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India and the U.S Govt Shutdown: Quick Market Thoughts

by with No Comment AMT MarketsAssetsFeatured Highlights

India and the U.S Govt Shutdown: Quick Market Thoughts

President Trump has been ramping up his claims that India is no longer going to buy Russian oil, he made a statement regarding this belief yesterday once again. As the White House threatened to initiate tougher sanctions against India, there seems to have been some movement towards a reconciliation between the two powerful nations.

The Trump administration is clearly trying to limit the amount of purchases of Russian oil by India to increase economic pressures on Russia, and reportedly India may be starting to actually buy less oil. India has certainly not stopped buying Russian oil in a maximum ‘fait accompli’, but if the nation continues to show a willingness to purchase less energy resources from Russia, this will go a long way in preserving a good U.S and India association. A stronger relationship between the U.S and India can achieve a vital economic and military correlation for the both nations. Improved friendlier tones from New Delhi and Washington D.C appear to have reassured investors in the Indian equity markets via highs currently being seen on Nifty 50, which are now within sight of apex values from late September last year.

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Nifty 50 One Year Chart as of 23rd October 2025

India is a vital and important part of U.S policy as it attempts to also create pressure on China too. By maintaining political and business dealings with India, the U.S can and should look upon this joint relationship as a vast long-term strategic interest. India understands this as well. The ability of India and the U.S to remain ‘friendly’ allies, and the prospect of creating a vigorous economic and military partnership should be one of the U.S government’s essential missions.

India does have strong connections to Russia the past handful of decades politically and economically via its non-aligned status. India will certainly maintain its dialogue and sometimes cooperative dealings with Russia. However, if India and the U.S maintain a solid relationship with the prospect of increasing their economic and political ties this could substantially change dynamics on the Asian continent.

U.S Government Shutdown Since the 1st of October

The U.S government has now been shutdown for over three weeks as Republicans and Democrats remain stubborn about compromise. Both sides have made the shutdown a political game. While each party claims they are doing what is best for the nation and preach to their collective voting bases, the stalemate could start to have uglier effects regarding wages not paid for many U.S employees on the 1st of November.

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Dow Jones 30 One Year Chart as of 23rd October 2025

A lack of government salaries not being dispersed will cause an economic hit via consumer spending and create at a minimum some temporary damage for GDP numbers. Remarkably, and to be clear about this potential impact, Wall Street hasn’t seemed to care yet, but this could start to change. As the U.S economy rumbles powerfully forward without a major downturn in the major equity indices, politicians appear to be comfortable acting like spoiled children on both sides of the aisles engaged in accusing the other side of misdeeds.

Likely to start changing attitudes among Republicans and Democrats in the next two weeks are the coming Federal Reserve’s FOMC Statement during the end of October, and voting results via key political races in the first week of November.

Wall Street wants clarity regarding interest rate outlooks for November, December and early next year. Investors might not get a clear picture from the Fed next week, taking into consideration the Federal Reserve will not have up to date official U.S economic data because of the government shutdown. Meaning the Fed will likely issue a 25 basis point rate cut on the 29th of October and say it is uncertain about the coming few months because it does not have enough inflation, employment and GDP information to form a concrete opinion. The joke of coarse being the Fed seldom seems to have a strong opinion, but now can use the government shutdown as an excuse.

And now for contemplation, let’s look at the election in NYC for Mayor. A bona fide socialist may get elected in New York City who carries the historically misguided and dangerous wisdom of a Marxist. The economic and social practices of Marxism have proven utter failures for over one hundred years consistently. If NYC suffers a victory from the socialist candidate running as a Democrat, Wall Street and many financial institutions based in the city will not react favorably.

In the meantime, U.S equity indices remain elevated, cautious and within sight of record highs. The Nasdaq, Dow Jones and S&P along with other financial assets are producing choppy dangerous conditions for day traders who are attempting to wager on daily changes and suffering from the cautious behavioral sentiment being generated. Investors who look towards the mid and long-term are likely more comfortable, but are certainly keeping an eye on what is going to transpire over the next two weeks. Gold and Silver have come off their speculative highs. Forex continues to create volatile conditions as financial institutions appear unready to make bold predictions about what the Federal Reserve will do into January 2026.
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India Insider: Working with the West as it Deals with Others

by with No Comment AMT MarketsFeatured HighlightsIndia

India Insider: Working with the West as it Deals with Others

India’s Prime Minister Narendra Modi visited Tianjin, China for the 2025 Shanghai Cooperation Organization Summit in early September, which was attended by over twenty nations. Before India visited the conference in August, Washington D.C had already imposed a 50% punitive tariff on India’s exports. The initial tariff was a 25% duty, but included another 25% penalty because India purchases a large amount of Russian Oil, which the U.S seeks to reduce. An uneasy trade dilemma looms for India.

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Many Western analysts quickly concluded that Prime Minister Modi was tilting India towards a stronger relationship with the Russian and Chinese camps, by potentially embracing warmer associations with Presidents Vladimir Putin and Xi Jinping, and defying Washington’s previous warnings.

Yet, the trade composition and the underlying reality highlights a different story. Despite India being positioned in the global South politically, the nation recognizes its higher value exports – which include textiles, gems and jewelry, apparel, and pharmaceuticals are primarily sold to the West. The United States clearly remains India’s biggest consumer. In essence President Trump holds a trump card.

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In contrast, China’s total exports to the global South (excluding Western Europe, Australia, New Zealand, and North America) has doubled since 2015. Chinese exports to the U.S were $525 billion USD in 2024, but to the global South, China’s exports grew to nearly $1.3 trillion USD.

As Professor Michael Pettis accurately points out, “countries with expanding trade surpluses with the U.S, use their higher revenues to fund deficits with the rest of the world.”

India Exports More to the West:

India’s trade surplus with United States, the European Union and U.K stands at $72.18 billion USD. If India wants to be competitive with China in terms of manufacturing, it should affiliate more astutely with the Western camp.

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Dependence on Anti-Western Countries Hurts India’s Trade Balance:

India’s combined trade deficit with Russia and China is approximately $158 billion USD, which demonstrates how much less India exports to these two countries. India’s overall merchandise trade deficit is $282 billion USD, with a deficit of almost 56% in total attributed to Russia and China.

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Service Exports a Crucial Metric in India’s Balance of Payments:

India’s services exports stood at $383 billion USD in financial year 2025, earned primarily from the U.S and other Western countries. Washington has imposed tariffs on India’s tradable goods sector, while the nation’s non-tradable sector has been operating without much stress.

India’s overall trade deficit stood at minus $94.26 billion USD in financial year 2025. Without service exports (predominately from the software services sector), India’s current account deficit would be much larger and the Indian Rupee would face greater depreciation pressures.

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India’s economic stability is precarious, equilibrium needs to be found. Solid domestic outcomes for manufacturing and a stable Rupee, including exchange rates, could be achieved with a well-defined calibration that looks West but does not weaken India’s stance as a non-aligned nation. New Delhi should focus on maintaining neutrality and strategic autonomy.

While India may shake hands with Presidents Vladimir Putin and Xi Jinping, an important economic lifeline runs firmly through Washington, Brussels, and London. Crucial negotiations are said to be taking place between Prime Minister Narendra Modi’s team and President Trump’s White House behind closed doors. New Delhi could become vulnerable if it does not find adequate solutions. President Trump has recently reiterated his friendship with the Prime Minister Modi, perhaps an agreement can be produced in the mid-term.

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India Insider: Strategic Balancing Act Comes with Risks

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

India Insider: Strategic Balancing Act Comes with Risks

On the 15th of August, India’s Independence Day, Prime Minister Narendra Modi announced a large reduction on Goods and Services Tax rates to boost domestic consumption. The Indian economy is certainly slowing, this as lackluster domestic consumption has prompted the Reserve Bank of India to cut the repo rates from 6.5% to 5.5% in 2025.

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Indian Bonds 30 Year LPS Yields One Year Chart as of 19th August 2025

As trade deal discussions with Washington flounder, New Delhi is being forced to shift economic considerations towards China. The diplomatic relationship between India and China has grown colder, particularly since they clashed on the eastern border region in 2020.

Relying on China also comes with challenges for New Delhi. Since 2021, the trade deficit with China has expanded from $73.3 billion to $99.27 billion USD, showing that India still depends increasingly on China for significant importing needs.

According to Bloomberg, India’s major conglomerates have already established excellent relationships with Chinese suppliers of lithium ion batteries and EV components, although they try to discreetly tread under the radar in order to avoid the wrath of New Delhi government.

The fact is India can sustain its economy and maintain its geopolitical posture of non-alignment by practicing a multi-polar stance with Washington and Beijing. But despite clinching trade deals with the U.K and reviving trade negotiations with the E.U, New Zealand & Australia, and its deepening bilateral relationships with many central Asian nations and within BRICS, New Delhi’s major trading partner for exports remains the United States. Around 18% of India’s exports go towards the U.S, while 15% of imported goods come from China. The numbers do demonstrate an intriguing balance.

While India’s negotiations with the U.S have stalled and appear postponed indefinitely, other Southeast Asian countries, including Vietnam, Indonesia and the Philippines have secured lower tariffs with the Trump administration making them more competitive in the U.S. market. These nations are using the U.S for economic and military security, but they also rely on China for manufacturing and logistical needs.

India Faces Additional Challenges with Washington and Beijing:

Indian IT companies derive nearly 57% of their export revenues from U.S clients, making them heavily dependent on that market. And rapid advances in AI and the erosion of legacy outsourcing models are putting India’s traditional profit engines under pressure.

Meanwhile, China is not keen on helping India achieve expertise and manufacturing competitiveness which would threaten its own business model. China wants to make inroads by selling goods to the world’s largest consumer market, rather than technology transfers which would allow India to attain manufacturing supremacy.

Some economists warn that India’s own plans for mitigation of its current circumstances will likely be disinflationary. India’s bond results via yields clearly express concern about potential fiscal costs and difficulties. New Delhi’s focus has shifted towards appeasing domestic consumers, while trying to deal with uncertain foreign partners. Government capital expenditures have been declining since last year, signaling that both corporate and public investment confidence remains weak.

India’s neutrality is welcomed. It’s not anti-Western or pro-Western, and attempts to balance between the U.S and China while trying to forge new trade agreements and ties are a constant high-stakes game capable of creating strains economically and politically. The path forward with the U.S and China will remain complex and it must be worked on with precision in order to help achieve success.

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India Insider: Labor Productivity and Rising Household Debt

by with No Comment Featured HighlightsIndiaRisk Management

India Insider: Labor Productivity and Rising Household Debt

The desire for India to become a fast growing economy can be alluring, but without proper distribution of income and improved labor codes, this remains a major challenge to achieve. During coronavirus, acute problems were faced by those working in private enterprises. While some businesses and institutions supported their employees, many people were left behind without social protective measures.

According to Business Line newspaper analysis, from July 2022 to June 2023, an average salaried Indian male made 20,666 Rupees ($236 USD) and a woman made 15,722 Rupees ( $180 USD) per month.

Experience tells us that lower salaries in the rural areas are pervasive. Many private sector nurses, schoolteachers, and other service workers earn less than the international poverty line of $3 per day (around 250 Rupees per current Forex). Sometimes due to extensive workforce supply, some educated people must work blue collar service jobs additionally to make their ends meet.

Agriculture and Low Productivity:

Wage disparity and underemployment exists rampantly. Half of India’s labor force works in agriculture, where productivity is poor. In agriculture, farmers are both producers and consumers. There are barriers in food supply and demand for agricultural products. Farmers need access to local markets where their buyers can afford to purchase their produce. Without solid markets or better road infrastructure to reach them, many rural areas have less incentive to improve productivity.

As a result, many farmers produce low volumes. This is also one of the reasons why New Delhi is reluctant to permit U.S imports of agricultural and dairy products. Smaller farmers cannot afford to invest in education, which hinders their efforts to move into industries with higher wages. Without increasing labor productivity and better opportunities, most of the population will continue to work in agriculture.

Stagnant Wages, Informal Work and Problems in Micro-Finance:

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India’s Micro-Finance Lenders Culminative Returns Past Year

A large portion of the workforce is employed via informal and low-paying jobs. If wage growth does not keep pace with increased productivity, domestic consumption will remain weak, making the economy more fragile during global downturns. Drivers and gig workers provide some insights because of their inability to make ends meet. Minimum wage policies are lacking for many gig workers. Employees work higher hours in these enterprises. Yet another reason why Indian households prefer to prepare their children for government jobs.

India’s micro lending industry is under stress as delinquencies rise at an alarming pace. This has prompted the Reserve Bank of India to intervene and impose fines on lenders charging excessive interest rates. Loan disbursements shrank 13.5% year-on-year, and shares of some small finance banks have fallen, this as they have been forced to set aside higher provisions for bad loans.

Total loans outstanding in the industry are around 3.75 lakh crore rupees ($43 billion USD) in financial year 2025, with non-housing retail loans accounting for nearly 55% of total household debt. Small ticket loans were meant to ensure financial inclusion in underserved areas. The RBI defines microfinance as collateral-free loans to households with annual incomes of up to 3 lakh Rupees (approximately $3,400 USD).

But when wages do not rise in line with inflation, households begin to borrow to cover deficits, often at high interest rates. This creates risk for small finance banks when borrowers default, besides many consumers who are clearly struggling. A bank employee in Tamil Nadu has said loan disbursements are now scrutinized more closely, and applicants with monthly EMIs – equated monthly installments – above 10,000 Rupees ($115 USD) are no longer eligible for micro-loans.

Job creation in the Manufacturing:

Despite media portrayals of India’s manufacturing ascent, Harvard economist Dani Rodrik offered a compelling remark paraphrased here which points out obstacles ahead, ‘what made manufacturing a vehicle for transformational growth was its ability to generate productivity while drawing unskilled labor from traditional farming’. Rodrik seems to believe manufacturing remains a lower income sector in India due to its large work force and inability to transform efficiently, while also facing globalization problems from other Asian competitors.

The reason why manufacturing companies in India can pay lower salaries is because of high unemployment ratios and a steady supply of new graduates every year, making it easy to find new employees. Wages don’t see much improvement because workers are replaced easily. Many employees working in manufacturing actually have engineering and Masters’ degree backgrounds. Their average salary is around 15,000 Rupees a month ($170 USD), the same amount paid to low skilled employees who have technician diplomas.

India needs to work on improving core manufacturing capabilities, creating better infrastructure via land reforms and logistical capabilities. Implementing a fair minimum wage policy would also influence the economy via better household wages. Yes, inflation is a concern, but India’s aspiration to become a $10 trillion economy will remain hard to attain unless coordinated policy changes occur.

Notes: 1 USD = 87.5 Rupees

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India Insider: Manufacturing Strategy to Create Rural Jobs

by with No Comment BusinessFeatured HighlightsIndia

India Insider: Manufacturing Strategy to Create Rural Jobs

Across much of India’s rural landscape, manufacturing remains scarce and finding a solution for this remains a priority. While some towns do have small scale industries that offer jobs, this is still limited. As of financial year 2023, agriculture accounts for only 16% of India’s GDP, down sharply from around 35% in the 1990s, due to a structural shift toward services and manufacturing.

A large share of rural families still depend on agriculture, often engaging in farming and irrigation with modern equipment. However, marketing their produce remains a persistent challenge. Meanwhile, many rural workers are engaged in low-wage trade and commerce, often in informal settings such as small shops and roadside businesses. These roles typically offer limited income and little upward mobility. Falling real wages have pushed many to migrate to India’s urban centers or venture overseas to Singapore, Malaysia, and the Gulf countries in search of better livelihoods, aided by favorable exchange rates.

Capitalism and Efficient Manufacturing

Adam Smith, in his seminal work The Wealth of Nations wrote that, ‘it is not by gold or silver, but by labor that all the wealth of nations is created’. This fundamental idea underpins the modern economic thought that wealth is not derived merely from money, but from the productive capacity of people.

When capital is invested in a capitalist enterprise, it generates profits for the owner, provides wages for employees, and delivers returns (such as dividends) for shareholders. But this cycle of value creation depends on active and efficient enterprise, particularly manufacturing which has been missing or underdeveloped in many parts of rural India.

Unlike countries such as the United States, where people readily relocate across States, India faces some unique challenges. Like the European Union, India is a union of diverse linguistic and cultural regions. It is uncommon for a small business owner from Himachal Pradesh to directly access markets in Tamil Nadu or Karnataka due to language barriers, cultural differences, and logistical constraints. These frictions further isolate rural producers from wider markets.

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Garment Industry Values in India, Bangladesh and Vietnam

Strategic Solutions and the Role of State Governments

To revive rural economies, business people along with their state governments must identify and invest in strategic sectors that create jobs and add value. Kerala is a fine example: as one of India’s top spice-producing States, Kerala has the potential to establish local industries focused on spice processing, packaging, and export. Coordination between agriculture and manufacturing can generate employment, stimulate local economies, and enhance foreign exchange earnings.

Albert Hirschman, a development economist, highlighted this approach through his theory of unbalanced growth and economic integration. He argued that certain industries have strong reciprocal connections with other parts of the economy. By prioritizing sectors with good synergy potential, developing countries can achieve significant growth even with limited resources.

Growing competition from countries like Bangladesh and Vietnam which both enjoy favorable trade agreements do pose new challenges, this must be taken seriously by India and create a focus on forward looking international commerce. There will always be competition from distant enterprises and nations, this must be accepted and planned for via commercial insights.

Within India is Tiruppur, a city in Tamil Nadu, known as the ‘Manchester of South India’ due to its vibrant textile industry. The city has created an ecosystem of manufacturing that consistently offers higher real wages compared to other towns in the region. It has successfully shifted labor from agriculture to industry, thereby increasing productivity and income. It is a bright example and defines one way to make progress.

Protecting New Industries and Creation of Success

In his book How Rich Countries Got Rich and Why Poor Countries Stay Poor, economist Erik Reinert argues that nations develop not just by doing what they are currently good – such as agriculture or mining, but by nurturing industries that can become more productive long-term. Typically manufacturing and technology sectors lead to greater innovation and economic resilience.

Reinert provides numerous examples, like South Korea’s emerging growth in steel and its automotive industries, and Ireland’s rise in information technology where specific protections and support for young industries has led to long-term prosperity.

India’s rural transformation cannot rely on New Delhi alone. State governments along with business people must take the lead by identifying sectors that have the potential to foster high growth and employment. Helping to create local value chains, investing in infrastructure, training, and market access will build resilience in these communities. By encouraging small-scale manufacturing and leveraging regional strengths, the country’s rural areas can become engines of economic growth.