The European Union (EU) and India have recently agreed to a trade deal which includes an MOU to allow “an uncapped mobility for Indian students”, according to officials, allowing Indians greater ease to travel, study and work across EU states. India's largest and most valuable export to the world is its people who last year sent $135 billion in remittances to their home country. Going by the numbers, the Indian economy is a tiny fraction of the European Union economy. Indians make up 17.8% of the world population but contribute only 3.3% of the global GDP. The European Union, on the other hand, has just 5.6% of the global population and produces 17.8% of the world's economic output.
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If finally signed and implemented, this "uncapped mobility" for Indians will probably become the most significant part of the deal. “More than 800,000 Indians are living and actively contributing to the countries of the European Union", according to Indian Prime Minister Narendra Modi. The two sides welcomed the conclusion of the India‑EU Comprehensive Framework of Cooperation on Mobility, in line with the national competences of EU Member States and India and domestic legislation of both parties. They applauded the launch of the first pilot European Legal Gateway Office, as a one‑stop hub to provide information and support the movement of workers, starting with the ICT sector. |
Indians are currently the seventh-largest migrant group in Germany. Just the talk of "uncapped mobility" from India will trigger a backlash across Europe where far-right parties opposed to all immigration are gaining popularity. There have been high-profile hate incidents against Indians in several European countries recently. While the rise of the AfD (Alternative for Germany) has increased hatred against Indian migrants, the arrival of the far-right in the mainstream political system in Germany has also started a conversation on racism that otherwise would have been swept under the rug.
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| EU-India Migration Agreement Tweeted by Modi |
Undaunted by the anti-immigrant sentiments, the Indian government has quietly signed labor mobility agreements with at least 20 countries over the past half-dozen years — in Europe and Asia, including the Persian Gulf — all with developed economies and most without much history of hiring Indian workers, according to the New York Times. Arnab Bhattacharya, the chief executive of the "Global Access to Talent From India Foundation" think tank, estimates that India could double its current export of 700,000 workers a year to 1.5 million by 2030. His country, he told the NY Times, “has a workforce that should be servicing the world and not just India.” Their real aim is to deal with the ongoing unemployment crisis in India.
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| EU-India Migration Agreement Tweeted by Modi |
Indian economy is not generating enough jobs for the nation's growing working age population. Corporate profits of Indian firms are growing at a much slower pace than the 8.2% GDP growth in its most recent quarter. Net income for Nifty 50 Index firms likely rose 1.1% in the three months through Dec. 31 from a year earlier, according to analyst estimates compiled by Bloomberg. That would be the slowest pace in five quarters, weighed down by deteriorating margins for banks. Falling profits and declining currency are causing foreign capital to flee Indian markets. Foreign Portfolio Investors (FPIs) pulled out over $20 billion from Indian equities in 2025, marking a severe, sustained withdrawal that has continued into 2026. Net Foreign Direct Investment (FDI) has seen consecutive monthly outflows, including $1.67 billion in October and $446 million in November 2025. Investment banker Ruchir Sharma wrote about it in a Financial Times op ed titled "India needs to import more capital and export fewer workers". Ruchir wrote: "Most strikingly, corporate revenue normally grows (or shrinks) with the economy — in any country. But last year corporate revenue growth for listed companies in India decelerated to barely half the GDP growth rate"
Related Links:
Independent Economists Expose Modi's Fake GDP
India's Unemployment Crisis
Top One Percent: Are Hindus the New Jews in America?
Growing Share of Working Age Population in Pakistan
Pakistan Scientific Output is World's Fastest Growing
India's "Great Brain Drain" Accelerating
Digital Pakistan 2022
Pakistan's Large and Growing Civil Nuclear Program
Riaz Haq's Youtube Channel
Imagine for a moment that this is a Pakistan-EU trade deal. Imagine that it has a provision for "uncapped" mass immigration of Pakistani students and workers to EU countries. Then this would be a fairy tale about Pakistan's burgeoning youth population, reaping of demographic dividend, economic prosperity through remittances and so on.
ReplyDeleteBut this is India. So I understand the story on India-EU trade deal should be about India's economic stagnation, the abysmally low per-capita GDP and incomes, the falling Rupee, brain drain, lack of jobs, falling profits for companies, foreign capital fleeing Indian markets, right-wing backlash against Indian immigrants in the West etc etc.
Never mind that Pakistan fares worse in most or all of these.
Vineeth, just wondering if you pass the same/similar comments on in Indian media when they post negative news about Pakistan.
DeleteG. Ali
@Vineeth 🤣🤣🤣 but unlikely to happen in Riaz's lifetime
DeleteG Ali,
DeleteThe only Indian English language media I used to read regularly was "The Hindu". After that got paywalled years ago I have since been mostly reading local Malayalam language media outlets for national and regional news, and international media outlets for international news. For news from Pakistan I mostly used to read DAWN. Malayalam language media here don't cover news from Pakistan that much, so there isn't much of an opportunity for me there to comment about India-Pakistan matters. But I do remember posting comments about the loss of Indian jets in Operation Sindoor and the exaggerated official narratives around that skirmish.
Does that answer your question?
Vineeth, a simple Yes or No would be enough to answer my original question.
DeleteG. Ali
G Ali,
DeleteI have already answered your question.
Regards.
AI Overview
ReplyDeleteThe 2026 EU-India trade deal, hailed as a "mother of all deals," faces significant opposition within the European Parliament, driven by concerns over lack of worker rights, environmental protections, and lingering protectionism in India. Despite reducing Indian tariffs on autos and wine, critics fear the deal harms local producers without securing sufficient sustainable development guarantees.
Opposition Highlights: Some MEPs and industry groups (like Eurofer) criticize the deal for imbalances, citing India's protectionist procurement policies.
Key Issues: The agreement lacks strong provisions on workers' rights and social protection, which angers key sections of the European Parliament.
Strategic Context: The deal was accelerated as a geopolitical counterweight to U.S. tariffs and to reduce reliance on China, making it sensitive to political shifts within the EU.
Ratification Hurdles: While aimed for 2027 implementation, the deal must pass approval from the European Parliament and all member states, where similar agreements (like Mercosur) have recently stalled.
While the deal strengthens trade in automobiles and machinery, opposition remains regarding whether it truly creates a fair, rules-based partnership or simply prioritizes geopolitics over European standards.
ReplyDeleteauspill
@aus_pill
India’s ruling BJP party leadership have said they want a strong diaspora, using existing influential ones as their model. This influence, combined with remittances and staving off a youth unemployment crisis is why they’re aggressive about putting migration pacts in trade deals.
https://x.com/aus_pill/status/2016720162016411752?s=20
Ajay Kamath
ReplyDelete@ajay43
The INR has fallen 6% against the Pakistani rupee over the past few weeks. It has literally collapsed against the Euro. Not one policy maker has an explanation, not one media outlet is asking questions, and
@iam_juhi
and
@SrBachchan
aren’t making jokes
https://x.com/ajay43/status/2016795856419357022?s=20
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sahil bhadviya
@sahilbhadviya
INR is not just falling against USD. It is falling against all major currencies. A euro trip is now 20% more expensive in last 1 yr. UK trip is 12%-14% expensive.. this is crazy. I fail to understand what is happening.
https://x.com/sahilbhadviya/status/2016772489519779916?s=20
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Pakistan becomes latest Asian country to introduce checks for deadly Nipah virus | Reuters
https://www.reuters.com/business/healthcare-pharmaceuticals/pakistan-becomes-latest-asian-country-introduce-checks-deadly-nipah-virus-2026-01-29/
Summary
India confirmed two infections in late December
India says no outbreak, no need for screening at its airports
A number of Asian nations have tightened screening
Nipah has high mortality rate but not easily transmitted
LAHORE/HANOI/HYDERABAD, Jan 29 (Reuters) - Authorities in Pakistan have ordered enhanced screening of people entering the country for signs of infections of the deadly Nipah virus after India confirmed two cases, adding to the number of Asian countries stepping up controls.
Thailand, Singapore, Hong Kong, Malaysia, Indonesia and Vietnam have also tightened screening at airports. But an Indian official said there were no plans to introduce screening at the country's airports and said there was no sign of any outbreak.
The Nipah virus can cause fever and brain inflammation and has a high mortality rate. There is also no vaccine. But transmission from person to person is not easy and typically requires prolonged contact with an infected individual.
PAKISTAN SEEKS TRANSIT HISTORY
"It has become imperative to strengthen preventative and surveillance measures at Pakistan's borders," the Border Health Services department said in a statement.
"All travelers shall undergo thermal screening and clinical assessment at the Point of Entry," which includes seaports, land borders and airports, the department added.
The agency said travellers would need to provide transit history for the preceding 21-day period to check whether they had been through "Nipah-affected or high-risk regions".
There are no direct flights between Pakistan and India and travel between them is extremely limited, particularly since their worst fighting in decades erupted last May.
In Hanoi, the Vietnamese capital's health department on Wednesday also ordered the screening of incoming passengers at Noi Bai airport, particularly those arriving from India and the eastern state of West Bengal, where the two health workers were confirmed to have the virus in late December.
Passengers will be checked with body temperature scanners.
"This allows for timely isolation, epidemiological investigation," the department said in a statement.
That follows measures by authorities in Ho Chi Minh City, Vietnam's largest city, who said they had tightened health controls at international border crossings.
NO OUTBREAK, NO WORRY, SAYS INDIA
India's health ministry said this week that authorities have identified and traced 196 contacts linked to the two cases with none showing symptoms and all testing negative for the virus.
The two infected people are health workers, with the male patient doing well and likely to be discharged from hospital soon, while the female patient remains critical and under treatment, the chief district medical officer in the eastern Indian state of West Bengal told Reuters on Thursday.
Indian health authorities have repeatedly sought to reassure people that the infection has been contained and that there is no reason to fear an outbreak. Federal health authorities also said there was no need to screen passengers at Indian airports.
If you look at this development beyond the India-Pakistan animosity prism, it is about time and that goes for any economy not US. While you can’t completely de-couple from the US, you have to de-risk and put more eggs in other baskets of the world.
ReplyDeleteYou mentioned racism in Germany, but Indians haven't been the focus of Afd. Their focus is largely regugees from mostly ME and African countries. Remember, Germany is the most popular country for aspiring refugees. This is changing though now, with current govt. following a very harsh route (to appease and win back Afd voters).
ReplyDeleteIndians just like any other S. Asians largely face "everyday racism" (I suspect this is no different in France or Italy). ie, you could get ill treated in a restaurant or be berated by your colleagues based on skin color. This has to be read together with more assertive actions to emphasise diversity by govt. agencies. Ultimately, Indians will never choose Germany like they chose Canada/US or UK due to high barriers such as language, lack of social mobility for immigrants etc.
Interesting:
ReplyDeleteThis is not an economy; it is a feudal estate with a digital gloss. The celebrated GDP growth rate, often near 7%, is driven almost entirely by the consumption and investment of this microscopic elite and the sectors that serve them: high-end services, luxury goods and speculative finance. It is a closed-loop circuit of prosperity.
https://asiatimes.com/2026/01/the-fast-growth-mirage-of-modinomics/
Sólionath
ReplyDelete@Anarseldain
Modi is an ethnic nationalist and the explicit goal of his party is to send millions of indians to the first world so that they can secure funding and policy influence for india, citing zionism as an example.
https://x.com/Anarseldain/status/2016887094464172457?s=20
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Polish Connection
@PoleConnection
Outcomes of the India EU deal, retweeted by Modi
https://x.com/PoleConnection/status/2016384034662679026?s=20
------------------
Narendra Modi
@narendramodi
These outcomes reinforce our commitment to further strengthening the partnership between India and the European Union.
https://x.com/narendramodi/status/2016149408027693258?s=20
Sushant Singh
ReplyDelete@SushantSin
This is nominal wage growth. Real wage growth is actually negative under the Modi govt. How can that lead to increased consumption which is what would drive private investment?
https://x.com/SushantSin/status/2016724428952858854?s=20
India’s consumption story has a wage growth problem | Business News - The Indian Express
https://indianexpress.com/article/business/india-consumption-story-has-a-wage-growth-problem-10499910/
While one-off tax cuts can boost consumption in the short term, sustained increase in household demand requires wages to grow at a healthy clip.
The year 2025-26 has been about supporting household consumption. First, the Union Budget presented last year lowered income tax rates under the new regime. Then, in September, the long-awaited rationalisation of the Goods and Services Tax (GST) was finally announced. Now, with the Union Budget for 2026-27 around the corner, it is expected that segments other than the consumer will be the focus.
But it is worth examining if consumption – even after the two supportive measures of the last one year – is indeed doing well. The problem is that there is no clear answer.
Yes, demand for consumer durables rose in the aftermath of the GST rate cuts, with vehicle sales increasing significantly, in particular as households took advantage of lower prices. According to credit bureau TransUnion CIBIL, demand for consumer durable loans was incrementally higher by around one-and-a-half times in the 20-day festival window between Dussehra and Diwali compared to the previous year. This, the firm said last month, was
- "The INR has fallen 6% against the Pakistani rupee over the past few weeks. It has literally collapsed against the Euro. Not one policy maker has an explanation, not one media outlet is asking questions.."
ReplyDelete- "INR is not just falling against USD. It is falling against all major currencies. A euro trip is now 20% more expensive in last 1 yr. UK trip is 12%-14% expensive.. this is crazy. I fail to understand what is happening."
The people who wrote these are either clueless about how the global economy works and how the valuations of currencies are inter-linked, or their comments are driven by other motivations. A fall in the value of Indian Rupee against USD will have a knock-on effect on its value against other currencies as well including Euro and even the Pakistani Rupee.
Remember that when the Pakistani Rupee was steeply devalued against the US Dollar a few years back its value against the Indian Rupee fell as well, despite India-Pakistan trade being miniscule.
For example, 1 INR = 1.55 PKR in 2016. Due to the sharp decline of PKR vs USD in the succeeding years the exchange rate became 1 INR = 3.69 PKR in Sep 2023. After the fall of INR vs USD after Trump's tariffs, the exchange rate is now 1 INR = 3.06 PKR. Similarly, 1 PKR = 113 EUR in early 2016. In Sep 2023 it was 1 PKR = 328 EUR.
Would it make any sense then in wondering why the value of PKR fell against EUR or INR after it was devalued against USD?
So there isn't anything surprising here. If the value of INR falls against USD, its value against other currencies would decline as well. As other economic analysts have pointed out, this is the direct effect of Trump's tariffs which has badly hit Indian exports to US, with the result that there are fewer Dollars coming in while the demand for USD remains high to pay for India's imports. If there are fewer Dollars, importers would try to buy more Euros instead which would result in the fall of Indian Rupee against Euro as well. In effect, its essentially the demand-supply dynamics that determines the valuations of currencies.
The Economic Survey 2025-26 projects India's nominal GDP to expand to ₹357.14 lakh crore in FY26, up from ₹330.68 lakh crore in FY25, representing an 8% growth rate. This projection highlights continued economic expansion with a 7.4% real GDP growth estimate for the same period.
ReplyDeleteAt 92 to a US$, ₹357.14 lakh crore converts to $3.9 trillion, while Modi govt clams well above $4.1 trillion.
https://www.youtube.com/live/UtF6aUpqSbs?si=5xbN-_woHq-jKs-Z
- "At 92 to a US$, ₹357.14 lakh crore converts to $3.9 trillion, while Modi govt clams well above $4.1 trillion."
ReplyDeleteThey would have calculated it based on the INR 85 = 1 USD rate for Jul 2025 after the slide began. Not unreasonable if they expect the current fall to be temporary and that a trade deal with US to eventually take the exchange rate of the US Dollar back to that level. The sudden collapse of the exchange rate of the Rupee from 85 to 92 happened in just the last 6 months and the reason is pretty obvious.
And as I noted in another comment yesterday (not yet published) about the sales data of two-wheelers in India and Pakistan for CY 2025, the real size of the Indian economy would be very likely in the $4.1 trillion range IF Pakistan's is indeed $410 billion. I do not see any other reason why India should be selling 11 times as many two-wheelers as Pakistan if its economy weren't as large in proportion, since the prices of the popular commuter motorcycles in India and Pakistan are mostly on par. The much wider disparity in car sales - 22 times - is likely to due to relatively higher prices of cars in Pakistan.
Automobile ownership is a poor indicator of GDP in South Asia given that both India and Pakistan are among the least motorized countries in the world.
ReplyDeletehttps://www.visualcapitalist.com/vehicles-per-capita-by-country/
Pakistan steps up EU trade engagement as India deal raises export fears
ReplyDeletehttps://www.arabnews.com/node/2631187/pakistan
Deputy PM chairs inter-ministerial meeting, calls GSP+ “crucial” for growth
Move follows India–EU trade pact that industry warns could hit exports, jobs
ISLAMABAD: Pakistan’s Deputy Prime Minister and Foreign Minister Mohammad Ishaq Dar on Friday chaired a high-level inter-ministerial meeting to review and strengthen trade and economic relations with the European Union, as Islamabad scrambles to safeguard market access following India’s new trade deal with the bloc.
The meeting is part of a broader diplomatic and policy push this week after India and the EU confirmed a free trade agreement granting Indian exporters sweeping tariff-free access to Europe — a development Pakistani exporters and analysts warn could erode Pakistan’s competitiveness, particularly in textiles, its largest export sector.
The EU is Pakistan’s second-largest export market, accounting for about $9 billion in annual shipments, mostly textiles and apparel. Industry leaders have warned that India’s tariff-free access could undercut Pakistan’s long-standing advantage under the EU’s Generalized Scheme of Preferences Plus (GSP+), which allows duty-free access in return for commitments on labor rights, human rights and governance.
At Friday’s meeting, Dar emphasized the centrality of GSP+ to Pakistan’s trade strategy with Europe.
“He emphasized that GSP Plus remains a crucial framework for mutually beneficial trade and underlined the need to maximize its potential for Pakistan’s economic growth,” the Foreign Office said in a statement.
Dar also stressed the importance of enhancing trade cooperation with the EU and exploring new avenues for economic engagement, as Pakistan assesses how to respond to shifting trade dynamics in Europe.
The inter-ministerial huddle follows a series of rapid consultations this week, including a meeting between Prime Minister Shehbaz Sharif and the EU’s ambassador to Pakistan, as well as briefings by trade bodies to Finance Minister Muhammad Aurangzeb on the potential impact of the India–EU agreement.
Exporters have warned that unless Pakistan lowers production costs, particularly energy tariffs, and secures continued preferential access, the country could face declining market share in Europe and job losses across its labor-intensive textile sector.
Pakistan’s Foreign Office has said Islamabad is aware of the India–EU agreement and continues to view its trade relationship with the EU as mutually beneficial, but officials acknowledge that the new deal has intensified pressure to defend Pakistan’s position within the bloc.
- "Automobile ownership is a poor indicator of GDP in South Asia given that both India and Pakistan are among the least motorized countries in the world."
ReplyDeleteIndeed the per-capita ownership of motor vehicles are quite low in India and Pakistan compared to many smaller developing economies, but that doesn't mean these numbers (and especially their visible disparity) are irrelevant as an economic indicator.
I'm sure you would agree that unlike the case of developed economies where motorcycling is more of a pastime or lifetsyle choice they constitute a vital mode of mobility for middle classes in India and Pakistan - particularly so for those among its lower middle classes who cannot afford a car. As a result, these sales numbers and their relative disparity do reveal some economic facts - especially the relative sizes of the middle classes of the two countries and their relative disposable incomes.
For one, we know that India's population is 5-6 times that of Pakistan. From what I could see the prices of the popular commuter motorcycles like the popular Honda CD70 or the Pridor in the Pakistani market are on the same ballpark as a Hero HF Deluxe or Splendor in India. Had India's per-capita GDP and income (or atleast those of its middle classes) were on the same level as Pakistan's we would have seen two-wheeler sales in India clocking only at around 5-6 times that of Pakistan's. But the actual difference we see here is on the order of 10-12. What explains this if not the higher average incomes for India (or the Indian middle class) vis-a-vis Pakistan's?
If you think is there is an alternate explanation for the disparity in numbers I would be interested to hear it. Is there some other reason why Pakistan's middle class would buy fewer two-wheelers on a per-capita basis than India? From what I see they aren't buying more cars to compensate for this (sales of cars in Pakistan is 22 times lower than India's), and it doesn't seem to be the case that Pakistan's public transportation infrastructure is better developed than India's either.
- "Pakistan steps up EU trade engagement as India deal raises export fears"
ReplyDeleteSo, its not the uncapped mass exodus of Indians to EU that should be worrying Pakistanis about the India-EU trade deal but the potential loss of that market. But never mind. As long as Dear Donald doesn't change his mind about India, Pakistanis have the US market all to themselves.
ReplyDeleteVineeth: “ If you think is there is an alternate explanation for the disparity in numbers I would be interested to hear it”
The only thing that comes to mind is that Indians are willing to take on a lot more debt than Pakistanis. Currently, the household debt in India is 41% of GDP vs 2% of GDP in Pakistan.
https://www.imf.org/external/datamapper/HH_LS@GDD/GBR/USA/IND/BGD/CHN/PAK/IDN/RUS
—————
When easy EMIs (Equated Monthly Installment) become a trap: 85% of struggling borrowers spend over 40% of their income often to predatory lenders - The Economic Times
Mumbai: India's household debt rose to 41.3% of gross domestic product at the end of March 2025, extending a steady increase above its five-year average, as b ..
Read more at:
https://economictimes.indiatimes.com/news/economy/finance/indias-household-debt-seen-above-5-yr-average-but-lower-than-chinas/articleshow/126281475.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
- "The only thing that comes to mind is that Indians are willing to take on a lot more debt than Pakistanis."
ReplyDeleteSo the only explanation you could think of for these numbers is that Indians love taking debt by buying more motorcycles per-capita than Pakistanis, and not that - just maybe - Indians do indeed have a higher per-capita income in proportion to the advertised size of the two economies?
Well, I rest my case. :)
Vineeth: “ - just maybe - Indians do indeed have a higher per-capita income in proportion to the advertised size of the two economies?”
ReplyDeleteIs that why 85% of Indian borrowers are struggling to pay it back?
AI Overview
Real wages in India have experienced a period of stagnation or decline over the past decade, driven by inflation outpacing nominal wage growth, particularly for salaried professionals and rural workers. Despite GDP growth, the purchasing power of many workers has not improved, leading to a "silent crisis" in consumption. This trend is attributed to structural issues, including a shift towards lower-quality, insecure, or informal employment, which has hindered broader economic prosperity.
https://www.indiatoday.in/interactive/photo-essay/the-great-indian-salary-crisis-middle-class-unemployment-job-loss-268-04-07-2025#:~:text=%E2%80%9CIndia's%2520salaried%2520professionals%2520have%2520experienced,That's%2520no%2520longer%2520the%2520case.%E2%80%9D
——-
When easy EMIs (Equated Monthly Installment) become a trap: 85% of struggling borrowers spend over 40% of their income often to predatory lenders - The Economic Times
Mumbai: India's household debt rose to 41.3% of gross domestic product at the end of March 2025, extending a steady increase above its five-year average, as b ..
Read more at:
https://economictimes.indiatimes.com/news/economy/finance/indias-household-debt-seen-above-5-yr-average-but-lower-than-chinas/articleshow/126281475.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
- "Is that why 85% of Indian borrowers are struggling to pay it back?"
ReplyDeleteHow easy it is to misread a headline! Please take a closer look at the article.
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When easy EMIs become a trap: 85% of struggling borrowers spend over 40% of their income often to predatory lenders
https://www.google.com/amp/s/m.economictimes.com/wealth/borrow/when-easy-emis-become-a-trap-85-of-struggling-borrowers-spend-over-40-of-their-income-often-to-predatory-lenders/amp_articleshow/126523169.cms
"The survey conducted by an expert panel, a unit of Eresolution Consultancy, that specializes in cases related to loan defaults, cheque bouncing, and harassment by recovery agents covering 10,000 financially distressed borrowers across India between June and December 2025, reveals 85% of struggling borrowers are forced to pay more than 40% of their monthly income toward EMIs."
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Nowhere does it say that "85% of Indian borrowers" are struggling to pay back their loans. What it clearly says is that a survey of 10,000 "financially distressed" borrowers revealed that 85% of those "struggling borrowers" (i.e. 85% out of those 10,000) are forced to pay 40% of their monthly pay towards EMIs.
Secondly, if you read that India Today article you quoted, you would see it is talking of the relatively affluent, white-collar salaried professionals living in metro cities like Delhi, Chennai, Ahmedabad, Bangalore, Pune etc that have very high costs of living especially in terms of house rent, utility prices, school fees etc. Their primary complaint is that their salaries haven't kept up with the rising cost of living (i.e. daily expenses) in those cities. This is a familiar story even in the West these days, isn't it?
On the other hand, the tier-II cities in India have significantly lower cost of living. I used to work at an IT company in Bangalore from 2005-2008 and shifted later to another company in Kochi, Kerala. The difference was very obvious. My house rent and other daily expenses were a lot lower and I was able to save a lot more every month. Therefore this story isn't about any general debt distress nation-wide. Its about how the rising living costs are eating into the salaries of corporate workers in India's metro cities. Also, these are the demographic that primarily drive car sales in India, not its two-wheeler sales. Corporate employees usually don't buy a Hero Splendor. Those with families buy cars, and the younger ones buy more premium motorcycles.
As for the second article from Economic Times about India's household debt, perhaps you missed this part.
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"India's household debt rose to 41.3% of gross domestic product at the end of March 2025... The ratio, up from a five-year average of 38.3%, remains lower than China's 60% and Malaysia's 69%."
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i.e India's household debt is still a lot lower than China and Malaysia. Would you say the Chinese and Malaysian households are going through a debt distress that is far worse than India's?
ReplyDeleteThe survey included 10,000 borrowers but lot more than 10,000 borrowers are experiencing distress in India. The percentage of distressed borrowers in India is 60 to 68%.And the reason is stagnant income/wages.
Approximately 60% to 68% of borrowers in India are experiencing financial distress, with some estimates indicating 85% of distressed borrowers allocate over 40% of their monthly income toward EMIs. A survey of 10,000 distressed borrowers (June–Dec 2025) highlighted a massive debt crisis, with many individuals unable to cover daily expenses due to high-interest personal loans, credit card debt, and BNPL, as stated by Expert Panel (via Moneycontrol) and Expert Panel (via Moneycontrol).
Key details regarding the distressed borrower situation in India:
Widespread Distress: A 2025 Bloomberg opinion piece noted that 68% of borrowers in certain segments show signs of distress.
High Debt Burden: Around 85% of distressed borrowers are spending more than 40% of their monthly income on loan repayments.
Key Drivers: Major causes include job losses (31%), extreme EMI-to-income ratios (28%), and emergencies like medical crises (19%).
Rising Defaults: The delinquency rate for credit card debt over 90 days reached 15% as of March 2025.
Impact on Borrowers: 60% of borrowers are struggling with repayments or have ceased payments entirely, with 40% of them taking new loans to pay off old ones, say Experts Panel (via Moneycontrol).
The surge in digital loans and personal loans has driven up household debt, leaving many consumers vulnerable to financial ruin and aggressive recovery tactics.
Perhaps this Bloomberg piece is the source of that 68% figure. Again, that 68% distressed borrowers specifically refers to the subprime loans in the microfinance segment - mostly the poor - and does not include other conventional loan borrowers.
ReplyDeleteEssentially the solution they highlight for that in the article is greater monitoring and regulation by the government and the RBI of the microfinance sector.
https://www.bloomberg.com/opinion/articles/2025-04-03/india-s-subprime-bubble-grew-2-100-now-a-bust-looms?embedded-checkout=true
India’s real problem is stagnant wages and income.
ReplyDeleteAI Overview
Real wages in India have experienced a prolonged period of stagnation, with growth failing to keep pace with inflation or corporate profit growth. Despite strong GDP growth and record corporate profitability, particularly in 2023-24, income levels for many, especially in the salaried and rural sectors, have remained below pre-pandemic levels.
Wage Stagnation Data: Real wages for salaried workers in mid-2024 were lower than in 2019. Rural real wages have seen near-zero growth between 2015-16 and 2022-23, following a period of faster growth, reports Ideas for India.
Profits vs. Wages: While 4,000 listed companies reported a 22.3% rise in profits for FY24, employee expenses grew only 13%, indicating a focus on cost-cutting over salary increases.
Impact on Consumption: Stagnant wages have reduced consumer purchasing power, which is a key driver of India's GDP, leading to concerns about the sustainability of the economic momentum.
Sectoral Disparities: The IT sector has seen a sharp drop in pay increases from 8–10% to roughly 3%, while urban wage growth was hit by high inflation and AI-related job shifts.
Root Causes: Factors contributing to this trend include post-pandemic recovery issues, high unemployment/underemployment, the impact of structural changes like GST and demonetization, and low agricultural productivity.
The government has acknowledged that weak wage growth is impacting consumer demand and the broader economy, urging for a better distribution of income. However, some recovery in urban real wages was observed in late 2025 due to lower inflation, per Vajiram & Ravi.
I'm not sure if you would publish this, but since we are doing so many AI overviews of Indian economy, this is the AI overview I got about the state of Pakistan's economy. Shall we see a writeup on this anytime soon sir?
ReplyDeleteAI Overview
Pakistan's economy is fragile, marked by high inflation, significant external debt, currency instability, and reliance on IMF bailouts, struggling with slow growth and rising poverty despite efforts to build resilience, facing challenges like structural weaknesses, political uncertainty, and limited job opportunities, especially for youth, contrasting starkly with India's faster growth.
Key Economic Challenges
Debt Burden: Massive external debt and a cycle of borrowing to service old loans, leading to dependency on foreign aid.
Inflation & Currency: High inflation and sharp currency swings have eroded purchasing power and business confidence.
Stagnant Growth: Economic growth barely keeps pace with population growth, resulting in stagnation, not progress, with low GDP per capita compared to regional peers like India.
Balance of Payments: Persistent deficits and low foreign reserves create pressure, with reliance on remittances and loans over exports.
Poverty: Poverty levels have risen recently after a period of decline, with increasing numbers falling below the poverty line.
Structural Weaknesses: Issues include weak private sector growth, reliance on agriculture, security concerns, and governance gaps (like elite capture).
Sectoral & Social Impacts
Youth Unemployment: High youth unemployment and limited opportunities lead to significant anxiety and a desire to emigrate, notes IANS LIVE.
Agriculture: While some areas like cotton, fruits, and livestock show growth, challenges remain, impacting food security and exports.
Current Outlook & Policy
External Support: The economy relies heavily on continuous bailouts and external financing, providing short-term relief but not solving underlying issues, says FocusEconomics and Economics Observatory.
Government Focus: Efforts aim to strengthen fundamentals, boost exports, improve human capital, and foster private sector growth, according to the World Bank Group and URAAN Pakistan.
AI Overview
ReplyDeletePakistan's economy is undergoing a cautious recovery in 2026, transitioning from a 2023 crisis to stabilization with GDP growth projected around 3%–3.2%, according to Asia Times and YouTube. Key drivers include significantly lower inflation (dropping near 0.3% in early 2025), rising foreign exchange reserves, and strict IMF-backed reforms, though structural challenges regarding debt and growth sustainability remain.
This video provides a summary of the economic reforms in Pakistan:
https://youtu.be/jU-fADS-iao?si=Ky1hdft26C7ladmT
Key Aspects of Pakistan's Economic Recovery (2025-2026)
Macroeconomic Stability: The economy has shifted from near-collapse to a stabilization phase. Inflation plummeted from over 17% in April 2024 to exceptionally low levels (e.g., 0.3% in April 2025), driven by tight monetary policy and reduced global commodity prices.
Growth Projections: The World Bank estimates ~3% growth for FY2025 and similar for FY2026, while the IMF projects 3.2% for 2026.
Foreign Exchange & Reserves: Foreign exchange reserves recovered to approximately $11 billion, offering better, though still limited, import coverage.
External Debt & Aid: Despite high debt, Pakistan has managed to secure external financing and roll over debts. The country also began prepaying some domestic debt, reflecting improved fiscal discipline.
Investment & Confidence: Investor confidence has shown signs of revival, with a reported 20% increase in Foreign Direct Investment (FDI) in the first half of FY2025.
Ongoing Challenges: Structural issues persist, including a low investment-to-GDP ratio (13.8% in FY2025), high external financing needs ($24.6 billion projected for FY26), and the need for further structural reforms to ensure long-term, inclusive growth.
This video discusses the challenges to Pakistan's economic recovery:
https://youtu.be/muhqn5JUwKs?si=NWC_i4Zk54yjYJaz
Pakistan Is Talking With IMF Over Plan to Boost Economic Growth
ReplyDeletehttps://www.bloomberg.com/news/articles/2026-01-30/pakistan-is-talking-with-imf-over-plan-to-boost-ecnomoic-growth?embedded-checkout=true
Pakistan is in talks with the International Monetary Fund over a plan to boost economic growth after achieving stability with stringent policy measures, Prime Minister Shehbaz Sharif said.
The International Monetary Fund paid $1.2 billion in installments to Pakistan as part of a loan program and a separate climate change impact debt, helping the country repay its debt and bolster foreign exchange reserves.
Prime Minister Shehbaz Sharif announced a cut in power tariff for industry and a lowering of the export refinance rate, saying he is convinced that direct taxes need to be lowered to help the industry grow.
Pakistan is in talks with the International Monetary Fund over a plan to boost economic growth after the South Asian nation achieved stability with stringent policy measures, Prime Minister Shehbaz Sharif said.
“Now is the right time to move toward sustainable, export-led growth,” Sharif told leading businessmen at an event in Islamabad on Friday. “I have talked to the finance minister and the central bank governor that we have to divert the capital to help the industry. The governor has to listen to business leaders and take bold decisions.”
The global lender paid $1.2 billion in installments to Pakistan as part of a three-year loan program and a separate climate change impact debt. Funding from the IMF helped the cash-starved country to repay its debt and bolster foreign exchange reserves. The central bank predicted this week that by December its foreign reserves will cross $20 billion - a record. However, the program requires Pakistan to maintain a tight monetary policy and restrain spending.
State bank of Pakistan, the central bank, this week unexpectedly kept its key rate steady at 10.5%, citing concerns inflation may pick up while forecasting GDP will expand 3.75%–4.75% in the fiscal year to June.
Sharif said his team led by Finance Minister Muhammad Aurangzeb “presented a good case” to the IMF. “I have told them that we have achieved stability and now we have to generate employment and reduce poverty,” he said.
“I am convinced that we need to lower direct taxes to help our industry grow,” Sharif said while announcing a 4.4 rupee cut in power tariff for industry and lowering the export refinance rate to 4.5% from 7.5%. “I want to do more but our hands are tied.”
What is unlikely to change in Mr Haq’s lifetime or mine, is Pakistan vs India confrontations whether on social media or elsewhere. Meanwhile, what’s sadly ignored are successful methods that could improve economic productivity and decrease deprivation. Lot what goes on this blog are mindless elitist comparisons among people who probably don’t even live there.
ReplyDelete"Pakistan’s export fragility exposed"
ReplyDeletehttps://www.dawn.com/news/1970476
The recently finalised EU–India Free Trade Agreement (FTA), described by Brussels as “the mother of all agreements”, is a crucial development that should prompt Pakistan to reassess its export strategy. The European Union or EU is not just another market for Pakistan; it is the cornerstone of the country’s export economy. Approximately 40pc of Pakistan’s exports head to the EU, with textiles and clothing representing nearly 76pc of those exports in 2024.
This heavy concentration on a single market and product category brings both advantages and risks. On one hand, European demand has traditionally been stable, and the Generalised Scheme of Preferences Plus (GSP+) has provided Pakistani exporters with sustained market access for value-added textiles. On the other hand, such reliance makes Pakistan highly vulnerable. Any reduction in competitiveness — whether through tariffs or non-tariff barriers — can quickly lead to lost orders, idle factories, job losses, and increased pressure on foreign exchange reserves.
Impact of the EU–India agreement
The vulnerability of Pakistan’s export sector will potentially come under strain due to the EU–India agreement. Indian exports, including textiles, will benefit from phased tariff reductions, eventually achieving zero duties for key products. Pakistani exporters have long relied on their preferential margins under GSP+ to compete in Europe. However, even with these preferences, Pakistan’s textile exports to the EU do not match China’s volume, and its share in core product categories (HS codes 61, 62, and 63) is not significantly larger than India’s, despite the 10-12pc tariffs India was facing.
As tariff preference margins diminish, the focus will shift from tariffs to core business fundamentals — areas where Pakistan has repeatedly delayed reforms. These include energy costs and reliability, turnaround times, compliance, exchange-rate stability, workforce skills, productivity, and product development.
Comparative exposure: India vs Pakistan
Comparing India and Pakistan underscores the risks of over-concentration. For India, the EU is an important market, but not an existential one. In 2024, India exported $97.2 billion to the EU out of total global exports of $441.7bn, meaning only about 22pc of its exports were EU-bound. In contrast, about 42pc of Pakistan’s exports relied on the EU, highlighting a much greater exposure to market shocks.
In textiles alone, the EU imported roughly $9bn from India and $9.7bn from Pakistan in 2024. Although both countries are similar in export value, for Pakistan, textiles to the EU represent the engine of its export economy, while for India, they are just one component of a diverse export portfolio.
With India’s tariff disadvantage disappearing, even a small shift in EU orders could disproportionately harm Pakistan. There is significant product overlap and reliance on cotton; India’s costs are lower, productivity is higher, it has a scale benefit, and its man-made fibres are more competitive. A 15pc reduction in Pakistan’s EU textile share would mean a loss of approximately $1.5bn in exports.
While India is less likely to gain from Vietnam (which will benefit further from the EU–Vietnam FTA by 2027) or Bangladesh (which enjoys quota-free, duty-free access under Everything but Arms), India stands to benefit as buyers diversify away from China under the China+ thrust and choose to substitute some sourcing away from Pakistan.
Over time, India could add $3–4bn in additional textile exports to the EU. A third to a half of this could be at Pakistan’s cost, though buyers are unlikely to switch all sourcing away from Pakistan.
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ReplyDeletehttps://www.dawn.com/news/1970476
Recommended actions for Pakistan
First, the GSP+ must be defended through visible action: The government must protect GSP+ by ensuring compliance with labour, environmental, and governance conventions. Export policy reforms, especially in energy, taxation, and exchange rates, are essential. Non-compliance puts export revenue at risk, especially as GSP+ has barely compensated for Pakistan’s 40pc higher energy costs compared to India — a cushion that may soon disappear.
Second, we have to move beyond tariff preferences. Exporters need to recognise that competing on tariff margins alone is no longer sufficient. The new focus must be on cost, quality, product range, sophistication, compliance, reliability, and trust. Addressing skills gaps, possibly by bringing in experienced supervisors from countries like Sri Lanka, will be vital.
Third, standards-driven trade must be prioritised and prepped for. Europe is increasingly enforcing standards that act as “shadow tariffs” on non-compliant suppliers. Pakistani exporters must prepare for carbon reporting and evolving EU border adjustment mechanisms to maintain access.
Fourth, Pakistan must diversify not only within textiles (eg, man-made fibres, technical textiles, performance wear, and design-led home products) but also geographically, by developing new export destinations. India’s resilience comes from market and product diversification, allowing it to adapt to changing conditions.
While Pakistan cannot influence the terms of the EU–India agreement, it can take decisive steps to ensure its textile industry remains competitive as preferences erode. The EU is a lifeline for Pakistan’s exports. It is crucial that Pakistan stops treating this market as a comfort zone and instead undertakes the necessary reforms to safeguard its economic future.