Trade Deal, Hard Choices

February 13, 2026

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Good Morning. As strong US jobs data and 4.3% unemployment cooled hopes of a Fed rate cut, India made a move of its own in defence. By clearing a deal for 114 Rafales with France, New Delhi has shown a clear preference for French jets over the F-35. US systems come tied to intelligence architecture and operational dependencies, and India appears unwilling to trade strategic autonomy even amid a $500 billion trade framework with Washington.

India’s equity indices ended lower on Thursday. The BSE Sensex closed at 83,674.92, losing 558.72 points or 0.66%. The NSE Nifty50 closed at 25,807.2, losing 146.65 points or 0.57%. 

In other news, India’s top airlines want the government to dilute cabin crew fatigue rules. Meanwhile, information technology giant Tata Consultancy Services (TCS) loses fifth largest market cap position to ICICI Bank.

Jet Deal Shows India Won’t Trade Security For Trade Promises

Sometime in the dim past, good news for the real economy used to cheer the stock market. Those times have disappeared like traditional incandescent lamps. Robust US jobs data for January has sent markets into a chill. Unemployment is a low 4.3%, and the US economy created 130,000 jobs off the farm, higher than for any number in 2025. If the economy is going strong, there is no reason for the Fed to cut rates to boost economic activity and create jobs.

Unlike India’s central bank, the US Fed has a dual mandate: it has to set policy rates bearing in mind price stability and the level of employment. Inflation is still above the Fed’s target level of 2%, so there is no reason to change the policy rate of interest on this count.

Financial markets are awash with liquidity, and changes in liquidity serve as the primary determinant of stock price changes, rather than changes in expected changes in corporate fortunes. In such a circumstance, good economic performance discouraging the need for stimulus supplying rate cuts signals no addition to liquidity and markets stagnate or fall.

The US market is the trend setter for the world, and Indian markets have come down in step with the American stock indices.

Rafale Over F-35

India has cleared the proposal to buy 114 more Rafale fighter aircraft, ahead of French President Macron’s visit to India later this month. This makes it clear that India is not in the market for F35s from the US. 

The simple fact is that US advanced weapons systems are locked into US intelligence systems dependent on US satellites and constantly updated information on the makes and specifications of potential enemy targets. If there is a chance of such intelligence not being shared for whatever reason, having the hardware alone would not be particularly useful. 

India’s agreement to buy $500 billion of US goods over the next five years, as part of the framework agreement for an interim trade deal between India and the US, should not make India scramble for easy options to meet the purchase obligation. The decision to opt for Rafales makes sense in this regard. India has also decided to purchase SCALP cruise missiles, jointly developed by France and Britain.

Soybean Imports Threaten Farmers

India will import soybean oil but not soybeans, it has been clarified, as part of the trade deal with the US. This does not offer great comfort to soybean farmers in India: the major use of soybean is as oilseeds, and if the oil itself is to be imported, the demand for soybean would definitely fall. 

The demand for soybean meal, what remains after the oil is pressed out from the soybeans, will also come down, thanks to the liberalised import of Dried Distillers’ Grains with Solubles, the residue of the fermented mash after it is distilled to take out ethanol. This is considered a protein-rich feed for animals, poultry and fish. The trade deal would, in other words, let those who rear food thrive at the expense of those who grow food.

It has also been clarified that India would strive to import $500 billion worth of goods from the US, rather than commit to importing that volume from the US. This makes the deal look less onerous.

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Rs 28.5

That’s how much it cost to prepare a vegetarian thali at home in January, down 1% year-on-year, bringing the cost of home-cooked meals lower and offering modest relief to household budgets, according to CRISIL Intelligence’s “Roti Rice Rate” report. The cost of a non-vegetarian thali declined 7% to Rs 56.4.

Overview: The veg thali's decline was driven by a sharp drop in onion (27%) and potato (23%) prices, alongside a 14% softening in pulses due to high imports. However, the overall decrease was tempered by a 50% surge in tomato prices.

Setup: Non-vegetarian thalis saw a more pronounced decline, largely due to a 13% drop in broiler prices, which constitute half of the thali's total cost. This downward trend was supported by softened staple vegetable prices, though restricted by a 4% rise in vegetable oil and a 6% hike in LPG cylinder costs.

Fatigue Rules Trigger Concern

India’s top airlines, including IndiGo and Air India, have urged the government to dilute proposed fatigue management rules for cabin crew, warning the measures could disrupt schedules and curb growth, Reuters reported.

Backstory: In a letter to the Directorate General of Civil Aviation (DGCA), the Federation of Indian Airlines (FIA) said the draft norms—issued in October—would raise weekly rest to 48 hours from 36, tighten night duty limits and require single hotel rooms during layovers. The pushback follows IndiGo’s cancellation of about 4,500 flights in December after poor planning linked to new pilot fatigue rules, which drew regulatory scrutiny.

Flashpoint: While the government claims the changes aim to enhance safety, especially following last June’s Air India crash, the FIA argues that the rules exceed global norms and could complicate crew scheduling, strain hotel capacity, and harm competitiveness if not implemented gradually.

Farm Firewall

India has excluded 90-95% of its agricultural tariff lines from the proposed India-US trade agreement, Commerce Minister Piyush Goyal told reporters, signalling that New Delhi will protect its farm sector in the negotiations. 

Setup: Agriculture remains politically sensitive, employs nearly half of India’s workforce, and the government has consistently shielded it from deep tariff cuts in past trade deals, including agreements with Australia and the UAE.

Catch Up Quick: At the same time, the White House revised its fact sheet on bilateral commitments. Earlier, it said India had committed to a $500 billion investment in the US. It now says India “intends” to purchase $500 billion worth of American energy, coal and other goods over time, framing the figure as projected trade rather than a binding pledge.

Code Red In IT

Indian IT stocks deepened losses on Wednesday, with the Nifty IT index falling 5.5% on the day, the steepest drop among the 16 sectoral sub-indexes. The index has declined 12.5% so far in 2026, after losing 12.6% last year. Information technology shares now hover near a 10-month low. ICICI Bank overtook Tata Consultancy Services as the latter’s market-cap fell to below Rs 10 lakh crore, the first time since Dec 2020.

Fast Facts: The selloff intensified after Anthropic unveiled its AI product, Claude Cowork, fuelling concerns that artificial intelligence could automate more complex workplace tasks. Investors fear such tools may weaken demand for traditional outsourcing services, especially in coding and back-office operations where Indian IT firms dominate.

Context: The sector was already under strain from slower US tech spending, cautious client budgets and margin pressure.

New CPI Debuts

India’s retail inflation accelerated to 2.75% in January, marking the first reading under a revised Consumer Price Index (CPI) with a 2024 base year. This new series reflects modern spending habits by slashing the weightage of food and beverages from 45.9% to 36.75%, while nearly doubling the weight of housing to 17.67%.

Flashpoint: Despite the uptick, inflation remains well within RBI’s 2%–6% target band, underpinned by a sharp decline in staples like onions and potatoes, which offset a 64.8% surge in tomato prices and a spike in precious metals.

Context: The index now includes rural house rent for the first time, providing a more high-fidelity view of rural consumption. Economists suggest the new data series will provide operational comfort to the RBI but may not trigger immediate rate changes.

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The IT Fear Wave Bringing Down Markets

On Episode 797 of The Core Report, financial journalist Govindraj Ethiraj talks to Sheetal Sapale, VP Commercial at Pharmarack AWACS as well as Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA.

  • The IT fear wave is spreading and bringing down markets

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  • India’s inflation index has thrown out VCRs and VCDs and brought in new constituents. At 2.75% what does it mean?

  • Why India’s weight loss drug market could explode in a few months

  • Google issues a 100year bond, adding to fears of AI exuberance

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