The 2026 Reality Check

Good Morning. As 2026 approaches, the hype around artificial intelligence (AI) is running into hard revenue realities. However, AI will likely only get more robust. Trump's tariffs could disappear, but India’s growth story has to reckon with realities like weak demand and rural distress. What will really shape growth, and what will be the risks in 2026?

India’s benchmark indices ended flat on Thursday. The BSE Sensex closed at 84,482, losing 78 points or 0.09% lower. The NSE Nifty50 closed at 25,815.55, 3 points or or 0.01% lower.

In other news, the landmark nuclear energy bill has been cleared by the Parliament. Meanwhile, India’s largest airline, IndiGo, faces a probe.

Trump’s Tariff Exit, AI Hype And India’s Growth Test: What Will 2026 Look Like?

Earlier this month, Sam Altman of OpenAI declared Code Red at the company: the latest version of its chatbot was underperforming Google’s latest offering, Gemini 3. That panic had one simple explanation: he believes AI to be yet another technology service in which the winner takes all. As a pure AI company without any other revenue stream, OpenAI cannot afford not to be the winner. The alternative is to lose all. Code Red, indeed.

Google, Microsoft, Meta, Amazon and even X have all alternate revenue streams to sustain themselves, even as their AI model struggles to find their feet. Not OpenAI. It must show sufficient revenue and sufficient revenue growth to justify its steep valuation.

The logic applies even more strongly in the case of all second-rung AI companies, including Anthropic and Perplexity. France’s Mistral AI could gain, however, from European revulsion against Trump’s America and American tech. Chinese AI would continue to thrive, as would China’s high-end semiconductor industry.

AI will manifest its abilities as a technology and its fragility as an outsized expectation of the stock markets in 2026.

AI applications would become more robust next year, as compared to now, enhancing productivity, but not enough to displace workers altogether. People who are trained only in specific skills, and did not use their formal years in education to enhance their general intelligence could struggle, however.

Growth Without Demand?

The 25% slab of Trump Tariffs levied on India for flouting sanctions on Russian oil would likely disappear, along with the sanctions against Russia. The Indian economy should get a boost from the removal. However, the extremely low rise in food prices that underpin inflation figures in the 0.25%-1.75% range suggests stagnant, if not falling, farm incomes, depressing all rural incomes. 

Combined with the cutbacks in employment guarantee outlays, thanks to the scrapping of the demand-driven MGNREGA scheme, demand would struggle to meet the rosy projections underlying the seven per cent-plus growth rate for India in 2026. 

If the government had kept its Budget promise to come out with Public Private Partnership policies for infrastructure sectors, there would have been some hope. Growth would come from statistical revisions, rather than economic activity on the ground.

Elections are due next year in Kerala, Tamil Nadu, Puducherry, Assam and West Bengal. The hectic electioneering would create some additional demand in 2026, whoever wins. But that would not push up gross fixed capital formation in the economy to create sustained growth.

Climate change will worsen. Delhiites would continue to choke and writhe in the final three months of the year, as they privilege the joy of filling the skies with smoke from Diwali crackers over the health of their own lungs and the developing brains of their young.

What else does 2026 hold for the world? 

Regulatory Heat On IndiGo

The Competition Commission of India (CCI) has decided to initiate an enquiry into IndiGo after receiving a complaint from an informant following recent flight disruptions. In a brief statement, the antitrust watchdog said it has taken cognisance of information filed against the airline in connection with widespread operational disruptions across multiple routes.

Fast Facts: Based on its preliminary assessment, the Commission said it will proceed further under the Competition Act, 2002. As per the process, the CCI will first conduct a preliminary inquiry and may subsequently ask its Director General to carry out a formal investigation. IndiGo cancelled thousands of flights from December 3 after pilot shortages triggered by the implementation of new FDTL rules.

Flashpoint: Meanwhile, in a video message, IndiGo CEO Pieter Elbers told employees that the “worst is behind us,” saying operations have begun stabilising, with 2,200 flights restored on Thursday after a “very challenging” fortnight.

G RAM G Passed

The Lok Sabha on Thursday passed a bill replacing the 20-year-old MGNREGA with the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G), guaranteeing rural jobs for 125 days a year. The legislation cleared the House amid strong protests from the Opposition.

The Lead: Rural Development Minister Shivraj Singh Chouhan said the government was upholding Mahatma Gandhi’s ideals through schemes like PM Awas Yojana, Ujjwala Yojana, Swachh Bharat Mission and Ayushman Bharat.

Setup: Opposition members protested the removal of Gandhi’s name, tearing copies of the bill and flinging them toward the chair. Despite the uproar, the Lok Sabha passed the bill by voice vote, and the Speaker adjourned the House.

India Opens Nuclear Doors

The Parliament also cleared the nuclear energy bill, with the Rajya Sabha approving legislation aimed at opening India’s tightly controlled civil nuclear sector to private participation. The Upper House passed the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill by a voice vote, a day after it was cleared by the Lok Sabha.

Setting: Minister of State for the Department of Atomic Energy Jitendra Singh said nuclear power offers a reliable 24x7 electricity source, unlike other renewable options. He also stressed that the bill would not dilute safety safeguards.

Overview: Addressing concerns during the debate, Singh sought to allay fears over radiation risks, saying there has been no reported radiation-related hazard to the public so far.

Atmanirbhar, With China

India has streamlined its business visa rules to make it easier for foreign engineers and technicians, including Chinese professionals, to work in the country, according to a statement by the Department for Promotion of Industry and Internal Trade (DPIIT).

Pivot: Previously, think-tank Observer Research Foundation (ORF) estimated that Indian electronics manufacturers importing critical equipment from China lost about $15 billion over four years, as tougher visa scrutiny delayed factory installation and commissioning. The easing of visa rules comes as India pushes to scale up manufacturing while grappling with shortages of specialised technical skills.

Context: India sharply restricted Chinese visas after a deadly military clash along the Himalayan border in 2020, which strained bilateral ties. The move follows Prime Minister Narendra Modi’s visit to China earlier this year, his first in seven years, where both sides discussed steps to stabilise relations.

✍️ Zinal Dedhia, Kudrat Wadhwa, Shubhangi Bhatia | ✂️ Rohini Chatterji | 🎧 Joshua Thomas

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