Good Morning. Post Covid, there was much discussion on India becoming a replacement for China, especially for exports to the US. A few months after the US imposed harsh tariffs on India, this notion is being turned on its head. Smartphones and pharma shipments fell despite no tariffs in these segments. China, meanwhile, is adding market share despite facing more tariffs. The difference is simple — as China competes on scale, price and policy alignment, India is still fixing the basics. 

Indian equity indices gained on Monday, with the BSE Sensex climbing 388.17 points or 0.46%, closing at 84,950.95. The NSE Nifty50 gained 103.4 points or 0.4%, closing at 26,013.45.

In other news, Tata Motors Passenger Vehicles Limited faces volume growth concerns. Meanwhile, India’s trade deficit widens.

DECODE THE NEWS

The Curious Case Of Slowing Smartphone And Pharma Exports To The US

By Katya Naidu

What? 

In the past few days, India has taken multiple steps to ease the pain its manufacturers face because of high US tariffs. India announced relief measures worth $5 billion for exporters that were hit, and also withdrew Quality Control Orders (QCOs) on key industrial outputs like textiles, plastics and mining applicable on their imports into the country.

These steps have been welcomed by industries. However, they come at a time when Indian exports to the US and, in general, have fallen steeply. 

While India was expected to have an edge at least on goods such as smartphones and pharmaceuticals that weren’t tariffed, that hasn’t happened. 

Categories that were not subjected to tariffs, like smartphones and pharma, saw a steep decline in exports. This is in addition to gems and jewellery, textiles, seafood and solar exports, which saw an anticipated fall. 

For smartphones in particular, it was a sharp downward spiral. These exports grew by a massive 197% in the same period last year.

US tariffs slipped into Indian exports in various stages. India started paying an additional term tariff from April, which was 10% extra. It increased to 25% on August 7, which we paid till August 27, until it rose to 50%, adding layers of uncertainty to the tariff structures. 

The tariff war has yet again shown why India needs to diversify to other countries and up its manufacturing game to compete with China.  

“US traders are recalibrating their sourcing strategies amid heightened volatility, while aggressive dumping from Mexico, Brazil, and parts of South-East Asia continues to undercut pricing discipline. In pharmaceuticals, the sentiment is turning cautious, global buyers fear that if trade negotiations with India lose momentum, generics could well be the next target of tariff scrutiny,” said Kunal Gala, partner, deal value creation at consulting firm BDO India, explaining why tariff-exempt categories lost out.

Why? 

The Indian government, as well as producers and manufacturers, have been actively trying to diversify the number of countries they can export to. The government is currently in talks with Australia, has already signed a free-trade agreement with the UK and has sent delegations as far as South America to generate demand.

Yet, experts believe that for these to take shape and have an impact on the balance sheets of companies, it would take at least a year or so. “The UK–India FTA is a step in the right direction, but policy intent must still translate into on-ground execution. In reality, we are at least 12 to 18 months away from seeing any substantive commercial impact,” said Gala. 

China, which was facing similar tariffs, has seen little impact. During the very same period, its imports to the US have gone up 20%, even with restrictions applied. Moreover, Trump has reduced the tariffs on China to 10%, putting India in more trouble.   

Ajay Srivastava, founder of the GTRI, said China is a monopoly supplier in many categories that it exports to the US. 

“Whereas India's exports are coming down because of high tariffs, while our competitors like Bangladesh and Vietnam they're facing lower tariffs. China is beyond, almost beyond, the game of death. India is very much into the game,” said Shrivastava. 

Could we see the results of these measures soon?

CORE NUMBER

$34.38 billion

That’s the monetary value of India’s merchandise exports in October, a 11.8% fall, according to government data released on Monday. In contrast, imports surged 16.63% to USD 76.06 billion, largely driven by a spike in precious metal shipments. Gold imports soared to USD 14.72 billion, up from USD 4.92 billion a year earlier, while silver shipments also surged, contributing significantly to the overall rise in inbound trade.

Impact: The sharp divergence between exports and imports widened the country’s trade deficit to $41.68 billion for the month.

Setting: During April–October of FY26, India’s merchandise exports edged up 0.63% to USD 254.25 billion, while imports rose 6.37% to USD 451.08 billion.

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FROM THE PERIPHERY

Tata Motors PV Drops.

Shares of Tata Motors Passenger Vehicles fell as much as 7.2% on Monday to a seven-month low after the company sharply cut its FY26 margin target for Jaguar Land Rover (JLR) in the aftermath of a September cyberattack, Reuters reported. The stock was the biggest drag on the Nifty 50, even as the benchmark traded higher. Tata Motors’ historical prices were adjusted after the recent listing of its demerged commercial vehicle business.

Overview: JLR, which accounts for most of Tata Motors’ profits, continues to face weak China demand, component shortages and rising competition. The cyberattack halted production for five weeks and resulted in a $228.5 million one-time charge. Jefferies noted that robust India growth will not be enough to offset headwinds such as China’s consumption tax, higher discounts and the transition to EVs.

Context: Despite a headline net profit surge, Tata Motors reported a Rs 6,368 crore (approximately $6.37 billion) loss excluding a Rs 82,616 crore demerger gain. JLR now expects 0%–2% FY26 margins, down from 5%–7%. At 10:19 IST, the stock was down 3.7% at Rs 377.20.

Jobless Rate Holds Steady

India’s unemployment rate held steady at 5.2% in October, even as the labour market absorbed a larger workforce, the latest Periodic Labour Force Survey (PLFS) showed. Rural labour markets continued to strengthen, with the rural jobless rate easing to 4.4% from 4.6% in September. Urban areas, however, saw pressure building, as the unemployment rate rose to a three-month high of 7%, up from 6.8%.

Flashpoint: Across demographic groups, trends were mixed. The unemployment rate for men remained unchanged at 5.1%, while women saw a marginal improvement, with the rate edging down to 5.4% from 5.5%. The labour force participation rate (LFPR) rose slightly to 55.4%, driven by an uptick in rural participation to 57.8%, even as urban LFPR slipped to 50.5%. The worker population ratio (WPR) stood at 52.5%, supported by continued gains in rural female employment.

Setup: The National Statistics Office said it revamped the PLFS sampling methodology from January 2025 to deliver more robust monthly estimates under the Current Weekly Status (CWS).

US Foreign Students Slide

It isn’t just Indian students. The number of Chinese students studying in US universities has reduced in the 2024-25 academic year too, reported Business Standard, quoting the South China Morning Post.

By The Numbers: According to the report, Institute of International Education data showed that there was a 4% drop in the number for Chinese students in the academic year of 2024-25, a 4 per cent drop.

Context: Indian and Chinese students make up a significant portion of foreign students in the US. However, Trump’s policies and stricter visa rules have made students wary of applying to American colleges. Recently, Trump noted that restricting foreign students from entry to the US could cripple the US higher education system. Foreign students pay significantly more than American students in universities.

Stubble Burning Win

Farmers in Punjab’s villages are reportedly sending crop residue for recycling, rather than burning it, according to a Reuters report. The Confederation of Indian Industry has said that around 800 villages are using balers to stack stubble and send it to factories that will turn them into bio fertilisers and biogas, and other commodities.

Context: Stubble burning is among the contributors to Delhi’s air pollution which was in the “very poor” category on Monday. According to the Ministry of Earth Sciences data, the daily mean contribution from stubble burning to PM2.5 in Delhi on November 17 was 12.8%

What Now: The Reuters report quoted Sunil Dahiya, founder and lead analyst at Envirocatalysts, a New Delhi-based think tank, as saying that the initiative was limited in comparison to the intensity of Delhi’s air pollution problem. Delhi’s air pollution levels are also affected by vehicular pollution, emissions from surrounding industries, road dust and construction activities.

PODCASTS

India’s Mid Cap Index Hits Record High

On Episode 728 of The Core Report, financial journalist Govindraj Ethiraj talks to Anand Kulkarni, Director at CRISIL Ratings.

• Valuation guru says he wants to move his money into cash and collectibles

• India’s mid cap index hits record high

• The green shoots in Agri export exemptions in the US

• Gold imports jump and drive up trade deficits but there is some good news too

• India is going on a cement expansion spree and rural India is powering it

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