India’s Resilience, Retested

THE TAKE 

As War Returns to West Asia, Can India’s Growth Story Hold?

Some 35 countries led by the United States fought the Gulf War beginning in August 1990, after Saddam Hussein invaded and attempted to annexe Kuwait.

The first phase of the war, called Operation Desert Shield, lasted six months until January 1991, and involved the buildup of troops and the defence of Saudi Arabia.

The second phase, Desert Storm, began in January 1991 and continued until February. 

This was the combat phase, accompanied by a five-week bombing campaign, and led by Chairman of the Joint Chiefs of Staff General Colin Powell and General Norman Schwarzkopf.

Exactly five months later, on July 24, 1991, then Finance Minister Manmohan Singh delivered a historic speech that tore down the economic barriers India had built over decades, ushering in the liberalisation process that continues to this day.

At the time, he pointed out that India’s foreign exchange reserves would last only two weeks and were worth just around Rs 2,500 crore.

The United States returned to the Gulf again in March 2003, determined to overthrow Saddam Hussein and then, presumably, leave. They eventually did in December 2011—almost nine years later.

A Council on Foreign Relations report said the costs of the conflict were high: $800 billion from the U.S. Department of the Treasury, with nearly 4,500 Americans and well over 100,000 Iraqis killed.

In the meantime, the U.S. had attacked Afghanistan in retaliation for the 9/11 terrorist attacks on September 11, 2001. An international coalition led by the U.S. invaded Afghanistan to dismantle the Al-Qaeda network after the Taliban refused to hand over Osama bin Laden. British forces joined American troops on the ground.

At the height of the conflict, there were more than 130,000 NATO troops deployed. By July 2021, nearly all NATO countries had fully withdrawn.

The Taliban is now back in control of Afghanistan.

Why India Keeps Powering Ahead

From the Gulf War of the 1990s to now, India’s economy has powered along steadily, largely unaffected by the wars waged outside—thanks to the sheer brute force and momentum unleashed by liberalisation and a generation of entrepreneurs desperate to break free.

If there were speed bumps along the way, they were mostly financial: the 1997 Asian financial crisis, which was largely confined to Southeast Asia; the 2000 dot-com bubble and subsequent market crash; and the 2008 global financial crisis triggered by a housing collapse in the United States.

The most recent roadblock was, of course, the COVID-19 pandemic.

The knocks have been hard but none have had dealt any telling blows, for a variety of reasons of course.

So what could happen now as the spectre of war spreads, with America back in the region?

Washington’s enmity with Tehran dates back to 1979, when Iranian students stormed the US Embassy in Tehran, leading to the severing of diplomatic relations.

But ties were strained even before that.

The United States has now warned Iran to stand down, or risk an even more forceful response than the bunker-busting bombs that hit three nuclear enrichment sites on 22 June 2025.

Will Iran capitulate—or retaliate at a time and place of its own choosing?

We don’t know at least here at The Core Report and this is not an area we are in a position to speculate.

A straight reading of recent history tells us that no war is ever short, whether it’s Israel versus Hamas, Israel versus Iran, maybe Israel and the US versus Iran, or Russia versus Ukraine.

India itself saw a brief exchange of hostilities on the Pakistan border after it launched Operation Sindoor on 7 May, following the brutal killings of tourists in Kashmir’s Pahalgam region a month earlier.

Things have quietened down but that was just a month ago.

Amid Conflict, India Must Push Forward

The reason India’s stock markets and economy are still holding up reasonably well despite growing war and trade tensions is the strength of its domestic economy.

Yes, oil prices could go haywire in the short term—especially if the Middle East conflict escalates—and hurt India’s balance of payments. But in the medium to long term, oil prices should stabilise.

That brings us to the larger question: how should we view this period of heightened uncertainty?

In some ways, as a window of opportunity.

There are still industries waiting to be opened up, licences to be freed—nuclear power comes to mind, aspects of defence—and many outdated state and central laws that could be scrapped altogether and make it easier to do business.

A prolonged war in the Middle East is in no one’s interest, including India’s. But we may have little say in the matter.

Back in the 1990s, when liberalisation began, India had perhaps $1 billion in forex reserves. Today, we sit on nearly $700 billion in dollar reserves.

More importantly, we continue to hold vast reserves of kinetic energy—entrepreneurs and businesses still straining to start up or scale and consumers wanting to aspire for a better quality of life.

Our task now is to ensure we keep our eyes fixed and our energies focused on unleashing those forces.

MESSAGE FROM OUR SPONSOR

CORE NUMBER

Rs 4.58 lakh crore

That’s India’s net direct tax collection as of June 19—down 1.39% year-on-year, per The Economic Times. The dip is driven by a 58% jump in refunds (Rs 86,385 crore) and slower advance tax growth.

💼 What’s inside the number:

• Corporate tax: Rs 1.72 lakh crore

• Personal income tax: Rs 2.72 lakh crore

• Advance tax: Rs 1.55 lakh crore (up just 4% YoY, vs 27% last year)

📊 The bigger picture:
Gross collections rose 5% to Rs 5.45 lakh crore. But lower TDS and refund volume suggest near-term weakness. FY26’s target? Rs 25.2 lakh crore.

India Hedges Its Oil Bets. In June, India imported more oil than ever from Russia, according to preliminary data by global analytics firm Kpler. Russian oil imports totalled more than the country’s total oil imports from its traditional oil trade partners like Iraq, Saudi Arabia, UAE and Kuwait.

Catch Up Quick: India has also increased its oil imports from the US. Experts view this move as the country’s broader strategy to prevent the disruptions caused by the Israel-US-Iran conflict, an Economic Times report said.  

Backdrop: After Israel attacked Iran on June 13, Iran threatened to close the Strait of Hormuz, through which 1/5th of the world’s oil passes, including the oil that India buys from Arab countries. Shipowners have been hesitant to send empty oil tankers to the conflict-ridden region, though Kpler analysts say a full blockade is unlikely.

Air India Cuts More Flights: Following last week’s Air India Flight AI171 crash in Ahmedabad, the airline has now trimmed its narrowbody operations by under 5%, after already slashing widebody international services by 15%. A joint probe is underway involving Indian, UK, and US aviation experts.

Catch Up Quick: Starting immediately until July 15, Air India will suspend three routes (including Bengaluru–Singapore and Mumbai–Bagdogra) and reduce frequency on 19 others, such as Delhi–Goa and Mumbai–Hyderabad.

What This Means: The airline says the move is voluntary and temporary, aimed at stabilising operations and prioritising safety amid mounting regulatory scrutiny.

India’s Energy Mix Evolves: As of June 2025, India’s total installed power capacity stands at 476 gigawatt (GW), with non-fossil sources making up nearly half (49%), PTI reported. This includes 110.9 GW of solar, 51.3 GW of wind, and 8.8 GW of nuclear power.

By the Numbers: While renewable energy is gaining ground, thermal power still dominates with 240 GW (50.52%) of capacity—over 91% of that from coal. An additional 176.7 GW in renewable projects is under implementation, and 72 GW is under bidding.

Context: India aims for 500 GW of renewable energy by 2030, but coal remains its primary energy backbone for now.

Declining Sales of European Car-Makers. European car-makers like Renault, Skoda and Volkswagen are struggling to grow in India. Data by JATO Dynamics, an automotive data analytics firm, showed declining sales for all three brands, with Renault experiencing the largest dip.

Setup: Experts attribute their mid performance to their focus on sedans and to the fact that they didn’t update their product models regularly. They also didn’t penetrate enough into Tier 2 and Tier 3 markets. Korean and Japanese companies, on the other hand, make cost-effective compact cars, which Indians prefer. 

Pivot: The Indian government’s tax structure also favours smaller cars, i.e., cars under 4 metres pay lower levies. But, European companies are trying to adapt. For instance, Skoda recently launched Kylaq, a subcompact SUV tailored to the Indian market.

THE SIGNAL DAILY

The Quiet Boom Of Medical Marijuana In India

Cannabis is technically illegal in India. But, for the past few years, it’s been relatively easy, though expensive, to obtain it. Some entrepreneurial Indians have set up online websites — there’s trost.in, itshemp.in, cbdstore.in, among many others. These websites sell both the non-psychoactive CBD (cannabidiol) as well as the psychoactive THC (tetrahydrocannabinol). 

They advertise it as an ayurvedic medicine in addition to using euphemistic language to describe their offerings. So, they say they’re selling hemp and hemp-based products, rather than saying “weed” or “ganja.” These products are also quite expensive — you’d have to shell out at least a couple thousand rupees to purchase one item. 

In the latest episode of The Signal Daily, available Monday, June 23 at 6 pm, we’ll learn about this online ayurvedic cannabis market. Who’s buying from these websites? Why are their products so expensive? And, how safe is it to consume their products? 

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas