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Good morning. There is no dearth of drama in this country. The monsoon session of parliament closed yesterday with the house in uproar over last-minute legislation that would allow the government to remove elected senior officials who have been arrested over criminal charges. In a country where the average legal case takes between five to 15 years for resolution, removing elected representatives from their posts before they are convicted can be a dangerously undemocratic tool.
In today’s newsletter, we take a look at the other big surprise the government pulled this week: a death knell for online games that involve real money. But first the Russian oil situation, which seems to have divided the world — with India at the centre.
Russian roulette
Is Russian oil the new trade deal? It’s beginning to look that way, if the amount of newsprint dedicated to the subject is anything to go by. Reports suggest New Delhi has now restored its oil procurement from Moscow after a brief dip in July, and placed advance orders for the next two months. Russia’s charge d’affaires Roman Babushkin told the press on Wednesday that oil exports to India are expected to continue at similar levels “despite the political situation”. He also expressed hope of trilateral talks soon between India, China and Russia. Meanwhile, external affairs minister S Jaishankar is in Moscow, urging Russian companies to deepen their engagement with India and seeking solutions to address the trade imbalance between the two countries, since India is now a major importer.
In the US, the narrative continues to be one of punishing India for buying Russian oil, without addressing any of the related contradictions in that position. Earlier this week, White House press secretary Karoline Leavitt called the 25 per cent additional tariff on India “sanctions”, a punitive term usually reserved for states seen by the US as threats or rivals. Peter Navarro, Trump’s trade adviser, accused India of funding Russia’s war in Ukraine in a piece for the FT. His commentary was so bereft of logic it gave me a headache.
The US position does not mention other countries that buy Russian oil, most notably China, the largest customer. Nor does it address Europe’s procurement of Russia’s pipeline gas, or the US’s own purchase of fertilisers and uranium from Russia. To India, this inconsistency in the Trump administration’s stance indicates that the real issue is not the country’s crude oil procurement strategy, but fallout from stalled trade talks and a cooling of personal ties between Prime Minister Narendra Modi and the US president.
For now, India seems to be digging in its heels and pivoting towards China and Russia, to somehow make up the missing numbers from trade with the US. This is a reflection of both the challenges of dealing with Trump’s whimsy as well as the sign of a failed diplomatic strategy by India. (Within India, the government’s stance of not bending to Trump’s wishes is a narrative that has not had as many fans as I thought it would.)
What does the future hold? In the short to medium term, all options are wobbly. Neither China nor Russia are strong allies for India, even if all three countries face a common problem in Trump. India is not going to back down from Russian oil until the terms of a US trade deal are finalised. The additional 25 per cent will hit next Wednesday. For now, both sides are holding firm, waiting for the other to blink first. It’s a fool’s game to pick a winner here.
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Game over
In one fell swoop, the government has threatened the very existence of online games that deal with real money. Both Houses passed a new regulation with a voice vote, and the bill now goes to the president for approval.
In the bill, the government said such games have led to serious social, financial, psychological and public health harms, especially to young people and the financially disadvantaged. The games were linked to unlawful activities including money laundering and financial fraud, and called out for using addictive algorithms and aggressive marketing techniques. The new law targets all parties involved — developers of such games, celebrities and influencers who promote them and financial institutions who process gaming transactions will all face hefty fines and even jail time. The ban also extends to offshore entities, closing a loophole that some developers had used in the past.
Both the sudden emergence of the bill and the tightly worded provisions in it took operators by surprise. Efforts to regulate the industry had until now treated games that required skill differently from those that involved only luck, but the new legislation has done away with this distinction and delegitimised both kinds of games. Several large gaming companies are already in court battling a Rs1.2tn ($14bn) retrospective tax bill. The ban not only questions the fundamental existence of companies such as Dream11, which commands a valuation of $8bn, but also has a network impact on the economy.
The gaming industry itself is expected to expand to $9.2bn by 2029 and is a growing contributor to government coffers. Just last September, finance minister Nirmala Sitharaman was talking about a 422 per cent annual growth in tax collected from online games, which the government will now lose. These companies are also some of the biggest advertisers both online and on television, spending an estimated $2bn a year.
I reached out to a few industry players, who expressed shock about the bill and are weighing next steps, including potentially shifting to an ad-based or subscription revenue model. Operators have also flagged that the new rules will only move the action to the grey market. By the government’s own estimates, some 450mn Indians play these games; at least some of them will find a way to continue despite the law. Some in the industry have lobbied the government by stressing the jobs and tax revenue at stake, but their efforts have been in vain. The sudden regulation is a further blow to what is now becoming a regular bugbear in this newsletter — the ease of doing business. A stable legislative environment is a basic ask, one that has not been provided to these companies.
But, on the user side, the picture is more complex. For the upper classes, who can afford to lose money in these games, the ban is indicative of an ever-expanding nanny state. For the poor, who now have easy access to mobile phones and data plans but may not have the savvy to understand the dynamics of online gambling or the money to pay for it, this law is a necessary protection. My view on the subject differs depending on which of these Indias I am thinking about, and the existence of several Indias is a perennial difficulty for Indian policymakers and commentators alike.
Do you think the government is right in outlawing all games that involve real money? Hit reply or email me at [email protected].
Go figure
HSBC’s flash survey for August showed the highest ever growth in India’s private sector since the survey began in 2005. The index tracks monthly changes in combined output across manufacturing and services. Manufacturing growth and international demand were strong during the month, but it was the service sector that broke records. Here are some key figures from the index.
Read, hear, watch
I watched Outrageous on the BBC Player on Prime Video. It’s an excellent series about the Mitfords, an aristocratic family with six daughters (and a son) who became famous in the 1930s. One sister married the British fascist leader Oswald Mosley, another was an ardent defender of Adolf Hitler. One was a staunch communist, two of them were writers. With endless arguments and fights, as well as balls and dances and hunting parties, the show is Downton Abbey with a generous dose of pre-world war two reality.
I also highly recommend this episode of the London Review of Books podcast, which married my two big loves — books and tennis. Give it a whirl.
Buzzer round
The sales of which product, named after a famous actress, helped this company briefly overtake LVMH to become the world’s most valuable luxury corporation by market valuation earlier this year?
Send your answer to [email protected] and check Tuesday’s newsletter to see if you were the first one to get it right. Note: This question has been edited for clarity.
Quick answer
On Tuesday, we asked you to keep the ethics of it aside for a minute and tell us if the permanent relocation of stray dogs to shelters was a practical solution? Here too, we couldn’t find a consensus. Looks like it’s pretty evenly divided.
Thank you for reading. India Business Briefing is edited by Tee Zhuo. Please send feedback, suggestions (and gossip) to [email protected].
