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India’s Empty Trump Card

India’s Empty Trump Card

September 12, 2025 • Estimated Reading Time: 12 minutes

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Good Morning. After months of keeping India hanging, US president Donald Trump said some warm words for the country, followed by a beaming response from Prime Minister Narendra Modi. This, even as the 50% tariffs still exist, and a new US bill affects IT outsourcing to India. As the country is caught in these mixed signals, the message is clear: it must build its economic and technological muscle to negotiate from a position of strength.

In other news, the rupee hits a record low against the dollar. Meanwhile, US and India’s volatile diplomacy spells trouble for Adani.

THE TAKE

India Can’t Bank On Trump’s Words, It Needs Real Economic Muscle

An appeals court has found Trump’s reciprocal tariffs to be without legal backing. His hope is to get this verdict reversed in the Supreme Court. In the meantime, Trump has urged the European Union to levy 100% duty on India and China to penalise them for importing Russian oil, and giving Russia the funds it needs to wage war in Ukraine.

Hours later, Trump posted a message on his social media platform, Truth Social, seeking to resume talks with India and speak “with his very good friend Prime Minister Modi.” PM Modi has responded with eager readiness to reciprocate and “unlock the limitless potential” of the India-US partnership.

Even as the Indian PM gushes unfounded optimism, a Republican senator has introduced a bill to levy a 25% tax on the value of all outsourced services to American companies or individuals. Considering the steep discount at which Indian IT workers’ services can be obtained, in relation to comparable services from IT workers in the US, and the sheer size and skill range of Indian IT workers, as compared to IT workers anywhere else in the world, the HIRE Act would be unlikely to make a serious dent on the traditional IT outsourcing model.

Yet, the bill comes at a time of AI-induced disruption to traditional IT services. How this would play out is anyone’s guess.

Innovations in AI are reported from Abu Dhabi. The Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) in Abu Dhabi has unveiled K2 Think, a low-cost reasoning model designed to rival systems developed by DeepSeek and OpenAI. It is based on Qwen 2.5, Chinse firm Alibaba’s large language model. If this comes as a surprise, please be aware that the UAE spends 1.75% of GDP on R&D, while India spends 0.64% of GDP on R&D.

India Needs Economic Muscle

Trump’s words of friendship towards India come at a time when India has overtaken China as the largest buyer of Russian oil. This is not because the Chinese are running scared of American wrath over their Russian commerce.

China is increasingly moving to electricity for transport, with more than half of all new car sales being of electric vehicles and high-speed trains that run on electricity offering viable alternatives to air travel on quite a few routes, and will increasingly buy smaller quantities of oil. China has stepped up its purchases of piped natural gas from Russia.

It is high time India’s policymakers realised that India cannot aspire to be a global player merely on the basis of its location in the balance of power between the superpowers, the US and China, but has to build the economic and technological muscle to become a power in its own right. India must be able to deal with the likes of Donald Trump from a position of strength, without gushing with warmth at a sudden word of praise from Washington.

Meanwhile, the world is in flux — violent protests in Nepal, the Japanese prime minister resigning, France getting a fifth prime minister in two years, Israel attacking Doha and Russian drones entering Poland.

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CORE NUMBER

Rs 88.44

This was the value of the Indian rupee against the dollar on Thursday, an all-time low, as US tariffs roiled Asia’s third-largest economy, Reuters reported.

Why it matters: The slide signals shaken investor confidence, with India now among the most vulnerable Asian currencies despite RBI interventions to curb volatility.

Tariff Strain: Washington’s duties on Indian goods have clouded growth and trade prospects. Foreign funds have pulled $11.7 billion from Indian equities and debt this year. Exporters face order uncertainty while importers hedge aggressively, distorting dollar demand.

Expert Speak: “Near-term weakness in the rupee is likely to persist, considering the impact of the US tariffs on labour-intensive sectors,” said Abhishek Goenka, founder and CEO, IFA Global.

FROM THE PERIPHERY

Will Tariffs Crash India’s Code?

Last week, US Senator Bernie Moreno introduced the HIRE Act, which proposes taxing companies that outsource work outside the US and contributing that money to an ‘American Worker Fund’, which would train and upskill US workers. If passed, it could have a massive impact on India’s $254 billion IT industry, which earns 60% of its revenue from the US.

The Backstory: Starting August 27, the US began levying a 50% tariff on two-thirds of India’s exports, accusing the country of financing Russia’s war on Ukraine. The August round, however, excluded high-value exports like pharmaceuticals, IT and electronics. If the HIRE Act passes, it could negatively affect Indian IT, an industry that is already struggling due to weak revenue growth. But, some say it could also encourage it to diversify to other markets.

Pivot: Experts say that this bill will likely get watered down before it’s passed. For starters, US firms and industry bodies will push back. Moreover, there’s enforcement challenges, like a potential conflict with international treaties, or corporations engaging in tax avoidance.

Tax Transparency

The Centre has asked businesses to display tentative pre- and post-Goods and Services Tax (GST) prices of consumer goods, including cars, durables and FMCG products, at retail outlets and on the official GST website to highlight rate cuts under the new GST regime taking effect September 22, The Economic Times reported.

Flashpoint: The Central Board of Indirect Taxes and Customs (CBIC) met with industry bodies and ministries to ensure smooth implementation after Finance Minister Nirmala Sitharaman announced a shift to two slabs—5% and 18%, plus a 40% special rate for luxury and sin goods.

What's Next? Officials expect 90% of the rate cut benefits to be passed on, with prices of automobiles likely down 12–15% and consumer durables by 10%. FMCG firms have urged strict monitoring to ensure compliance, while Moody’s warned revenue loss may constrain fiscal consolidation.

Diplomatic Eclipse For Adani

Adani’s attempt to close US bribery cases has stalled, with US authorities alleging a $250 million scheme tied to solar contracts. Talks to settle have faltered as the US’s Securities and Exchange Commission (SEC) struggles to serve legal papers in India, amid volatile India-US ties.

Impact: The pending case is delaying Adani’s overseas projects and making investors more cautious; TotalEnergies has already slowed new commitments.

Critical Moment: Tensions could also affect Ambani’s Reliance Industries — US officials have accused India’s wealthy of profiteering from Russian oil, and about 30% of the crude Reliance processed recently came from Russia.

Mumbai Reinventing Space

Mumbai is clearly reinventing itself. Between 2020 and mid-2025, 910 societies initiated redevelopment, unlocking nearly 327 acres of land, according to Knight Frank's latest report, Upgrading Mumbai: The Redevelopment Story. This surge is concentrated in the western suburbs, which account for two-thirds of deals. If executed, the pipeline could deliver 44,277 housing units by 2030, with an estimated value of Rs 1300 billion.

By The Numbers: Redevelopment activity peaked in 2024, with 196 societies and 101 acres entering projects, while 2025 is already off to a faster start with 115 deals in just five months. The market remains fragmented, with 80% of plots under half an acre.

Flashpoint: Shishir Baijal, chairman and managing director of Knight Frank, said, "Mumbai’s real estate market is entering a pivotal phase, marked not by outward expansion, but by inward reinvention. At the heart of this transformation lies redevelopment: not a strategy, but a necessity.”

India’s Supplement Frenzy: Health Fix Or Just Hype?

India’s supplement industry is booming right now. Conservative estimates say that this industry is ⁠growing⁠ at a CAGR of 11%, but some experts ⁠even⁠ place its growth rate at 16-18%.

Supplements as a concept isn’t new, what’s new is new-age brands packaging their products in a stylish way. Rather than selling straight up tablets, they sell effervescent tablets, gummies and even multivitamin ice-creams, for instance. Moreover, they’re leveraging social media by getting influencers to market their offerings.

So, should you invest in these premium supplements?

In the latest episode of The Signal Daily, we’ll hear from consumers, doctors and industry people on what’s behind this boom. Do you really need these supplements? And if yes, which ones are worth it—and which ones aren’t?

Listen to The Signal Daily on Youtube, Apple Podcasts and Spotify.