Moment of reckoning in oil markets is at hand

I wrote in an earlier post that the oil markets are under-pricing the risks inherent in the Iran conflict and that a spike in oil prices is not far off.

Even as President Trump weighs the option of another strike on Iran, it appears that the moment of reckoning in oil markets is not far off. Another two or three weeks of the stalemate could push oil prices to over $120 per barrel. And another strike by the US? Well, the bets are truly off.

If that sounds pessimistic, here are two pieces, one by Martin Wolf on the prospects for the oil markets and another by Amos Hochstein on how oil prices can soon impact the US. 

Martin Wolf gives three reasons why we should be worrying:

• The problem is not just the closure of the Strait of Hormuz but the destruction of physical infrastructure in the Gulf countries
• The shortages are not just of crude oil but refined products. The US is a net exporter but it has requirements of imported crude of specific varieties.
• So far the price impact has been muted by the drawdown of stock. But stocks are finite. Moreover, there is not much spare production capacity.

Hochstein presents an interesting fact. Gasoline price has shot up to $4.5 per gallon. The highest level reached so far in the US is $5.02 per barrel which happened in June 2022. Gas prices are poised to rise because, given that jet fuel prices have risen even further, production capacity is being used for jet fuel and not for gasoline! The implications are clear enough:

Energy prices feed into the core consumer price index with a lag of several weeks. The pump pain of May will translate into inflation figures in July and August. The 30-year Treasury yield has risen to the highest level since the financial crisis and the 10-year Treasury yield is already rising. Mortgage costs, corporate borrowing rates and the cost of financing national debt all move with it.

The oil markets are still banking on a swift resolution of the conflict. If that doesn't happen, 'the largest energy shock in history' will wreak havoc on the world economy. 

Vietnam war revisited: the architects knew it was a doomed expedition

Since the Iran conflict is getting branded as another Vietnam, an Economist article on the Vietnam war is worth reading.

In the war, 3 million Vietnamese were killed; over 50,000 American soldiers died. The US failed to overthrow the government of North Vietnam. Instead, it retreated ignominiously as North Vietnam overran South Vietnam and united the two parts.

Why did the US expend so much resources and lives over a decade on the war in Vietnam? The popular view is that the architects of the war- Kennedy, Johnson, McNamara and others- thought victory was attainable and were carried away by hubris.

Not at all, says the author of the article cited above:

America’s decision-makers were hardly experts on Vietnam and its history, but among themselves and behind closed doors they acknowledged that they were entering a deeply challenging environment, in which triumph was far from assured.

The extensive internal record is clear on this score. It shows the private misgivings of senior Washington officials throughout the years of heavy escalation. The sceptics included McNamara himself, and the two presidents he served: John F. Kennedy and Lyndon B. Johnson. From the time then-Congressman Kennedy visited Vietnam in 1951, during the height of the French-Indochina War, until his death in Dallas in 1963, he expressed doubts that Ho Chi Minh’s revolutionary nationalist cause could be subdued by military means. Johnson—who ordered the “Americanisation” of the conflict in 1965, involving the commitment of major ground forces and sustained air power in order to preserve a non-communist South Vietnam—regularly wondered if the struggle could be won, and indeed whether the outcome really mattered.

If that was indeed so, why did these gentlemen embark on the war and pursue it against all odds? The author provides a possible answer:

A key part of the answer is that for both men, maintaining the course, through escalation if necessary, offered the path of least immediate resistance. They and their advisers had offered repeated public affirmations of South Vietnam’s importance to American security, and of the certainty of ultimate success. It made sense that they would be tempted to hang on, in the hope that the new military measures would work. It was about credibility—their nation’s, their party’s, their own. 

Once you sell a story to the public, your best bet is to make the story happen.

We have to wonder: is the same mistake playing out in the Iran conflict now?

India's new private universities: how much of a game changer?

The Economist has an upbeat story  about India's new crop of private universities. But its title - India's pricey universities want to take on the Ivy League- suggests it is getting carried away. The new private universities could, at bestm become India's Ivy League but that's hardly the same as taking on America's.

The new universities- Ashoka, Shiv Nadar, Krea, Jindal, Ahmedabad, to name a few- are funded by businessmen. The Economist writes:

The new crop of private universities set themselves apart in several ways. From the beginning they have sought to excel in research, not just in teaching. Many emphasise humanities and social sciences, says Eldho Mathews, an education researcher in Kerala—which in other Indian institutions are often considered secondary to science-based subjects and also to training for the professions.

Well, the new private universities have distinguished themselves from the general run of public universities. However, other than Ashoka, which has an outstanding undergraduate programme, none remotely approaches the Ivy League in quality. Perhaps they do not even match the rigour and class of the best IITs and IIMs. They have a long way to go.

The Economist sees the new universities as having to deal with sensitivity to research on controversial issues:

A big worry is the Indian government’s intolerance for research or opinion that it finds irksome. Self-censorship is rife in the social sciences in particular, says one academic. Publishing an inconvenient finding can easily “blow up in your face”. Sensitive topics include religious freedom and the state of India’s democracy.

It's not clear that is the biggest problem. One problem certainly is attracting quality faculty. Not many have established a tenure system, whereby security is tenure is assured after a probationary period of the first few years. Nor is the faculty pay particularly attractive except in a few places. The IITs and the IIMs offer not just pay but quality accommodation, job security and substantial funds for research and travel. The new private universities do not uniformly measure up on these counts. The new universities also tend to have a centralised model of leadership, more akin to that of ordinary Indian universities than the IIT and the IIMs.

That the new universities are backed by businessmen does not  a blank cheque. The institutions are expected to meet a substantial portion of their funding requirements through fees and executive training. After the initial bout of funding, the business backers are often reluctant to provide substantial support. The formula for IITs and IIMs has proved unbeatable: 100 acres or so of land, Rs 150 to 200 crore for initial capital expenditure and recurring revenue grants of upwards of Rs 100 crore - for at least ten years.

The new universities will be preferred to the typical Indian college. But Ivy League is miles away.

US has lost the war in Iran- Robert Kagan

Robert Kagan, US columnist and neoconservative, joins the chorus of voices that say that the US has lost the war in Iran.

The US cannot bring about the collapse of the Iran regime without extremely high costs. Kagan spells out these costs and argues that simply walking away seems the best option for Trump:

Unless the U.S. is prepared to engage in a full-scale ground and naval war to remove the current Iranian regime, and then to occupy Iran until a new government can take hold; unless it is prepared to risk the loss of warships convoying tankers through a contested strait; unless it is prepared to accept the devastating long-term damage to the region’s productive capacities likely to result from Iranian retaliation—walking away now could seem like the least bad option.

And walking away from the present situation is certainly defeat:

There will be no return to the status quo ante, no ultimate American triumph that will undo or overcome the harm done. The Strait of Hormuz will not be “open,” as it once was. With control of the strait, Iran emerges as the key player in the region and one of the key players in the world. The roles of China and Russia, as Iran’s allies, are strengthened; the role of the United States, substantially diminished

Far from being toppled or even weakened, the government in Iran is poised to emerge stronger and Iran will be a greater force in the world than in the past:

The power to close or control the flow of ships through the strait is greater and more immediate than the theoretical power of Iran’s nuclear program. This leverage will allow the leaders in Tehran to force nations to lift sanctions and normalize relations or face penalties. Israel will find itself more isolated than ever, as Iran grows richer, rearms, and preserves its options to go nuclear in the future. 

The question is how soon will President Trump bow to the reality and walk away. The longer the wait, the greater is the cost to the world economy.

Who is right about oil prices? The market or analysts?

 

The oil markets have been far more sanguine about the conflict in Iran than analysts. It took weeks for the markets to price oil at $100- and it hasn't venture very far beyond that.

The markets initially reckoned the conflict would end in four to six weeks. They have been proved wrong. What is even more baffling is that the markets seem relatively unruffled even today, some 11 weeks into the conflict. 

Analysts think that if the conflict lasts for another two or three weeks, oil prices will go through the roof. The futures markets don't reflect this. 

We should know soon who is right.

My column in BS, Oil markets wrong on Iran?

Oil markets wrong on Iran?

Despite the biggest oil supply disruption in history, markets remain slow to react

T T RAM MOHAN

There is one great mystery in the Iran conflict: The behaviour of the oil markets. This is said to be the largest disruption in the history of oil markets. Yet the markets have been pricing oil at levels well below what analysts believe the fundamentals warrant. Either the analysts are fools. Or the markets have been hopelessly myopic. We should know in the weeks ahead. 

After the Iran conflict erupted in late February, oil prices stayed well below $100 in the initial days. Experts concluded that the conflict would not last more than four to six weeks. The disruption to the world economy would not be considerable.

The notion that the disruption in oil supplies would cease immediately if the conflict stopped within four weeks or so was absurd. As The Economist (April 30) points out, production at oil wells cannot be switched on in a trice — it takes several weeks for production to return to normal. Tankers that have switched to other routes have to return to the Persian Gulf, again a time-consuming process. Refineries that were out of action for want of crude oil supplies have to be restarted. The disruption in oil supplies was bound to stretch well beyond any cessation of the conflict.  

The oil markets — and the experts who relied on them — were proved wrong. The conflict did not end in four to six weeks. It has stretched to over 10 weeks and is still on. The worry is whether the oil markets are reflecting the Iran situation adequately even now. Analysts do not think so. 

The oil markets’ big failure was not anticipating Iran’s ability and willingness to close the Strait of Hormuz. They seem to have assumed that because this had not happened in the past, it would not happen now. Iran’s leaders had issued very explicit warnings about how the country would retaliate to an American attack. These warnings were not taken seriously by the United States administration or the oil markets. 

The Economist estimates that the closure of the Strait of Hormuz in the last two months has taken out supply equivalent to10 per cent of global consumption over the last two months. Oil prices have been slow to react to a shortfall of this magnitude. In the past, smaller shortfalls in supply had caused much larger increases in oil prices. 

It took nearly three weeks from the outbreak of the conflict for oil prices (Brent crude) to touch $100 per barrel. At the time of writing, it is $112 per barrel. This is the price of a three-month futures contract for July 2026. Thereafter, the market sees the oil price dropping to $104, $99 and $95 in August, September and October respectively. 

What do the oil markets know that analysts don’t? The current oil prices are difficult to square with the supply-demand balance in the oil market. Still less do they square with the status of the conflict between Iran and the US-Israel alliance. Analysts believe that President Donald Trump’s upbeat messaging on the course of the conflict — “we are close to a resolution”, “it will end soon”, and such like — has had much greater effect on the oil markets than is warranted.  If the analysts are right, the world economy could soon be in serious trouble. 

Even at levels the oil prices have seen thus far, the impact on the world economy will be significant. The International Monetary Fund’s World Economic Outlook (April 2026) assumes an average petroleum spot price of $82 per barrel for 2026 in what it calls its “reference” forecast. In this scenario, global growth falls to 3.1 per cent in 2026, from 3.4 per cent in 2024. That is 0.2 percentage points below the IMF’s January forecast before the Iran conflict broke out. This fall does not capture the full magnitude of the impact of the Iran conflict. But for the Iran conflict, the IMF reckons, global growth would have been 3.4 per cent or the same as last year. 

How realistic is the assumption of an average price of $82 per barrel of oil for 2026 as matters stand today? In the first four months of this year, Brent crude has averaged $87. Most analysts believe that if the Strait of Hormuz remains closed for another four weeks, oil prices will shoot up to well above $125, perhaps even touch $150 per barrel. 

If that happens, the prospects for the world economy are truly dire. If oil prices average $100 per barrel, the IMF estimates global growth to drop sharply to 2.5 per cent. At a price of $110 per barrel, growth will drop to 2 per cent, which is close to global recession. 

Despite the conflict, US growth in the reference forecast would be 2.3 per cent in 2026, higher than the 2.1 per cent in 2025. While the world languishes, the US remains relatively unaffected. This may explain its appetite for the conflict in the first place. But it’s not as if the US has not been impacted by the Iran war. Before the war broke out, US growth in 2026 was projected at upwards of 2.5 per cent.

There is an important fact that has got obscured in the revised growth forecasts consequent to the Iran war. The war has impacted the world economy in a way in which Trump tariffs had not. Economists had warned of the folly of US tariffs and the grave consequences that would follow. They have ended up looking foolish. 

Three points are worth highlighting. First, world economic growth was unscathed by the Trump tariffs in 2025 and it was poised to remain unscathed in 2026. Secondly, US growth in 2026, following the tariffs, is projected to be higher than in 2025.

Most dramatically, world trade growth grew by a phenomenal 5.1 per cent in 2025, up from 3.7 per cent in 2024. Expansion in technology-related exports offset slower growth in other categories. China reoriented its exports from the US to Asia and Europe and recorded a new high in goods trade surplus of $1.2 trillion. 

President Trump’s instincts about tariffs have been proved right —they benefited the US economy without harming the world economy. What a pity his instincts have let him down on Iran. 

Migrants head back to villages as LPG price hike bites

 FT reports that migrants have begun to find life unaffordable in cities following the LPG price hike and are heading back to the villages. I must confess I was surprised as I have not seen such a story in the Indian newspapers.  

.......Shreya Ghosh, a labour rights activist from the Centre for Struggling Trade Unions, an umbrella group, estimated the number of departing workers was “in the hundreds of thousands”. “The LPG [liquefied petroleum gas] price rise made life unbearable,” she said. “No one can survive on wages even close to [the monthly minimum of] 11,000 rupees.”

In UP, the government has hiked wages by 21 per cent in order to stave off protests from workers. Industry is upset and says that many units will become unviable as a result.

“A steep rise in minimum wages will render operating costs unsustainable for industries across sectors,” said the Confederation of Indian Industry in a written statement to the state government, which is led by Modi’s party. “This may prompt companies to consider relocating or expanding operations in other cost-competitive states.” 

I have to wonder how the Indian press missed the story. 

Olly Robbins and the Mandelson affair: civil servants and politicians

The Mandelson affairs in the UK threatens to unseat PM Keir Starmer.

Starmer appointed Mandelson, now known to be tainted by his long association with Epstein, as UK's ambassador to the US. Before you get appointed to such a post, you have to go through an elaborate vetting process.

Richard Dearlove tells us why the vetting is so important:

The restricted compartments of the UK’s national security infrastructure are clearly defined and closely controlled. To work across them requires “a developed vetting certificate”. The primary qualification for holding a “DV” is integrity, honesty and transparency in one’s personal and professional life. To lie about or hide potential vulnerabilities is an immediate disqualification. Staff who do not meet the DV requirements for whatever reason are barred from positions that demand DV clearance. There are no grey areas or soft edges.

The role of British ambassador in Washington is one of those posts. It sits across a number of highly classified compartments. It is no ordinary diplomatic job. The extensive security acreage of the special relationship includes, for example, the UK’s nuclear deterrent, the intelligence relationship, the UK-US alliance which ties together the National Security Agency and GCHQ by treaty, and other domains of great sensitivity. The ambassador has access to these even though their need to become involved in them in normal times is limited. The British staff that comes under the ambassador’s authority is extensive and stretches beyond those working in the embassy. The ambassador’s access to the US administration is also usually highly privileged, such is the nature of the special relationship.

Olly Robbins knew that Mandelson had failed the vetting. He did not inform his boss, the Foreign Secretary. PM Starmer thus remained unaware of Mandelson's failing to qualify. The Foreign Office has the right to overrule vetting recommendations. Robbins exercised that right, with all the risks that entailed.

Another significant fact: the PM announced Mandelson's appointment even before he had gone through the vetting process. 

Now, why would a senior civil servant do something as foolish as clearing a candidate who had failed the vetting process?

A report in the Guardian explains the motivation:

Robbins told MPs: “I walked into a situation in which there was already a very, very strong expectation. And you have seen the papers released already under the humble address that’s coming from No 10 that he needed to be in post and in America as quickly as humanly possible. The very first formal communication of this to my predecessor from No 10’s private office being that they wanted all this done at pace and Mandelson in post before [Donald Trump’s] inauguration.”

Asked who in No 10 had applied pressure, he said it was mainly the prime minister’s private office, which is staffed by civil servants. But he added: “I think that the private office would only have been [putting on] this pressure themselves if they were under pressure.”

In other words, Robbins knew that the PM expected him to clear the appointment and he proceeded to do just that.

Nothing novel here.

What Robbins describes is universal: survival and progress in the civil service are contingent on the civil servant reading the mind of the politician and doing the needful. The politician will rarely be explicit about his requirement. The civil servant must have the ability to pick up cues, to anticipate - and to oblige.

By the time the civil servant reaches the top, he's entirely accustomed to such behaviour. 

That raises the question: why would you do all this after reaching the top?

One reason is that if you don't, you will be sidelined in your job. The more important reason is that there are sinecures to look forward to if you cater to the politician's needs: in the UK, a knighthood, an ambassadorship, member of Parliament, etc.

If you ready to hang up your boots after retirement, you can act correctly and conscientiously. But what civil servant would want to retire when there are plums to be had after retirement?

Oil prices above $100 expose a vulnerability in Indian economy

The plunge in the exchange rate of the rupee has come as a rude shock to policy makers and businessmen. The plunge comes at a time when India's economic fundamentals are better than before. 

Despite seemingly sound fundamentals, FIIs are exiting India. Why? For most of 2025, it was because India came to attract Trump tariffs of over 50 per cent including punitive tariffs of 25 per cent for buying oil from Russia. FIIs saw the US administration posture towards India as a negative. That problem was resolved in February 2026. Then in March came the Iran war which pushed oil prices to well over $100 a barrel.

Oil prices of over $100 can push India's current account deficit (CAD) to over 2 per cent. That's a level that policy makers are okay but not foreign investors. India's CAD averaged 0.8 per cent in the last five years. They stayed low, thanks to oil prices staying well below $100 for the most part. 

I argue in my BS article that oil prices rising above $100 expose a vulnerability in the Indian economy.

Iran shock highlights India’s external vulnerability

Managing external risks may require reining in growth ambitions

Going by the revised gross domestic product (GDP) series, the Indian economy grew by 7.2 per cent, 7.1 per cent, and 7.6 per cent in FY 24, FY 25, and FY 26, respectively. This is a truly impressive growth record in an environment marked by the Ukraine conflict, high interest rates in Western economies, and Trump tariffs. have posed serious challenges. 

Even a tariff rate of over 50 per cent on much of India’s exports to the United States could not stop the Indian economy in its stride. With the inflation rate at an extremely benign 3 per cent, it appeared that India was finally set on a 7 per cent growth trajectory even in a difficult global environment. The conflict in Iran, now paused for two weeks, threatens to  undermine these expectations.  

The truly unsettling element in the scenario has been the fall in the exchange rate of the rupee. The fall predates the Iran conflict. The conflict has merely accentuated an underlying trend. The nominal effective exchange rate of the rupee has fallen by 8.5  per and the real effective exchange rate by 8.1per cent in the period from February 2025 to February 2026 (trade-weighted 40 currency basket). The latter is well beyond the Reserve Bank of India’s comfort zone of 5 per cent. 

 A growth rate of over 7 per cent, an inflation rate below 3 per cent and a current account deficit of 0.8 per cent scarcely justify a fall of this order. The fall has to do entirely with capital flows. There was a net foreign portfolio investment (FPI) outflow of ~1.52 trillion in FY26. These are the highest FII outflows ever in any given year. They exceed the outflows of ~1.22 trillion in the Covid-impacted year of 2021-22.  

In 2021-22, the growth outlook was nowhere as positive as it is today. The inflation rate was running at 5.5 per cent. The banking system was under considerable stress. The flight of FII funds was entirely understandable. Why would FIIs want to exit an economy growing at over 7 per cent, with inflation at 3 per cent and banking system indicators that are highly favourable?

The outflows are perceived to have happened on account of the punitive tariffs imposed on India by the Trump administration. FIIs were said to perceive the US administration’s stance towards India as a big negative for the economy. It was a risk factor that argued against staying exposed to India.

The tariff issue was resolved with the Indo-US interim trade agreement in February 2026. In the same month came the judgment of the US Supreme Court striking down the Trump administration’s tariff regime. For the present, India, like everybody else, is subject to tariffs of 10 per cent on its exports to the US.  It cannot be that the tariff factor is material to the exchange rate of the rupee any more. 

The material factor is the war in Iran. It has changed the outlook far more drastically than the Trump tariffs had done. The impact on growth and inflation are still manageable. Several agencies now project India’s growth at 6.5-7 per cent or even 6 per cent, down from 7 per cent earlier.   Inflation is projected at 4.5 to 5 per cent, which is within the RBI’s inflation band. Neither projection is scary.

It is the current account position that is seriously impacted by higher oil prices. Analysts see the current account deficit (CAD) going up to 1.8 per cent of GDP if oil prices remain at $85 per barrel throughout the year. That is what the RBI has assumed for FY 27 in its April Monetary Policy Report. If oil prices are above $100, the CAD could be higher than 2 per cent.  

That does change the perspective drastically for foreign investors. India’s policy makers have always believed that a CAD of up to 2.5 per cent is manageable. What investors will focus on, however, is a significant worsening in relation to the past five years. When FIIs see CAD increasing steeply from an average of 0.8 per cent of GDP in the past five years to around 2 per cent, expectations of a depreciation in the rupee are inevitable. As FIIs head for the exit to protect their returns, these expectations will prove self-fulfilling. 

It is clear that improvements in the fundamentals of the Indian economy in recent years have concealed an important vulnerability:  The impact of oil prices above $100 a barrel on the current account deficit. This vulnerability was not noticed because world prices have stayed below $ 100 for most of the past five years, except for about four months in 2022 after the Ukraine conflict erupted. They have stayed below $80 over the past two years.  

The conviction in the markets has been that oil prices will stay in the mid-60s under President Donald Trump. The rise in oil prices to well over $100 a barrel  over the past month has upset all calculations.  No surprise that, until the announcement of the ceasefire in Iran, the downward pressure on the rupee seemed relentless.   

There is not much the government can do about the prices of oil and related products. It can at best focus on ensuring supply and cushioning the price impact on consumers. So far, it has done a good job on both counts. 

As for the exchange rate, intervention by the RBI can only manage the fall in the rupee, it cannot prevent it. If the ceasefire does not last and oil prices stay elevated for a long period, the RBI may  have little choice but to increase the policy rate. The cumulative reduction in the RBI’s policy rate of 125 basis points since February 2025 is now beginning to look somewhat imprudent. With the economy growing at around  7 per cent, it may have been wiser  to have exercised restraint , given the enormous uncertainties in the international environment ever since President Trump assumed office in January 2025. 

 There is an important lesson here for policymakers. If we are to effectively manage risks in the economy, if stability is not to be compromised, it is necessary to rein in aspirations for GDP growth. In a troubled global environment, a growth rate of close to 7 per cent is not something to be sniffed at. Macroeconomic policies that seek to accelerate the growth rate at the current level of savings and investment expose the economy to avoidable risk.

Dhurandhar makes news in The Economist; FT zooms in on Bollywood films

The Economist has taken note of Dhurandhar. It sees the move is propaganda for PM Modi. It explains what has driven the movie's success:

Two emotions have driven the films’ record-smashing success. One is sheer exhilaration at the stylised ultraviolence set to a sweat-soaked soundtrack. The other is a sense of catharsis. A country that cannot pull off an assassination in Canada—Canada!—without getting rumbled is in “Dhurandhar” capable of retribution that makes Mossad look like LARPing teenagers. The trailer for “The Revenge” starts with a Pakistani terrorist telling the Indian spymaster that “Hindus are a very cowardly people”. The film spends four hours proving him wrong.

But ultimately the movie is a hit because it reflects a world that many Indians think is real:

The loudest cheers came when the screen lit up with news footage of Mr Modi, the bravest Hindu of all. But to dismiss “Dhurandhar” as propaganda is to miss something important. It did not become a monster hit by trying to convince viewers of an alternate reality. Its genius is to reflect the world many Indians, browbeaten by years of shrill pro-Modi messaging on TV news and social media, already believe to be real

The FT focuses on Bollywood. It portrays an industry that is struggling, with a movie such as Dhurandhar offering hope of a way out. 

One executive says the industry is “on a ventilator”. Cinema attendance last year fell 6 per cent from 2024 levels to 832mn, the lowest in a decade barring the pandemic years, according to Ormax Media, a consulting firm tracking India’s entertainment sector. While box office receipts have recently edged back, helped by rising ticket prices and a smash-hit thriller that heaps praise on Prime Minister Narendra Modi, insiders and analysts say Bollywood is a shadow of its former self.

 ....One top producer who has worked with many of Bollywood’s top actors says the combination of cultural drift and waning star power is a deadly one. “If you’re bankrupt on creativity, then the only thing you’re banking on is stars,” he says. “Nobody’s coming to the movie theatre to watch a star any more.” This, he adds, is a major reason why several international studios abandoned their attempts to enter the Indian industry.

There are some hopeful signs of late:

 As last year drew to a close, a violent spy thriller named Dhurandhar (Stalwart) started gaining traction at the box office, offering the industry some hope. Built around some real incidents, the film features a swashbuckling Indian spy in Pakistan and heaps glory on India’s current national security adviser and Modi. By January, despite a run time of well over three hours, it had become one of India’s largest-grossing movies ever, earning over $140mn. 

.......Despite a fall in the number of cinemagoers year on year, Indian films made $1.45bn from ticket sales in 2025, up from $1.32bn in 2024, Ormax Media said in a report in January, “underscoring the continued dependence of the box office on rising average ticket prices in recent years”.  India’s total moviegoing audience, meaning the number of people who go to the cinema — often for repeat visits — rather than total ticket sales, has been stuck at about 150mn to 160mn for nearly a decade, according to Ormax.  But streaming platforms appear to have lost some of their initial charm when it comes to watching films. That has fed into the prices they and TV channels are willing to pay to buy rights for films, which was down 10 per cent in 2024, according to a report by EY. “Streaming has reached a point where audiences are no longer enamoured by it like they were when it came, because initially there was a sense that this is so different and so new,” Ormax’s Kapoor says.

IRGC navy chief was an expert in aysmmetrical warfare

 The IRGC naval chief, Ali Reza Tangsiri, who was reportedly killed in an Israeli strike was an expert in asymmetrical naval warfare.

The Guardian pays an unusual obit :

According to the US Treasury, which sanctioned him in 2019 and in 2023, Tangsiri oversaw the IRGC Navy’s testing of cruise missiles and sat on the board of a company that developed armed drones. Both weapons could now be used to maintain the current blockade of the strait.

A third weapon strongly supported by Tangsiri was fast boats – light, manoeuvrable craft that can threaten civilian shipping but also, he hoped, evade the defence systems of modern warships.

Last week, Tangsiri dared the US to launch a ground assault on Kharg Island, Iran’s principal hub for oil exports, pointing out the effect such a move would have on oil prices. On Monday, said in a media post that Iran had “prepared the graves of child-killing aggressors”.

Iran seems to have nurtured a crop of extremely talented military leaders. The talent pool is so wide that the killing of those at the helm is little cause for concern- they seem to get replaced by younger, even more highly motivated leaders. 

That should be a real worry for the US and Israel. 

Trump tariffs are here to stay- Navarro

The US administration has been going out of its way to emphasise that the Supreme Court judgement striking down tariffs imposed by President Trump changes nothing. Tariffs will stay- and the trade deals done so far, including the one with India (done but not signed), will remain.

If anybody has doubts on this score, the article in FT by Peter Navarro should dispel these.  Navarro notes that the SC only struck down tariffs imposed under the International Economic Emergency Powers Act (IEPPA). It doesn't question the President's powers to impose tariffs using a variety of other laws.

The court did not declare tariffs unconstitutional. It did not strike down section 232 of the Trade Expansion Act. It did not invalidate section 301 of the Trade Act. It did not question the use of sections 122, 201 or 338. It did not revive the “nondelegation” doctrine. And only three justices relied on the “major-questions” doctrine, meaning the court created no sweeping precedent limiting presidential trade authority.  

In fact, even as the court struck down the IEEPA tariffs, it acknowledged that the president retains broad and powerful authority under numerous other statutes to impose tariffs.

......  Moreover, by narrowing the legal dispute in this case to the IEEPA alone, the court clarified the legal landscape. The authority under those other statutes is not in doubt. It is written clearly into law. That clarity will significantly strengthen the president’s tariff hand. 

The message is clear. President Trump will not back off from the tariff regime. Trump himself has clarified that the SC verdict will not change outcomes. He said at a press conference:

The India deal is on. All the deals are on, we're just going to do it a different way. 

And on Truth Social, President Trump posted:

Any Country that wants to 'play games' with the ridiculous supreme court decision, especially those that have 'Ripped Off' the U.S.A. for years, and even decades, will be met with a much higher Tariff, and worse, than that which they just recently agreed to. Buyer beware."

Indo-US trade deal: India's problem is not the current account but the capital account

Much of the analysis of the Indo-US trade deal centres on what India has gained or lost in terms of trade. But the point about the deal is not that it improves our export prospects while opening up selectively to American goods. 

It is that the deal improves the prospects for capital inflows, FDI and FII. These inflows have been distinctly unsatisfactory consequent to the US's imposing additional tariff of 50 per cent on Indian exports (barring a few specified items).

Foreign investors do not view favourably any emerging market towards which the US administration is ill disposed. That would have meant a downward pressure on the rupee indefinitely. Any further fall in the rupee had the potential to destabilise the Indian growth story. The rupee exchange rate rising to around Rs 90 from Rs 92 or so before the deal was announced is an indicator of how the attitude of the US towards India matters.

More in my BS article, Indo- US trade deal is not just about trade

Indo-US trade deal is not just about trade

The deal shifts the US posture towards India from hostile to neutral, and that matters for growth

T T Ram Mohan

The India-US trade deal, for which a framework for an interim agreement has been agreed, will not lack critics. The Congress party has called it a surrender. A farmers’ organisation has called for protests. Many will pore over the fine print once the details are finalised and argue that the deal is more favourable to the United States.

We need to be clear about a couple of things.

First, any nation negotiating a trade deal with the Trump administration must expect the deal to be tipped in favour of the US. President Donald Trump has made it clear that his priority is to reset America’s economic equations with the rest of the world. He is determined to use the economic and military might of the US to do so.  

For the entire post-War period until recently, the US was happy to let the advantage lie with many of its trade partners. It believed that it was economically strong enough to do so. Sharing prosperity with partners, the US believed, would make for world peace and it would also keep the world safe from communism. 

Not any more. Mr Trump rode to power in 2016 by insisting that the time had come to reorder trade relationships to the benefit of the US.  He didn’t quite manage to do so, partly because his initiatives were scuttled by Washington establishment status quoists in his Cabinet. In his second term, Mr Trump is determined not to make that mistake.  He has filled his administration with loyalists who will faithfully execute his orders. 

Last July, Mr Trump reiterated his perception of where matters stand. He said in a post, “The United States of America has been ripped off on TRADE (and MILITARY!), by friend and foe, alike, for DECADES. It has come at a cost of TRILLIONS OF DOLLARS, and it is just not sustainable any longer - And never was!” In any trade deal, therefore, it will be Advantage US.

Second, we must be clear that the overall relationship with the US is contingent on arriving at a trade deal that America approves. Not doing a trade deal means courting US hostility across the board. In negotiating a trade deal with the US, every nation faces a choice: Does it want the US to be a friend or a foe? 

Mr Trump’s trade deal with the European Union is an excellent illustration of the two points made above. For the EU, the issue was not just access to the vast American market. It was also American support to Europe in the Ukraine conflict, including the supply of critical weaponry and intelligence and America’s involvement in the North Atlantic Treaty Organization (Nato) itself. Faced with the prospect of jeopardising its defence relationship with the US, the EU settled for terms that were widely seen as humiliating.

The EU now faces a baseline 15 per cent tariff on its exports to the US. In addition, steel, aluminium and copper exports from the EU will face a 50 per cent tariff. Car exports would be subject to a quota.  The EU has also agreed to buy an additional $750 billion in US energy products over the next three years and make investments worth $600 billion in the US by 2029. The EU, for its part, will eliminate tariffs on imports of all US industrial goods and provide preferential access to a wide range of US seafood and agricultural products.  A more abject surrender is hard to visualise. Mr Trump has likewise signed deals with the UK, Japan and South Korea — all close allies of the US —that are conspicuously one-sided.  

The lesson for India is that the Indo-US trade deal is not just about access to the US market. India has weathered Mr Trump’s 50 per cent tariff on Indian exports much better than expected. India’s total exports are up 4.4 per cent year on year despite Trump’s tariffs. Nor have exports to the US suffered — they are up 9.8 per cent in April-December 2025.

The problem for India is that capital flows are flagging. This is happening at a time when India’s current account deficit of 1.3 per cent of gross domestic product (GDP) compares favourably with that of a range of countries, including Canada, the United Kingdom and Australia, as the latest Economic Survey notes. India had no difficulty financing current account deficits of a much higher magnitude in the post-reform era. Today, we are hard-pressed for capital inflows, and the rupee is under pressure despite a highly favourable set of economic indicators. That is not something to be treated lightly.

Gross foreign direct investment (FDI) fell marginally by 2 per cent in calendar year 2024. This may be in line with the general decline in FDI flows in recent years but it does not help us at all. At the same time, outward FDI from India as well as repatriation of profits by foreign firms in India have increased sharply. As a result, net FDI in April-November 2025 was a mere $5.6 billion. The bigger problem at the moment is with foreign portfolio inflows (FPI). It was (-)$3.9 billion in April-December 2026.  

There could be many reasons why FPI inflows have turned negative. You can be pretty sure, however, that the orientation of the US administration towards India is an important factor. When India is subject to a punitive tariff regime by the US, fund managers are unlikely to view India as a good place to invest in. The Treasury department houses individuals, including the Treasury Secretary, with strong links to Wall Street. They are known to work the phone lines with fund managers on a range of matters. 

Absent a trade deal, therefore,  we must reckon with rough weather in respect of capital flows, however good our macroeconomic indicators. (Using the future tense, as in the original version, because the deal is not finalised yet- TTR . And who knows, services exports to the US will not be subject  to punitive action as well? Also at risk are  defence collaboration, technology transfers and the entire strategic partnership that has been built over the past two decades. Thus, India’s strong economic performance in the present year is  no assurance that it can be sustained in the absence of an Indo-US trade deal. 

The point about the Indo-US trade deal is not that it involves compromises, such as cutting back on oil imports from Russia or scaling up imports of goods from the US to $100 billion annually for the next five years. It is also not just about getting a tariff rate of 18 per cent, one that is lower than that of many of our competitors. The substantive point is that it moves the US posture towards India from hostile to neutral. That is good news for the Indian economy.

 

Marco Rubio at Munich: the West versus the rest?

US Secretary of State Marco Rubio's impassioned speech at the Munich security conference a few days ago lays out very clearly what the US thinks is wrong with the world and how it thinks it should be set right.

Rubio highlighted the three principal mistakes the West made in the post- War era.

First mistake: free trade

.....we embraced a dogmatic vision of free and unfettered trade, even as some nations protected their economies and subsidized their companies to systematically undercut ours – shuttering our plants, resulting in large parts of our societies being deindustrialized, shipping millions of working and middle-class jobs overseas, and handing control of our critical supply chains to both adversaries and rivals. 

Second mistake: climate change thesis

To appease a climate cult, we have imposed energy policies on ourselves that are impoverishing our people, even as our competitors exploit oil and coal and natural gas and anything else – not just to power their economies, but to use as leverage against our own. 

Third mistake: opening the doors to immigration:

And in a pursuit of a world without borders, we opened our doors to an unprecedented wave of mass migration that threatens the cohesion of our societies, the continuity of our culture, and the future of our people. 

How to set the world right? Europe must follow America's lead in asserting the primacy of Western civilisation over the rest of the world. The centuries of colonialism before the WW2 were the era of Western greatness and it's time for the West to put aside the post-WW2 order in order to reclaim that dominance:

For five centuries, before the end of the Second World War, the West had been expanding – its missionaries, its pilgrims, its soldiers, its explorers pouring out from its shores to cross oceans, settle new continents, build vast empires extending out across the globe. 

But in 1945, for the first time since the age of Columbus, it was contracting.  Europe was in ruins.  Half of it lived behind an Iron Curtain and the rest looked like it would soon follow.  The great Western empires had entered into terminal decline, accelerated by godless communist revolutions and by anti-colonial uprisings that would transform the world and drape the red hammer and sickle across vast swaths of the map in the years to come. 

Against that backdrop, then, as now, many came to believe that the West’s age of dominance had come to an end and that our future was destined to be a faint and feeble echo of our past.  But together, our predecessors recognized that decline was a choice, and it was a choice they refused to make.  This is what we did together once before, and this is what President Trump and the United States want to do again now, together with you. 

The troubling question for Europe is what the new colonial enterprise means for them. In the old days of colonialism, Europe called the shots. The partnership that Rubio now advocates is one in  which the US will hold the upper hand. As we have seen, all trade agreements the US has signed so far are tipped in favour of the US. And the US  expects Europe to defer to the US in matters that the US thinks are vital to itself, such as Greenland.

Many Europeans may well think that this order, unlike the earlier colonial era, is one in which they are at the receiving end of colonialism! 

Indo-US trade deal: some preliminary thoughts

It's a trade deal, not an agreement. The broad contours have been agreed between PM Modi and President Trump. Now the details have to be filled in.

Trump made a number of claims in his post on Truth Social:

• India will stop buying Russian oil
• American exports to India will be subject to zero tariffs and there will be no non-tariff barriers
• India will buy $500 bn of American goods

None of the above appears likely.

India will scale down purchases of Russian oil but will not scrap oil purchases altogether- the relationship with Russia is too deep and too valuable for India to attempt such a radical step.

Zero tariffs on all American exports are also a pipe-dream. Some exports, particularly agricultural exports, will face tariffs. No government will survive if it allows agricultural products to come in freely.

India imports about $40 bn worth of goods and $83 bn of goods plus services, so $500 bn appears way out- unless spread out over several years. Even if India steps up oil and defence purchases, $500 bn appears distant.

The tariff of 18 per cent is slightly lower than that for competitors such as Vietnam but that in itself is not going to confer great advantage. All trade is linked to FDI- and unless US FDI rises considerably, we are not going to see any great increase in Indian exports.

But for India the deal is not really about pushing exports. Overall exports have not suffered in FY 26- despite US tariffs, exports are 4.4 per cent up over the previous year. Indian exports to the US in the aggregate have not suffered either, thanks to electronic and pharma exports that are not subject to tariffs. Gems and jewellery, apparel have taken some hit, though, but these sectors have not suffered as much as feared, partly because of support from the government to cushion the impact of Trump tariffs.

For India, the deal is about capital flows, FDI and FII and the impact on the rupee. The rupee has bounced back from Rs 92.04 to around Rs 90.28 after the deal was announced. The deal certainly brings stability to the rupee. 

The deal is also about the overall strategic relationship with the US, including defence supplies and an understanding on containing China in the Indo-Pacific. We do not wish to be an ally of the US but nor do we wish to be seen as a foe. Commentators have noted that trust will take a long, long time to restore but the trade deal is a good start.