiring stakes, or providing financial support abroad. Data on OFDI is primarily tracked and reported by the Reserve Bank of India (RBI) on a monthly basis, with breakdowns by components (equity, loans, guarantees) and destinations.

As of August 29, 2025, the most recent official RBI data available covers up to July 2025, with preliminary estimates or trends for August based on ongoing reporting patterns. Comprehensive monthly figures for August 2025 are typically released in RBI’s bulletin around mid-October 2025.

India’s OFDI has shown robust growth in FY 2024-25 (April 2024–March 2025), reflecting the global expansion of Indian firms in sectors like financial services, manufacturing, and trade. This shows the intentions of domestic companies to seek diversification, market access, and supply chain resilience abroad. However, OFDI contributes to a lower net FDI balance for India, as it offsets inbound investments.

Key Trends in India’s FDI Outflow for 2025

(a) Annual Context (FY 2024-25): Net OFDI surged 75% year-on-year to $29.2 billion, up from approximately $16.7 billion in FY 2023-24. This growth was driven by repatriation pressures and Indian firms’ aggressive overseas expansion. Key destinations included Singapore, the US, UAE, Mauritius, and the Netherlands (accounting for over 50% of the rise). Sectors like financial/banking/insurance (leading contributor), manufacturing, and wholesale/retail trade made up over 90% of the increase.

(b) Quarterly and Monthly Breakdown: RBI data indicates steady monthly commitments, with a focus on equity and debt instruments. For the first half of 2025 (April–September 2024, as a basis for early trends), OFDI averaged around $3–5 billion per month, influenced by global factors like U.S. policy shifts and supply chain realignments.

(c) August 2025 Specifics: Based on RBI’s sequential trends and preliminary reports, OFDI commitments for August 2025 are estimated at approximately $3.5–4.0 billion, showing a marginal rise from July 2025’s $3.4 billion (adjusted for inflation and growth patterns). This estimate accounts for continued investments in semiconductors, renewables, and digital services amid global diversification from China. Equity components likely dominated at $0.8–1.0 billion, with loans at ~$1.0–1.2 billion and guarantees at ~$1.5–1.8 billion. Singapore remained the top destination (30–40% share), followed by the US and UAE.

Monthly OFDI Commitments (USD Billion, Actual and Estimated for 2025)

The table below summarizes RBI-reported monthly OFDI data for select months in 2024–2025, with an estimate for August 2025 derived from trends (e.g., 5–10% sequential growth observed in prior months). Data is for financial commitments (not disbursements).

Factors Influencing August 2025 OFDI

Positive Drivers

(a) Global Expansion: Indian firms like Tata, Reliance, and JSW invested heavily abroad for market diversification (e.g., Africa, Southeast Asia). In April 2025 alone, OFDI rose 90% YoY to $6.8 billion, led by telecom and energy.

(b) Sectoral Focus: Financial services (e.g., banking acquisitions in the US/Europe) and manufacturing (e.g., semiconductors in ASEAN) accounted for ~60% of outflows. Renewables saw a 50% YoY increase in related investments.

(c) Policy Support: Liberalised Overseas Direct Investment (ODI) norms under FEMA allow up to 400% of net worth for automatic route investments, encouraging flows.

Challenges

(a) Repatriation Pressures: Higher global interest rates led to $51.5 billion in repatriation/disinvestment in FY24-25, indirectly boosting net OFDI.

Export, FDI And FII Losses To India Due To 50% Tariff By U.S.

(b) Geopolitical Factors: US tariff threats and EU supply chain shifts prompted Indian firms to invest abroad for resilience, but currency volatility (INR depreciation) increased costs.

Rupee Crashes To Record Low Breaching The 88-Per-Dollar Mark

(c) Net Impact on India: While OFDI signals economic maturity, it contributed to net FDI falling to $0.4 billion in FY24-25 (96% YoY decline), raising concerns about capital retention.

Brutal And Total Foreign Direct Investment (FDI) Withdrawal From India In 2025

Comparison With Inflows And Global Context

(a) Inflows vs. Outflows: Gross FDI inflows reached $81 billion in FY24-25 (up 14% YoY), but net FDI was near-zero due to $29.2 billion OFDI and $51.5 billion repatriation. For August 2024 (latest comparable), inflows were $6.39 billion (peak month), while outflows were $3.35 billion—highlighting a balanced but outflow-heavy dynamic.

(b) Global Ranking: India’s OFDI share in global flows rose to 2–3% in 2024 (UNCTAD World Investment Report 2025), positioning it as a top emerging market investor. Compared to peers, India’s outflows grew faster than China’s (down due to restrictions) but lagged the US ($400 billion annually).

(c) Projections For Rest Of 2025: RBI forecasts 15–20% YoY growth in OFDI for FY25-26, potentially reaching $35 billion annually, driven by BIT negotiations (e.g., with UAE, EU) and greenfield projects in semiconductors/renewables. For the latest official figures, refer to RBI’s website (rbi.org.in) for the October 2025 bulletin.

As on 27-08-2025, the Indian rupee has fallen to a record low of 88.19 against the U.S. dollar, primarily due to the imposition of steep tariffs by the U.S. on Indian goods, which has raised concerns about India’s trade balance and economic outlook. This marks the first time the rupee has breached the 88-per-dollar mark, reflecting significant pressure from foreign fund outflows and weak domestic market conditions.

Total FIIs Withdrawal From India Till August 2025 And Impact Upon Stock Market Of India

Foreign Institutional Investments (FIIs) Withdrawal From India In 2025

Export, FDI And FII Losses To India Due To 50% Tariff By U.S.

Brutal And Total Foreign Direct Investment (FDI) Withdrawal From India In 2025

FDI And FII Withdrawals In India Increased Significantly In 2025
Posted on August 26, 2025

Reasons Why Domestic Consumption Is Declining In India

As a result of the above mentioned economic conditions of India, the Indian rupee has recently fallen to a record low, breaching the 88-per-dollar mark for the first time. As of August 29, 2025, it closed at an all-time low of 88.19 against the US dollar, marking a significant decline of 61 paise from the previous day.

Reasons For The Decline

(a) US Tariffs: The primary factor contributing to this decline is the imposition of steep tariffs by the United States on Indian goods, which have doubled to 50%. This has raised concerns about the impact on India’s trade balance and economic growth.

(b) Market Sentiment: The rupee’s fall is compounded by negative trends in domestic equities and persistent foreign fund outflows. Investors are worried about the long-term effects of these tariffs on India’s economy, with estimates suggesting a potential economic hit of $55–60 billion.

Market Reactions

(a) Forex Market: The rupee opened at 87.73 and fell to an intra-day low of 88.33 before settling at 88.19. This marks a significant shift from previous levels, where it had been trading around 87.95 earlier in the month.

(b) Government Response: The Indian government is expected to announce measures to support exporters and bolster India’s global trade presence in light of these challenges.

Let us discuss this issue in more detail now. Indian Rupee (INR) Hits Record Low, Breaching 88 Per Dollar On August 29, 2025.The Indian rupee plummeted to an all-time low, trading as weak as ₹88.3075 against the US dollar (USD) during the trading session, before closing at ₹88.1950—a decline of 0.65% from the previous day. This marked the first time the rupee has breached the psychologically significant 88-per-dollar level, surpassing its prior record low of ₹87.95 set earlier in the year.

The sharp depreciation reflects escalating economic pressures, primarily triggered by fresh US tariffs on Indian goods, amid broader concerns over trade balances, foreign investment outflows, and global market volatility.

Key Reasons For The Crash

The rupee’s fall is largely attributed to a combination of external trade shocks and domestic vulnerabilities. Here’s a breakdown:

(a) US Tariffs on Indian Exports: The US imposed an additional 25% tariff on Indian goods this week, effectively doubling the total duties to 50%. This move, aimed at addressing perceived unfair trade practices and India’s ties to Russian oil imports, has heightened fears of reduced export competitiveness. Analysts estimate this could cost India $55–60 billion in exports, particularly impacting labor-intensive sectors like textiles, footwear, gems, and jewelry.

(b) Foreign Investor Outflows and Equity Market Pressure: Foreign institutional investors (FIIs) pulled out approximately ₹3,856 crore from Indian equities in recent sessions, exacerbating the rupee’s weakness. This capital flight is linked to souring sentiment over the trade dispute and broader emerging market risks. Domestic stock indices like the Sensex and Nifty also dipped in early trade, adding to the downward spiral.

(c) Reserve Bank of India (RBI) Interventions: The RBI likely stepped in by selling dollars through state-run banks to curb the rupee’s freefall, preventing it from hitting even deeper lows like ₹88.50. However, such interventions have depleted forex reserves, which stood at a 10-month low earlier in the year, limiting the central bank’s ability to fully stabilise the currency without further strain.

(d) Global Factors: A stronger U.S. dollar, fueled by expectations of sustained high interest rates from the Federal Reserve, has weighed on Asian currencies. Additionally, rising crude oil prices (with Brent crude hovering around $80–81 per barrel) increase India’s import bill, as the country relies heavily on energy imports. Geopolitical tensions, including US-India trade frictions under the Trump administration, have amplified these pressures.

The rupee has now logged its fourth consecutive monthly decline, weakening by about 4.44% over the past year and over 2% year-to-date in 2025. This is not an isolated event—earlier breaches like the 86 and 87 marks in January and February were also tied to similar tariff threats and global economic headwinds.

Economic Implications

(a) Inflation and Growth Risks: A weaker rupee raises import costs, potentially fueling inflation in India, where consumer prices are already sensitive to energy and commodity prices. The RBI has warned of “downside risks” to GDP growth, now projected at 6.6% for the fiscal year—down from earlier estimates—due to export slowdowns and reduced foreign investment.

(b) Trade Balance Strain: India’s current account deficit could widen further, with exports to the US (a key market) facing erosion. While a depreciated rupee might boost some export sectors in the long term by making Indian goods cheaper abroad, the immediate tariff hit outweighs this benefit.

Outlook And Potential Recovery

Analysts remain cautious, with forecasts suggesting the rupee could test ₹88.50–89.00 in the near term if trade tensions persist. J.P. Morgan notes that while the real effective exchange rate is at a two-year low (boosting competitiveness), sustained outflows and a wider trade deficit may keep pressure on. The RBI’s upcoming policy review will be pivotal— a potential rate cut could ease some strain, but interventions might continue to support the currency. India is negotiating a bilateral trade deal with the US to mitigate tariffs, focusing on diversification and avoiding retaliation. In the medium term, positive factors like strong domestic consumption and potential Fed rate cuts could provide relief, but the rupee’s trajectory hinges on resolving US-India trade frictions. For now, importers and travelers should brace for higher costs, while exporters might see mixed opportunities.

Impact Of Falling Rupee Upon Indian Economy

The Indian rupee’s record low, breaching ₹88 per US dollar on August 29, 2025, has significant implications for the Indian economy. Below is a concise analysis of the impact across key areas, based on available data and real-time insights:

Negative Impacts

(a) Higher Import Costs: India, heavily reliant on imported crude oil (80% of its needs), faces higher costs as Brent crude hovers around $80–81 per barrel. A weaker rupee amplifies this, raising fuel prices and impacting transportation and manufacturing sectors.

(b) Inflationary Pressure: Imported goods, including electronics, machinery, and raw materials, become costlier, fueling consumer price inflation. This could push India’s CPI, already under scrutiny, higher, squeezing household budgets. Analysts like those at Nomura estimate a potential 0.5–1% uptick in inflation if the rupee remains weak.

(c) Widening Trade Deficit: The US tariffs (25% additional, totaling 50%) on Indian goods like textiles, footwear, and jewelry threaten $55–60 billion in exports. Despite a weaker rupee making exports theoretically cheaper, the tariff barrier offsets this advantage, potentially widening India’s current account deficit (CAD), projected to hit 2–2.5% of GDP in FY26.

(d) Foreign Exchange Pressure: Higher import costs and reduced export earnings strain India’s foreign exchange reserves, already at a 10-month low, limiting the Reserve Bank of India’s (RBI) ability to stabilise the rupee.

(e) Capital Outflows And Market Volatility: Foreign institutional investors (FIIs) withdrew ₹3,856 crore from Indian equities recently, driven by US-India trade tensions and global risk aversion. This weakens the stock market (Sensex and Nifty dipped in early trade) and further pressures the rupee.

(f) Investment Slowdown: A weaker rupee and trade uncertainties may deter foreign direct investment (FDI), impacting long-term growth in sectors like manufacturing and tech.

(g) Higher Borrowing Costs: Indian companies with dollar-denominated debt face increased repayment burdens as the rupee depreciates. This could strain corporate balance sheets, particularly in sectors like aviation and telecom, potentially leading to higher interest rates or credit rating downgrades.

(h) Economic Growth Risks: The RBI has revised GDP growth projections downward to 6.6% for FY26, citing export slowdowns and global headwinds. A weaker rupee, combined with trade disruptions, could further dampen industrial output and job creation, especially in export-oriented sectors.

Positive Impacts

(a) Temporary And Limited Export Competitiveness: A depreciated rupee makes non-tariff-affected exports (e.g., IT services, pharmaceuticals) more competitive globally. For instance, IT firms like TCS and Infosys could see marginal gains from higher dollar revenues, though this benefit is tempered by US tariffs and global demand slowdowns. The real effective exchange rate (REER) at a two-year low enhances price competitiveness, potentially boosting exports to non-US markets.

(b) Remittance Gains: Indian diaspora remittances (estimated at $120 billion annually) gain value in rupee terms, boosting domestic consumption and supporting families reliant on overseas earnings.

(c) Domestic Substitution: Higher import costs could encourage local production in sectors like electronics or chemicals, aligning with India’s “Make in India” initiative. However, this depends on policy support and infrastructure readiness.

Broader Economic And Social Effects

(a) Consumer Impact: Rising prices for fuel, imported goods, and travel hit the middle class hardest, potentially curbing discretionary spending.

(b) Policy Dilemma for RBI: The RBI faces a tough choice between defending the rupee (depleting forex reserves) or letting it slide to preserve reserves, risking inflation. A potential rate cut could stimulate growth but may weaken the rupee further.

(c) Geopolitical and Trade Dynamics: Ongoing US-India trade talks are critical. Failure to secure tariff relief could deepen economic strain, while a successful deal might stabilise sentiment.

Conclusion

The rupee’s fall to ₹88.1950 (with intraday lows of ₹88.3075) signals short-term pain for India’s economy, with inflation, trade deficits, and capital outflows as immediate concerns. Analysts predict that the rupee may continue to face pressure due to ongoing trade tensions and market conditions. The RBI has indicated that uncertainties surrounding US trade policies pose risks to India’s economic outlook.

While export sectors and remittances offer some relief, the net impact is negative unless trade disputes ease. The RBI’s interventions and India’s trade negotiations with the US will be pivotal. Analysts forecast the rupee could test ₹88.50–89.00 if pressures persist, but a resolution to tariffs or a global US dollar weakening (e.g., via Fed rate cuts) could provide relief by Q1 2026. For now, businesses and consumers should brace for higher costs, while policymakers face a delicate balancing act.

Foreign Institutional Investors (FIIs) have withdrawn approximately ₹1.16 lakh crore (around USD 13.23 billion) from Indian equities in 2025, with significant sell-offs primarily in the IT, FMCG, and Power sectors. This trend reflects a risk-averse stance among global investors due to factors like weak earnings, high valuations, and a weakening rupee. As of August 2025, the total withdrawal amounts to approximately ₹1.57 lakh crore (around USD 19 billion). This trend reflects a cautious approach among global investors due to various economic factors.

See Also

Export, FDI And FII Losses To India Due To 50% Tariff By U.S.

Monthly Breakdown Of FII Withdrawals

Sectors Affected By FII Withdrawals

Conversely, sectors like telecommunications and services have seen consistent inflows, indicating a shift in investor focus.

The primary factors contributing to this trend include:

(a) Weak Earnings: Disappointing corporate results have raised concerns about the health of companies.

(b) Global Economic Pressures: Issues like tariffs and a weakening rupee have made investors cautious.

(c) Market Volatility: Significant fluctuations in the market have prompted a shift towards small and mid-cap stocks.

(d) Geopolitical Concerns: Events such as U.S. tariffs have added to the uncertainty.

(e) Economic Conditions: Recession risks and high inflation in developed economies can prompt FIIs to seek safer investments.

(f) Interest Rates: Sharp interest rate hikes in developed markets make them more attractive compared to emerging markets like India.

(g) Economic Growth: Weak growth, high inflation, and fiscal deficits can erode confidence in the Indian market.

(h) Profit Booking: After strong market rallies, FIIs may sell to realise profits.

Impact Of FIIs Withdrawal On Stock Market Of India

FIIs withdrawals can lead to significant declines in stock prices, increased market volatility, and a depreciation of the Indian rupee. This outflow often results in lower investor confidence and can cause stock indices like Nifty 50 and Sensex to experience corrections of 10-20%.

Effects on Stock Market

(a) Decline in Indices: When FIIs withdraw funds, stock indices like Nifty 50 and Sensex often experience corrections ranging from 10% to 20%.

(b) Selling Pressure: The exit of foreign capital creates excess selling pressure, leading to a drop in stock prices.

(c) Rupee Depreciation: A decrease in dollar inflows results in a weaker rupee against the US dollar, affecting import costs and inflation.

(d) Rising Bond Yields: As FIIs sell off Indian assets, government securities (G-Sec) face increased selling pressure, causing bond yields to rise.

The withdrawal of FIIs from the Indian stock market can lead to significant declines in stock prices, currency depreciation, and rising bond yields. Understanding these impacts is crucial for investors navigating market fluctuations.The overall sentiment among FIIs remains cautious, driven by weak earnings, high valuations, and global economic pressures. While some sectors continue to attract investment, the trend of withdrawals highlights a significant shift in foreign investment strategies in India.