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good morning. This is Robin Harding, the Asian editor of FT, who enjoys the break she deserves while standing in Veena. The downside is that I am deeply ignorant of India, so I will miss Veena’s wisdom. But what’s more questionable is that I am deeply ignorant of India, so I can at least provide an outsider’s perspective.
The crackdown on household credit is clearly a key reason for India’s slow growth recently, with FT having released a big piece. But first, that moment: where is the Indian opportunity for Donald Trump’s tariffs on China?
iPhone or vacuum flask?
Currently, China’s exports to the US face 125% “mutual” tariffs, while India is exempt for 90 days along with everyone else. For now, smartphones, semiconductors and other high-tech products are also excluded along with drugs. This is an amazing moment. The world’s largest manufacturers flock to the world’s largest market, so how can India turn the situation into advantages?
A good place to start is this excellent FT infographic, indicating that it relies on imports from China due to industry and market size. The best sector to suggest is when the US is heavily dependent on China and the supply chain is not that complicated. This throws products like vacuum flasks, celebration supplies, and various low-end appliances, but spends some time playing around with the data yourself. Hundreds of small factories are produced in China for the US market, many of which are foreign-owned, and now they are considering whether or not to relocate. India should aim to become their most attractive alternative.
Of course, chasing large, well-known industries like smartphones, semiconductors, and computer manufacturing is fascinating, but I think there’s a reason to be careful. First, tariff exemptions will increase China’s comparative advantage in these sectors if it continues. Look at it like this. Many Chinese labor will be available to companies hit by tariffs, reducing costs in exempt sectors. India has made some advances in attracting Apple’s supply chains, and while US tariffs are an opportunity to build on that progress, it took Chinese industry decades to reach current levels of refinement.
Rather, it is all a smaller, less attractive industry and can be obtained. Yes, their value added may be low, but it was easy to relocate at footless and they were already getting prices from China, even before the tariffs.
Frankly, when I talk to manufacturers they say Vietnam is China’s preferred alternative, but if I’m an Indian authorities I’ll give free tours to business owners (US, Chinese, etc.) looking to set up in the local economic zone. Would you like to introduce some subsidies to cover your relocation? This is a once-in-a-lifetime opportunity and you will pay any fees many times.
Is it a good strategy targeting China’s lower end of exports to the US? Hit a reply or write to us at indiabrief@ft.com
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Household debt ≠ economic growth
The crackdown on Indian Reserve Bank’s crackdown on unsecured lending is clearly one of the major factors behind the slowdown in India’s economic growth rate over the past 12 months or so, and my colleagues Chris Kay and Krishn Kausik have harsh stories of Loan Shark harassing debtors in yesterday’s great big read. However, India’s household debt ratio is a modest 39% compared to 64% in China and up to 100% in some developed economies. I think so.
Household debt is not very correlated with wealth. According to the IMF, Australia is 110% of GDP. The best economic evidence suggests that increasing it will move forward in time at the expense of long-term economic growth. For example, the bank’s International Village Bank estimates that a 1% point increase in the household debt to GDP ratio tends to fall by 0.1% point over the long term.
It makes sense intuitively. Simple credits tend to support consumption rather than inhaling investments, imports, and once households run out of their borrowing capacity, they need to stick to repayment and cut back. By deregulating this part of the economy, there is no easy victory. The RBI appears to have a solid grasp of the issue and hopes they don’t want to relax by pursuing the consumption boom.
Go to the diagram
The size of the Indian economy will soon overtake Japan’s economy. . . But that’s not the case yet.
$438.9 billion
Japan’s 2025 GDP
$427.2 billion
India’s 2025 GDP
2026
India’s GDP is projected to surpass Japan’s GDP
My Mantra
“I always measure productivity by how happy my clients are with the advice I am giving. It’s not their appearance, it’s their emotions.”
Devarajan Nambakam, India Investment Banking, Goldman Sachs
Every week, we invite successful business leaders to teach us the mantras of work and life. Want to know what your boss is thinking? Reply to indiabrief@ft.com and nominate
Simple questions
Donald Trump has pledged tariffs on drugs next month or two months. But will he move on? Join our polls.
Buzzer round
On Friday, we asked: Which of the world’s best-selling spirit brands, along with fame behind the scenes of TV drama and pop music?
The answer is. . . It rides K waves on the shelves of cocktail bars and supermarkets around Korea, Seoju, Jinro, and around the world.
Yaman Sinhania came in second and Lu Ying did that right, but Anirudha Dutta was quick again with the correct answer. Congratulations to everyone.
Thank you for reading. Indian Business Briefing is compiled by Tee Zhuo. Send feedback, suggestions (and gossip) to indiabrief@ft.com.
