This article is an on-site version of the India Business Briefing newsletter. To receive it in your inbox regularly, sign up if you’re a premium subscriber, or upgrade your subscription here.
Good morning. The Indian government has classified the Delhi car explosion as a “terror incident perpetrated by anti-national forces”. The death toll from Monday’s explosion is now 13, according to local media. Tensions in the region are high, with Pakistan on Tuesday accusing India of pursuing “state terrorism” after a suicide car bombing killed at least 12 people outside a judicial complex in its capital Islamabad. India has denied any involvement.
Meanwhile, the talk is that a trade deal with the US will be announced soon. Donald Trump, who is now fighting to control his Maga base after the revelations in the Epstein emails, has indicated this a couple of times this week too. In fact the US president defended the use of H1B visas on Wednesday, saying the US “needs certain talents”. Is the cycle turning?
Results of the polls in Bihar will be out today, and exit polls seem to strongly suggest a third term for Nitish Kumar.
Expense report
It’s that time of the year again, when we hear the first whispers of a phrase that gets India’s businesses and consumers excited: the Union budget. This week, finance minister Nirmala Sitharaman kicked off preparations for next year’s fiscal event with a consultation with leading economists. And that meeting brought forth that other term that should incite excitement, but has of late been rather contentious — capital expenditure.
Experts from private banks and other financial institutions used the meeting with Sitharaman to push for an increase in government capex, which they think will generate employment and improve general economic wellbeing. Government capex is expected to stay around 5 per cent of GDP this fiscal year, Emkay Research estimates, continuing the marginally downward trajectory in the past two years. In her budget in February this year, Sitharaman had increased the allocation of government capex by 10 per cent from last year, earmarking $129bn for these projects.
It is ironic that it is now the private sector that is urging the government to increase spending. In the past few years the finance ministry has been the one demanding that the private sector increase its capex, with Sitharaman using several public appearances to scold industry for this lapse. But the results have been a mixed bag. A significant area of expansion of private capital this year was expected to be in manufacturing for exports, specifically as a “China plus one” strategy for global companies to de-risk their supply chains. But this approach is no longer viable after Trump’s 50 per cent tariffs on India. Even if a deal is announced soon, the damage to investor confidence will take a while to repair.
However, there is some good news on private capex being invested in projects for the domestic market. A report from the Reserve Bank of India projects this to grow by 22 per cent this fiscal year, on the back of the recent interest rate cut and improving economic conditions. Much of this money is being invested in incremental boosts to capacity in renewable energy, roads and other projects.
Capex is one of the most significant factors for India’s economic health. Public capex is especially crucial, with every dollar spent having a multiplier effect of 2.4 to 2.6 times on the economy. The question now is whether private capex will step in so that the government can ease its spending. This week’s meeting suggests it is unlikely. Even if private investment does go up, it is growing from a low base; the government should not take it as a signal that it can take its foot off the pedal early.
Do you think there is enough private capital expenditure now? Hit reply or email me at indiabrief@ft.com
Recommended stories
-
The government is promoting homegrown WhatsApp rivals in a tech nationalism drive.
-
Meta chief AI scientist Yann LeCun is planning to leave and launch his own start-up.
-
Can anything halt the decline of German industry?
-
A leadership row has landed UK Prime Minister Keir Starmer in a political crisis.
-
Your next job interview could be a fantasy simulation.
Road hazard
Indian roads are so dangerous that they account for the highest number of accident-related fatalities in the world. According to data shared by Nitin Gadkari, the minister in charge of road transport and highways, 480,000 accidents took place on Indian roads in 2024, killing 172,000 people. More than 35,000 of these fatalities were pedestrians, while 54,000 deaths were due to lack of helmets and 16,000 were people not wearing seatbelts. Road accidents are the single largest killer of young men aged between 15 and 29, accounting for 20 per cent of all deaths for that age group.
These are grim statistics. What is worse is that there does not seem to be a solution in sight. The minister himself remarked that some of this is because of the poor construction of roads, saying hundreds of deaths were caused because of civil engineering mistakes and pot holes, before adding that he was only responsible for building highways.
The poor quality of roads is also a serious economic problem. India is losing 3 per cent of GDP annually through road accidents, according to Gadkari, although I am not sure how he arrived at this number. Nevertheless, it is safe to say that a poorly designed network of roads riddled with bottlenecks would multiply commute time and result in millions of man-hours lost. During the monsoons, streets are flooded in most Indian cities. Potholed roads are so common across all of India that some of them have now become internet memes.
This administration takes incredible pride in how it has expanded road connectivity across the country. Some 55,000 kilometres of new national highways have been built in the past 11 years, according to government data. But just building roads is not enough — attention has to be paid to how they are engineered and subsequently maintained. If India’s ambition is to be a global economic powerhouse, it has to have high-quality infrastructure as well as valuing human lives. Having the most dangerous road network in the world is a terrible reputation. While it is great that the minister is willing to talk about this in public, his office should also be more proactive in ensuring this is rectified quickly.
What has been your experience of Indian roads? Hit reply or email me at indiabrief@ft.com
Go figure
India’s inflation fell to a record low in October. Here is a look at how the consumer price index performed.
Read, hear, watch
I am making my way through Granta’s autumn edition that is dedicated to India. (Disclosure — the publishers sent me a copy). I really enjoyed the opening piece — a short story by the Kannada writer Vivek Shanbhag (of Ghachar Ghochar fame) translated by Srinath Perur. I am about halfway through the book, and the other pieces have not really blown me away so far.
It’s been a busy couple of weeks in London, but I have managed to watch 10 minutes of Platonic on Apple TV every night. I didn’t care for it much in the beginning, but warmed up to it after the third episode. (I could totally identify with the situation, since I spend quite a bit of time getting up to no good with my platonic
Buzzer round
Which organisation is going to award a “peace prize” next month in Washington? Hint — its main area of expertise in peace negotiations involves yellow and red cards.
Send your answer to indiabrief@ft.com and check Tuesday’s newsletter to see if you were the first one to get it right.
Your view
On Tuesday, I wrote about the government’s desire to create “big banks”, potentially through more mergers and foreign investment. India Brief reader Ajay Doshi had this to say:
“Maybe the first step would be for the state to not get involved in commercial banks. They should privatise completely and then let the market work out what is best for its consumers, whoever and wherever they are. Regulation is necessary, but there should be absolutely no government interference. No favours either.”
(Edited for length and clarity)
Quick answer
On Tuesday we asked if you think India will be able to fix the air pollution problem. Here are the results. Seventy per cent of you don’t think it will. (Also, linking results to last week’s poll on Bihar elections here, since results will be out today.)
Thank you for reading. India Business Briefing is edited by Tee Zhuo. Please send feedback, suggestions (and gossip) to indiabrief@ft.com.