Few people in India may have heard the name of George Friedman. No, we are not talking about the author of the 2005 book on the Indian IT industry ‘The World is Flat’—that was Thomas Friedman. The two Friedmans are not related but, like Thomas, George is also a best-selling author and columnist. And this week, we are looking at a book George published in February 2020, just as the coronavirus pandemic was beginning to wreak havoc across the world.
That book is The Storm Before the Calm: America’s Discord, the Coming Crisis of the 2020s, and the Triumph Beyond. It’s a long title, we know, but stay with us for a minute. In the book, which came out when Donald Trump was in the last year of his first term as US president, George analyses America’s often-turbulent history and talks about socioeconomic and institutional cycles going back over 300 years. He also makes a prediction—the turbulence that America is going through now will shift into a period of calm starting from the presidential election of 2028. Or 2032 at the latest!
Of course, like many predictions, this forecast may also prove untrue. But for now, we need to hold on to that hope and brace for the impact of the storm that reached Indian shores this week.
Starting this Wednesday, the US doubled tariffs on Indian imports to as much as 50% and ratcheted up the rhetoric that India’s purchase of crude oil from Russia was the main reason why Vladimir Putin wasn’t halting the war on Ukraine.
India has, indeed, ramped up Russian crude purchases since Putin invaded Ukraine in 2022. Russia now accounts for nearly 40% of India’s crude imports, up from just 2% before the war began, as Moscow offered a discount to Indian refiners such as Reliance Industries after it was hit by European and American sanctions.
The petroleum sector’s gain is turning out to be a loss for several other industries. US tariffs will severely hit export-oriented companies in sectors such as textiles and garments, leather and footwear, gems and jewellery, auto parts, machinery, and shrimp. However, smartphones, pharmaceuticals and energy are thus far exempt from tariffs.
The US accounted for $10.8 billion of Indian textile shipments last year, or 35% of the total. Similarly, gems and jewellery exporters shipped products worth $10 billion last year to the US, or almost 30% of their global sales. Seafood exports to the US were $2.6 billion last year, with 40% coming from shrimps alone, and auto component exports were $6.6 billion.
More important than these revenue numbers are the thousands of jobs that are now in peril in these industries across cities like the diamond hub Surat, textile hub Tirupur, the shrimp producing region of Andhra Pradesh, and auto parts suppliers’ locations around Pune or the Gurgaon-Manesar belt. These export-oriented companies and their employees don’t have the luxury of hoping for the calm that may come after 2028. They must weather the storm now.
Forge New Ties
There is little doubt that US tariffs will hit several sectors. But what will be their impact on the overall Indian economy?
The finance ministry said this week that the immediate impact of tariffs on exports seemed limited but admitted that the ripple effects on the economy posed challenges that must be addressed.
In its July monthly economic review, the finance ministry said India-US trade negotiations “will be crucial” and that India is pursuing a diversified trade strategy that includes a recent deal with Britain and some European nations. It is also engaging in talks with New Zealand and the European Union to sustain its trade performance.
However, “these initiatives will take time to show results and may not fully address the shortfall in exports to the United States that may arise if the current tariff rates on India persist,” the ministry acknowledged.
The ministry also expressed confidence that a recent sovereign rating upgrade by S&P would reduce borrowing costs for Indian companies and attract higher foreign capital while the planned rationalisation in GST rates would lift consumption.
The GST reform isn’t the only effort the government is making to boost the economy. So, what else is it doing?
For starters, Prime Minister Narendra Modi is heading out to meet the leaders of China, Japan and Russia in an attempt to build closer diplomatic and commercial ties to cushion the impact of US tariffs.
Modi will be going to China after a seven-year gap. He is likely to meet both Chinese President Xi Jinping and Russian President Vladimir Putin during his visit to attend a meeting of Shanghai Cooperation Organisation, a regional security bloc. The visit is significant in light of the tensions between the two countries since a deadly border clash in 2020.
In recent months, however, both countries have been trying to bridge their differences in certain areas. The two countries plan to resume direct flights after a gap of five years and lift trade barriers. China recently agreed to lift curbs on exports of fertilisers and rare earth minerals to India while India is looking to ease scrutiny on Chinese investments.
Modi will also head to Japan to meet Prime Minister Shigeru Ishiba and discuss expanding cooperation between the two countries, particularly in areas such as critical minerals and high-value manufacturing.
Already, Japanese companies have a massive presence in India. From Suzuki, Honda and Toyota in the automobile sector to Sony, Panasonic and Daikin in consumer electronics, many Japanese companies are household names in India. Large conglomerates like Mitsui and Mitsubishi have also been growing their presence in India. And this week, the Reserve Bank of India allowed Sumitomo Mitsui Banking Corp to increase its stake in YES Bank to 24.99% from 20%.
Go Electric
Talking about Japanese companies, Suzuki Motor is finally joining the EV rush in India. Its local unit and India’s biggest carmaker, Maruti Suzuki, this week started commercial production of its mid-sized “e Vitara” SUV at its Gujarat factory.
Why is it important? Well, until now, Maruti’s Japanese parent Suzuki Motor and its compatriots such as Toyota and Honda have been reluctant to launch EVs in India. Instead, they have been focusing on hybrid cars.
This has allowed Indian and Chinese automakers to get the first-mover’s advantage in the EV race. Tata Motors is so far leading this race, with EV versions of its Nexon, Punch, Harrier and Tiago cars and SUVs. Mahindra & Mahindra is catching up fast, with its XUV400, BE6 and XEV 9e models. China’s MG Motors sells ZS, Comet and Windsor EVs in India. Then there is Hyundai, which has launched an EV version of its best-selling SUV Creta.
To be sure, Maruti hasn’t yet announced a timeline to launch the e Vitara in India, where it holds a 40% market share overall. It says the high cost of batteries pushes up costs of EVs for price-conscious Indian consumers.
In fact, Suzuki Motor earlier this year cut its India sales target and scaled back its EV plans. This, despite EV sales growth in India outpacing the overall auto market and the government aiming for a 30% EV share by 2030 from 4.5% currently.
Still, for now, Maruti will focus on exports. Maruti chairman RC Bhargava said the company will export between 50,000 and 100,000 of the EVs a year to begin with.
Maruti already makes 17 models for export to almost 100 countries, including its parent’s home Japan. It will now become Suzuki’s global production hub for electric cars and the Gujarat factory will eventually have a capacity of 1 million units. Suzuki will also invest Rs 70,000 crore in India over the next five to six years.
Clearly, Suzuki is keen to retain its dominance in India’s auto market. That will require it to roll out its EVs for Indian consumers sooner than later.
Equities Vs Bond
Moving on to developments in the world of investing, the tariff tantrum has had a definite impact on stock markets. India’s benchmark stock indexes slipped this week, pulled down partly due to consistent selling by foreign institutional investors, but the fall wasn’t as steep as some might have expected. Here’s the reason why.
FIIs had sold Indian shares heavily in early 2025, with their net sales crossing $13 billion in January and February. This pushed benchmark indexes to one-year lows by early April. But then they resumed buying, with net purchases totalling $4.5 billion during the April-June period. And then changed course again. In July and until August 28, net sales by FIIs in Indian equities have totalled nearly $5.4 billion, or about Rs 46,650 crore, according to NSDL data.
These FIIs outflows have pushed stock markets lower, with benchmark indexes falling about 4% since the start of July. Why hasn’t the market seen a deeper drop? That’s because Indian institutional investors have been buying heavily. Local mutual funds and insurance companies have been net buyers in equities to the tune of about Rs 76,400 crore, thanks to steady inflows from retail investors like you and I, both through SIPs and lumpsum investments.
To be sure, FIIs haven’t ditched India altogether. Instead, they have merely shifted their focus towards another asset class—debt. NSDL data shows FIIs were net buyers of Indian debt to the extent of $1.4 billion each in July and August.
But why are FIIs and local institutional investors moving in opposite directions?
Actually, domestic investors are more excited than foreign investors about the proposed GST reforms that the government unveiled on the Independence Day. The planned reduction in GST rates is likely to lower prices for many goods and services. This will lift consumption and improve corporate earnings.
Foreign investors, on the other hand, have been attracted by an increase in bond yields by about 30-50 basis points across the 10-30-year tenors since early May, according to a research report by HSBC.
Market Wrap
India’s stock market benchmarks fell this week, stretching their losses for a second consecutive month in August as concerns related to US tariffs weighed on investor sentiment.
Both the Sensex and the Nifty 50 lost about 1.8% during the week. For August, the Nifty fell 1.4% while the Sensex declined 1.7%. The indexes had slipped about 3% each in July.
As many as 12 of the 16 major sectoral indexes ended with losses during the month. Public-sector enterprises, pharma, financials and energy stocks were the top laggards in August.
However, the auto index jumped 5.5% in August while the consumption index rose 2.7% on expectations that a proposed cut in the Goods and Services Tax will boost demand. Hero MotoCorp soared 19.4% and Maruti Suzuki climbed 17.3% in August.
Maruti was also the top performer this week, followed by Royal Enfield bike maker Eicher Motors and Hero MotoCorp. ITC and Hindustan Unilever were among the other key gainers. Asian Paints, TCS and Wipro also ended in the green.
Mahindra & Mahindra was the top laggard this week, losing almost 6%. Index heavyweights HDFC Bank and Reliance Industries as well as Adani Enterprises and Apollo Hospitals fell 3-4% each. Shriram Finance, SBI Life, Sun Pharma and PSU stocks NTPC and Power Grid were among the other big losers.
Other Headlines
- India’s industrial production rises 3.5% year-on-year in July versus 1.5% in June.
- Former RBI governor Urjit Patel appointed IMF executive director.
- Samvardhana Motherson to acquire Japanese auto parts firm Yutaka Giken for $184 million.
- A23 challenges ban on online money-based games, moves Karnataka High Court.
- Former Axis Bank deputy MD Rajiv Anand takes charge as CEO of IndusInd Bank.
- Govt extends cotton import duty exemption until December-end amid US tariff pressure.
- TCS forms new AI-focused unit, names insider Amit Kapur as head.
- Apple to hold annual fall event on September 9, likely to launch new iPhones, watches.
- Nayara Energy appoints Teymur Abasguliyev, ex-CFO at Azerbaijani oil firm SOCAR, as new CEO.
- Jakson Engineers to invest over ₹8,000 crore in solar manufacturing plant in Madhya Pradesh.
- Fitch retains India rating at ‘BBB-‘ citing high debt, US tariff risks.
- Online investment platform Groww gets SEBI approval for IPO.
That’s all for this week. Until next week, happy investing!
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