{"id":43470,"date":"2026-10-09T16:43:58","date_gmt":"2026-10-09T11:13:58","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=43470"},"modified":"2026-10-09T16:44:00","modified_gmt":"2026-10-09T11:14:00","slug":"american-dreams-and-wake-up-calls","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/american-dreams-and-wake-up-calls\/","title":{"rendered":"American Dreams and Wake-up Calls"},"content":{"rendered":"

For an Indian software engineer, an exporter and a family saving for their child\u2019s education at an American university, this week\u2019s headlines carry a common message: access to the United States is becoming harder to take for granted.<\/p>\n

Meanwhile, Elon Musk launched a broadside over the delay in getting a licence in India for his satellite communication company Starlink and finance minister Nirmala Sitharaman admitted that trade talks between India and the US had stalled.<\/p>\n

Together, these developments expose growing friction in a bilateral relationship that businesses and households have built significant expectations around for the past several decades.<\/p>\n

Let\u2019s start with technology jobs. The US has suspended several major companies, including Infosys, Tata Consultancy Services, Wipro, HCL Tech, Cognizant, Microsoft and Adobe, from the Permanent Labor Certification programme, or PERM. It alleged fraud and said new and pending applications involving these firms would not be processed.<\/p>\n

Why is this important? Well, because PERM is a step towards employment-based green cards. The announcement concerns this certification route; it is not a blanket cancellation of existing work visas.<\/p>\n

For Indian IT companies, the potential damage extends beyond paperwork. A credible route to permanent residency helps attract and retain employees in the US. Blocking it could make staffing more difficult, encourage workers to seek other employers and increase dependence on local recruitment. More work might eventually move to India, but that is no automatic windfall: client requirements and the need for on-site teams limit how much can shift. Investors should watch hiring costs, employee retention and management commentary on margins.<\/p>\n

The next development directly affects household finances. The US administration has proposed charging universities $70,000 for a student\u2019s initial participation in Optional Practical Training, with a further $30,000 for subsequent participation. OPT allows international students to gain work experience related to their studies.<\/p>\n

Now, the charge would formally fall on institutions rather than being a universal fee payable by every foreign student. But that distinction offers limited comfort if universities pass on costs or become reluctant to support applications.<\/p>\n

For many Indian families, overseas education involves a calculation: expensive tuition today, followed by dollar earnings that help repay the loan. If post-study employment becomes costlier or less accessible, that calculation changes. Families may reconsider destinations, borrowing amounts or the course itself. Education lenders could also face greater repayment risk if graduates return to Indian salaries with debt accumulated for an American career.<\/p>\n

Add Sitharaman\u2019s statement to these restrictions and it becomes clear that the India-US relationship is struggling to find common ground. Sitharaman said trade negotiations had reached a \u201cplateau\u201d, with further concessions difficult for both sides. Her remarks come even as exporters are already dealing with higher tariffs and an uncertain environment that is making American buyers cautious about placing large orders.<\/p>\n

Then came Musk\u2019s all-out attack. The world\u2019s first trillionaire accused Indian \u201coligarchs\u201d (read Reliance Jio\u2019s Mukesh Ambani and Airtel\u2019s Sunil Bharti Mittal) of blocking Starlink. \u201cIs Ambani the real boss of India?\u201d Musk wrote.<\/p>\n

The Indian government rejected the allegation, saying all three licensed satellite operators were undergoing security assessments and stood broadly at the same regulatory stage.<\/p>\n

The thread connecting these stories is the growing influence of government decisions on commercial opportunity. A company can have willing customers, a student a university admission, and an exporter a competitive product, yet still face barriers that change the economics.<\/p>\n

\"SIP_Kuvera\"<\/b><\/strong><\/p>\n

The RBI\u2019s conundrum<\/strong><\/h3>\n

A quarter percentage point does not sound like much. For borrowers, it means a little more interest. For savers, perhaps a slightly better deposit rate. But the Reserve Bank of India\u2019s latest move carries a bigger message: the comfort of expecting borrowing costs to stay low is beginning to disappear.<\/p>\n

On October 7, the RBI raised the repo rate by 25 basis points to 5.50%, its first increase since February 2023. All six Monetary Policy Committee members supported the hike. A 4-2 majority backed changing the stance from neutral to \u201ccalibrated tightening\u201d. That takes near-term cuts off the table while allowing either further increases or a pause.<\/p>\n

Yet Governor Sanjay Malhotra sounded cautious about how much tightening would follow. The RBI sees inflation risks building, but limited evidence that higher input costs have become entrenched in businesses\u2019 pricing decisions. It also remains guarded about declaring that strong economic activity is generating excessive demand.<\/p>\n

There is a reasonable case for this restraint. Higher interest rates cannot improve rainfall or bring down crude oil prices. They work by making borrowing more expensive, moderating spending and influencing expectations. An unnecessarily large increase could weaken investment and consumption while doing little to fix the original supply problem.<\/p>\n

But supply shocks can spread. Higher transport costs enter food prices; expensive energy raises manufacturing costs; workers seek compensation for lost purchasing power. Monetary policy needs to limit that process before persistent inflation becomes part of everyday financial decisions. Waiting for conclusive evidence carries a cost, too.<\/p>\n

The RBI\u2019s forecasts show why the question matters. It projects inflation at 5.2% for 2026-27, reaching 6% in October-December before easing to 5.7% in January-March. Meanwhile, it raised its growth forecast to 7.1% from 6.7%. That combination suggests room to withdraw monetary support.<\/p>\n

Against that backdrop, 25 basis points looks defensible as an opening move. Its adequacy depends on what follows. If price pressures broaden and the RBI repeatedly postpones action, today\u2019s caution could require larger increases later. Conversely, easing oil prices and improving food supplies could justify a slower approach. The important test is whether policy responds promptly when the evidence changes.<\/p>\n

The rupee adds another complication. Higher US bond yields and a stronger dollar are pulling money towards American assets, while expensive oil is raising India\u2019s import bill. A modest domestic hike cannot neutralise those forces. The quarter-point hike is, therefore, unlikely to reverse capital outflows. For people and households, continued rupee weakness would also make overseas education, travel and imported goods more expensive.<\/p>\n

But will the higher policy rate actually translate into tighter financial conditions? The question is relevant because the banking system currently has surplus liquidity. This can limit the effect of monetary transmission.<\/p>\n

For borrowers with repo-linked floating-rate loans, the increase can feed through at the next reset, raising instalments or extending repayment periods. Deposit rates may improve more gradually, depending on banks\u2019 funding needs.<\/p>\n

Bond investors or debt mutual fund investors face a different adjustment: rising yields reduce existing bond prices, with longer-duration portfolios generally more sensitive. The eventual benefit is the opportunity to reinvest at higher yields.<\/p>\n

For equity investors, earnings will matter alongside interest rates. Strong growth can support revenues, but higher financing costs and expensive inputs can squeeze profits.<\/p>\n

The AI Question<\/strong><\/h3>\n

From policy rates, let us move our focus to the tech sector with Tata Consultancy Services, India\u2019s biggest IT company, reporting its quarterly results this week.<\/p>\n

The results show that Artificial Intelligence is becoming a bigger business for TCS. Whether it is adding to the company\u2019s growth or gradually changing what that growth looks like is a more difficult question to answer.<\/p>\n

TCS\u2019s annualised AI revenue rose to $3.1 billion in the July-September quarter, from $2.6 billion three months earlier, and crossed 10% of its total revenue. Yet overall revenue grew only 0.5% sequentially in constant currency.<\/p>\n

Consolidated revenue rose 11.2% from a year earlier to Rs 73,188 crore, marginally above analysts\u2019 expectations. Net profit rose 15% to Rs 13,884 crore, also slightly ahead of expectations.<\/p>\n

The company signed $9.6 billion of new deals during the quarter, compared with $9.5 billion in the previous quarter and $10 billion a year earlier. Its banking, financial services and insurance business, which accounts for 32.8% of revenue, grew 3.9% from a year earlier in constant currency and 2.5% sequentially.<\/p>\n

AI presents a complicated trade-off for IT services companies. Businesses are spending on automation, modernisation and AI-led transformation, creating new work for technology providers. But AI can also reduce the amount of human effort required for some traditional IT work, putting pressure on the industry\u2019s long-standing billable-hours model.<\/p>\n

TCS\u2019s results show that the new demand is already becoming meaningful. What they do not show is how much of that AI revenue represents additional spending by clients, rather than spending shifting from older forms of IT work.<\/p>\n

That distinction matters because AI is increasingly being embedded into the services TCS already provides. The company is not simply building a separate AI business alongside its traditional operations; it is also using AI to change how existing services are delivered.<\/p>\n

Margins came under pressure as well. TCS reported an operating margin of 24%, compared with 25.2% a year earlier, as higher wages weighed on profitability.<\/p>\n

Infosys, HCLTech, Wipro and Tech Mahindra will report their results in the coming weeks. TCS\u2019s numbers, therefore, offer an early look at how the industry\u2019s shift towards AI is showing up in actual business.<\/p>\n

AI is already generating billions of dollars in annualised revenue. The harder part is understanding how much of that becomes additional growth, and how much changes the nature of work that IT companies have traditionally sold.<\/p>\n

TCS\u2019s September results do not answer that question yet. They show that both forces are present.<\/p>\n

Banking on an Outsider<\/strong><\/h3>\n

HDFC Bank has found its next CEO. The harder question is what he will change.<\/p>\n

Anup Bagchi will take charge of India\u2019s largest private-sector lender on October 27, becoming the first outsider to lead the bank. His appointment ends the uncertainty over who would succeed Sashidhar Jagdishan. It does not, by itself, resolve the questions that have weighed on HDFC Bank since its merger with its former parent.<\/p>\n

Bagchi brings more than three decades of experience across banking, capital markets and insurance. He spent much of his career with the ICICI Group, including as an executive director at ICICI Bank overseeing retail, business and rural banking and later wholesale banking. He also headed ICICI Securities and has been CEO of ICICI Life Insurance since 2023.<\/p>\n

That makes the appointment less about whether Bagchi knows banking and more about what he does with the mandate.<\/p>\n

HDFC Bank’s business is still growing. Deposits rose 18.8% from a year earlier by September-end, while gross advances increased 16.3%. Yet the bank\u2019s shares have lagged peers since its 2023 merger with mortgage lender HDFC Ltd, as investors have continued to assess the effect of the integration on growth and margins. Questions around the bank’s post-merger trajectory have added to investor unease.<\/p>\n

The market\u2019s initial reaction to Bagchi was cautious. The stock fell 2.3% on October 5 after the appointment was announced, despite gaining earlier in the session. It closed at Rs 692.60 on October 8, about 1.7% below its October 5 close. The decline came as Indian equities broadly weakened, with the Nifty falling 1.64% that day.<\/p>\n

That makes the share price less useful as a verdict on the appointment. The more important issue is what investors expect Bagchi to do once he takes over.<\/p>\n

His mandate also comes with a compensation structure that puts part of his potential pay alongside the bank\u2019s performance. HDFC Bank has proposed annual remuneration of about Rs 35.9 crore for Bagchi, comprising fixed and performance-linked pay. A one-time joining award could take his potential first-year compensation to about Rs 43.2 crore. That would make him India\u2019s highest-paid bank CEO. For perspective, his predecessor Jagdishan\u2019s remuneration was Rs 15.13 crore.<\/p>\n

The package gives Bagchi a direct financial interest in the performance of the institution he is being brought in to lead. But the bigger question is what an outsider can change without disrupting what already works.<\/p>\n

Bagchi\u2019s outsider status could give him more freedom to reassess the organisation. But it also means learning a complex institution while deciding how much needs to change and how much needs to be preserved.<\/p>\n

That balance matters because HDFC Bank remains a large and growing lender. The challenge is not simply to change direction, but to determine where the post-merger model needs adjustment and where continuity matters more.<\/p>\n

The appointment removes one uncertainty for HDFC Bank. The more difficult part begins with the performance mandate: turning its scale and growth into better execution, while rebuilding investor confidence.<\/p>\n

That is the reset investors will ultimately be watching.<\/p>\n

\"FD_Kuvera\"<\/p>\n

 <\/p>\n

Market wrap<\/b><\/h3>\n

India\u2019s stock market benchmarks logged modest gains this week, ending an eight-week stretch of declines that was their longest weekly losing streak since 2001.<\/p>\n

The Nifty 50 ended the week 0.4% higher while the BSE Sensex climbed 0.8%. They had dropped 8.7% and 8.4%, respectively, in the last eight weeks. In the broader market, small-caps rose 0.5% and mid-caps inched 0.1% higher.<\/p>\n

Half of the 16 major sectors closed with gains this week. The winners included financials, which rose thanks to robust quarterly business updates, and IT stocks, which overlooked concerns related to US restrictions on foreign workers.<\/p>\n

Apparel retailer Trent was the top performer, surging 13.1% after reporting strong quarterly sales. BSE, which entered the Nifty 50 last week, was the second-highest gainer with 7.9%. Other financial stocks that rose more than 3% included Kotak Mahindra Bank, HDFC Life Insurance, Axis Bank and ICICI Bank.<\/p>\n

FMCG companies ITC, Nestle and Hindustan Unilever also gained. Bharti Airtel, Eternal and auto companies Eicher, Maruti and Tata Motors Passenger Vehicles climbed, too.<\/p>\n

Tata Consultancy Services jumped 3.9% after reporting quarterly results but other IT companies including Infosys, HCL Tech and Tech Mahindra ended in the red.<\/p>\n

Adani Enterprises was the worst Nifty performer and slid 6.5% on concerns asset manager GQG Partners could trim its stake. Max Healthcare, JSW Steel, Hindalco, Bharat Electronics and Cipla were among the other big losers.<\/p>\n

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