Moments of Valor and Reflection: The Week That Was

What a week it has been—globally and in India! Among the numerous high-impact events, the most significant, proud, yet deeply concerning, was Operation Sindoor—a name as fantastic as the operation itself—India's swift and decisive response to the terror attack in Pahalgam.

While the very idea of war—loss of lives, devastation, and long-lasting consequences—fills me with worry, I cannot help but feel immense pride in the Indian Armed Forces for their extraordinary execution of this mission, far exceeding expectations.

Adding to this pride was witnessing two remarkable women officers, Colonel Sofia Qureshi of the Indian Army and Wing Commander Vyomika Singh of the Indian Air Force, leading the official press briefing. Their leadership is a testament to the growing strength and representation of women in the Indian Armed Forces, a truly inspiring sight.

As I write this, the border situation remains tense, and the media landscape is flooded with information—much of it unverified or unreliable, unfortunately. In these moments of uncertainty, I turn to reflection and writing, to steady my nerves.

Here’s a roundup of other key events from the week, along with my thoughts on them:

India set to be the 4th largest economy, per IMF

As per the IMF’s April 2025 outlook released this week, India is set to be the 4th largest economy by 2025, marginally overtaking Japan (US$ 4,1870.02 Bn for India vs USD 4,186.43 Bn for Japan). The data also projects India to become the 3rd largest economy in 2028, overtaking Germany. Way to go, India!

Source: IMF

PS – Quite disappointed with the IMF’s additional funding grant to Pak.

From Dialogue to Deal: What the India-UK FTA Means for Businesses

India and UK signed a historic trade agreement earlier this week, eliminating tariffs on 99% of Indian products entering the UK, including clothing and footwear, food products including frozen prawns, jewellery and gems.

This deal has been a long time in the making, with on-off negotiations going on for some three years. However, it seems that tariffs introduced by US President Trump has prompted countries to sign FTAs. Of the ~70 deals signed by the UK, its deal with India is its third biggest after its agreements with Australia and Japan.

India has cut taxes on goods imported from the UK including cosmetics, scotch whisky, gin and soft drinks, higher-value cars, food including lamb, salmon, chocolate and biscuits, medical devices, aerospace, electrical machinery.

India has also requested a Double Contributions Convention agreement which grants a three-year exemption on the social security paid by Indian employees working in the UK, on short-term visas.

Let’s look at some of the sectors impacted by reduced tariffs –

Automotives: Tariffs to drop from 100% to 10%, granting Indian automakers an in-roads in the UK market. Simultaneously, import of high-end UK built luxury cars (like Land Rover, Jaguar, Aston Martin, Bentley, and Rolls-Royce) to get cheaper.

• Auto OEMs: JLR key beneficiary. Miniscule impact on others (Eicher – Royal Enfield, TVS Motors – Norton, and others)

  
  

• Auto Components: According to the Automotive Component Manufacturers Association of India (ACMA), India exported auto parts worth ₹1,590 crore to the UK and imported components worth ₹1,150 crore. Thus, some might say that the Indian auto components industry is expected to benefit from the FTA.

View – We anticipate that the relative pricing compared to alternative sourcing countries, following the duty adjustments, will play a pivotal role in shaping sourcing decisions.

Snapshot below of countries exporting auto parts to the UK alongwith their FTA status:

Source: InCred Research

Alcohol: India has agreed to cut import duties on Scotch, whisky and gin from 150% to 75% with a further reduction to 40% over the next 10 years; meaning that imported spirits will become much cheaper for Indian consumers. Furthermore, India being the world's largest whisky market by volume, presents a significant opportunity for UK producers. The tariff reductions are expected to increase Scotch whisky exports to India by £1 billion over the next five years and create approximately 1,200 jobs in the UK.

• Short-term impact on domestic liquor companies like Radico Khaitan.

  
  

• United Spirits (Diageo) expected to benefit. Johnnie Walker's global recognition, widespread availability, and tiered offerings (Red, Black, Blue) set it apart, maintaining dominance in a rapidly evolving premium whisky landscape.

Gems & Jewellery: Exports were at USD 941 Mn and imports at USD 2.7 Bn in 2024. UK’s current tariffs on Indian gems and jewellery are in the range of 2-4%; the FTA aims to eliminate these to zero. Industry executives project that exports to the UK are expected to reach USD 2.5 Bn within the next two years, marking a more than twofold increase.

Specifically for jewellery, the UK presents a substantial market, with annual imports valued at around USD 3 Bn. Currently, India's share in this market is approximately USD 400 Mn, representing about 15%, implying significant opportunities for expansion. Current jewellery tariffs at 2% may not seem much, however, a 2% cost advantage is substantial, making Indian jewellery more appealing to UK consumers.

• Kalyan Jewellers and Malabar Gold and Diamonds have recently inaugurated new stores in the UK, with other top retailers also preparing to establish a foothold in the country.

The FTA is poised to further accelerate this growth trajectory, solidifying India's position as a leading supplier in the UK jewellery market.

How meaningful is this deal from a bird’s eye standpoint? While India was UK’s 11th largest trading partner, it makes a very small proportion of UK’s trade (see chart below).

Source: BBC News

The India-UK FTA is expected to boost UK’s economy by ~ £4.8bn vs UK’s economy which was worth £2,851bn last year, which some might say is not as meaningful.

View - it is important to note that FTAs bring a multitude of advantages to partnering countries, and we anticipate that India will derive significant benefits from this agreement. This deal also sets a precedent for other such trade deals with more significant trading partners like the EU.

India’s bilateral trade in goods with the EU stood at USD 137.41 Bn in 2023-24, making it India’s largest trading partner for goods (vs India-UK bilateral trade for 2024 estimated at ~USD 61.35 or £42.6 Bn).  Additionally, the bilateral trade in services between India and the EU is estimated at USD 51.45 Bn for 2023. Both India and the EU have said they aim to finalise this by the end of 2025.

China's Monetary Shift: People's Bank Cuts Reserve Requirements

The People’s Bank of China (PBOC), on May 7, 2025, announced a 50 bps cut to the Reserve Requirement Ratio (RRR) and a 10 bps cut to key lending rates, releasing an estimated ¥1 trillion (~USD 138 Bn) of liquidity into the system.

These measures are more reactive than proactive, as China contends with a slowing economy and the looming threat of a trade war with the U.S.

• Clear Signs of Slowing Growth: Indicators such as manufacturing PMIs, retail sales, and rising youth unemployment all point to a decelerating economy. China’s April manufacturing PMI dropped to a 16-month low of 49.0 from 50.5 (vs consensus ests of 49.7). The biggest drop for the month was in the new export orders category (at 44.7 from 49.0). The employment sub-index also eased slightly from 48.2 in March to 47.9 in April.

  

Source: ING

Interest rate cuts are therefore a necessity, not a choice.

• Trade War Pressures: China's actions come in response to escalating U.S. tariffs—now exceeding 100% on key product categories. With exports weakening and foreign capital outflows increasing (record outflows as net FDI dropped by USD 168Bn), Beijing is aiming to boost domestic lending and consumption.

The PBOC is walking a tightrope:

• Rate Cuts Weaken the Yuan: Lower interest rates risk further depreciation of the yuan, potentially accelerating capital outflows.

  
  

• Liquidity Risks Asset Bubbles: Injecting liquidity could stoke speculative bubbles, particularly in real estate and equities.

  
  

• Limited Policy Space Amid Trade Tensions: Easing during a trade war leaves little room for manoeuvre, especially as fiscal tools remain constrained.

What Can One Expect?

• Yuan depreciation pressure in coming weeks.

• Commodities may catch a bid, especially metals and energy, if credit starts flowing to infrastructure.

View – this is more than a shift in monetary policy—it signals a deeper loss of confidence in organic, export-led growth. Beijing is pivoting toward domestic consumption as a recovery strategy, amid increasing global isolation and external headwinds.

Mutual Funds Sahi Hai! – Flows Data Released for April 2025

MF inflows into equity funds fell for the 4th consecutive month in April, reaching their lowest level in a year, amid market volatility triggered by US tariff concerns. Net inflows into equity-oriented funds fell 3.24% month-on-month to INR 242.69 Bn.

Source: Reuters

Large cap funds witnessed a 7.75% increase in inflows, whereas small and midcap inflows fell 3% and 2.2% respectively - signaling preference towards safer bets amid market volatility.

Source: Reuters

While April saw a slight dip, net inflows have remained positive in the last 50 months. Furthermore, SIP contributions reached a record high of INR 266.32 Bn (up 2.7%).

View – Over the past 50 months, net equity inflows have consistently remained positive, reflecting sustained investor confidence in the long-term prospects of the Indian equity markets despite periods of volatility (India Vix chart below). While near-term fluctuations may arise due to India-Pak tensions, investors continue to demonstrate resilience and a focus on long-term growth.

Source: Investing.com

Weekend Recommendations –

For those of you looking to calm your nerves too in the tense times, I strongly recommend only following verified news updates. Or just distract yourself with –

• Mother’s Day Celebration – While the Indian Armed forces remain ready and vigilant to protect Mother India, a little celebration for each of our mothers / motherly figures back home can also help loved ones be at ease in these testing times.

Do things together – cooking meals, watching movies, playing card / board games, dancing!

• Summer Refreshment – The mango malai ice-cream at Naturals is a 10/10. Head to your nearest outlet and thank me later!

• Light-hearted OTT content –

  1. MasterChef Australia – new S17 is out on JioHotstar!

  2. Pysch – an old comedy murder mystery series on JioHotstar!

• Take charge of your fitness! – Brisk walking, jogging, yoga stretches, core workouts are a good starting point for those looking to begin a fitness regime!

Until next time, toodles!