Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Hormuz. Show all posts

Monday, May 11, 2026

Is the India Growth Story Over?

In a television speech to the nation, Indian Prime Minister Narendra Modi urged his people to make sacrifices by spending less on fuel, fertilizer, and travel. He also asked them not to buy gold for a year. “To save foreign exchange, we must accept the challenge of patriotism,” he said. It appears that India's problems do not just stem from the effects of the US-Iran war; India's problems started well before that. Flight of foreign capital has put the Indian currency under tremendous pressure, with the Indian rupee falling nearly 10% in recent months. Many analysts believe that the Indian IT services exports could fall significantly as the artificial intelligence (AI) models begin to replace the IT workers. It could create a balance of payments crisis that could force India to seek the IMF bailout in the not too distant future. Already, the Indian economy has slipped to the sixth-largest economy by nominal GDP, dropping from previous projections that had it at fourth.

Indian Economy Drops From 4th to 6th Rank. Source: IndMoneyApp

Energy Crisis:

India is facing a serious energy crisis driven by the closure of the Strait of Hormuz that has disrupted global oil and gas supplies. While the government has assured citizens that there are no immediate shortages of petroleum or natural gas, the escalating costs of imports are putting extreme pressure on the nation's foreign exchange reserves.

AI Challenge:

Indian IT firms are cutting staff to prepare for the expected disruption from the adoption of AI. For example, the IT services firm Cognizant is planning major workforce reductions that could impact between 12,000 and 15,000 employees globally, with India expected to account for the majority of the cuts, according to a report.

A US-based investment research firm Citrini Research is forecasting a significant disruption to India's traditional IT services sector by 2027-2028, driven by the collapsing cost of AI coding agents. Here's an excerpt of the Citrini research report:

"The country’s IT services sector exported over $200 billion annually, the single largest contributor to India’s current account surplus and the offset that financed its persistent goods trade deficit. The entire model was built on one value proposition: Indian developers cost a fraction of their American counterparts. But the marginal cost of an AI coding agent had collapsed to, essentially, the cost of electricity. TCS, Infosys and Wipro saw contract cancellations accelerate through 2027. The rupee fell 18% against the dollar in four months as the services surplus that had anchored India’s external accounts evaporated. By Q1 2028, the IMF had begun “preliminary discussions” with New Delhi".

Stocks Selloff:

Sensing the growing crisis, Indian stock market investors are selling off their holdings. IN particular, foreign investors have accelerated their exit from Indian equities in early 2026, selling over $20 Billion in the first four months, driving 14-year low ownership levels. Triggered by Middle East conflicts, rising oil prices, and rupee depreciation, this record exodus—marking the worst quarterly selloff in March—was driven by outflows in banking, financial services, and IT.

Investors see the writing on the wall. The Indian economy has already dropped from the 4th to the 6th rank in the world. The Indian currency is under a lot of pressure. India's current account deficit will worsen with the loss of IT services exports.

Thursday, April 9, 2026

US-Iran Ceasefire: Pakistan Saves "A Whole Civilization"

Both the American and the Iranian delegations are expected to begin peace talks in Islamabad tomorrow after the announcement of the Pakistan-brokered ceasefire. The US team is led by Vice President J.D. Vance and includes President Trump's envoy Steve Witkoff and the president's son-in-law Jared Kushner. The Iranian team includes Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Aragchi. Mohammad Ghalibaf is a former IRGC (Iranian Revolutionary Guard Corps) commander with close ties to the hardliners.

The Islamabad meeting has come as a result of the tireless efforts of the Pakistani leaders to stop the war since it started on February 28 with the US-Israeli attack on Iran. But these efforts took on special urgency on the morning of April 7, when President Donald Trump posted an ominous warning on Truth Social: "A Whole Civilization will die tonight, never to be brought back again". "We will find out tonight, one of the most important moments in the long and complex history of the world", Trump added. The ultimatum to Iran sent shockwaves around the world because it is a fact that the president of the United States controls one of the largest stockpiles of weapons of mass destruction (WMD). The post came out at 8 AM US East Coast time when it was 8 PM in Islamabad. Immediately, Pakistan's Prime Minister Shehbaz Sharif and Field Marshal Asim Munir stepped up their frantic efforts to save the world as Trump's deadline approached. The world heaved a sigh of relief when, about an hour before Trump's deadline, the US president acknowledged and positively responded to a Pakistani proposal to accept a two-week ceasefire which was also approved by the Iranian leadership. The oil price dropped and the stock markets rallied in the hope of a permanent end to hostilities.

President Trump's Post Accepting Ceasefire with Iran

After the ceasefire announcement two days ago, Pakistani leaders have organized a US-Iran meeting scheduled for Saturday in Islamabad. JD Vance, the Vice President of the United States is traveling to Pakistan to lead the US delegation for talks with Iran's Foreign Minister Abbas Aragchi.

Iran's 10-Point Proposal For Peace

Iran's 10-point proposal that Trump referred to in his post as the basis of US-Iran talks includes the following:

1. Guarantee that Iran will not be attacked again.

2. Permanent end to war, not just a ceasefire.

3. End to Israeli attacks in Lebanon.

4. Lifting of all US sanctions on Iran.

5. End to all regional fighting against Iranian allies.

6. Iran would reopen the Strait of Hormuz

7. Iran would impose a $2 million fee per ship transiting Hormuz.

8. Iran would split these fees with Oman.

9. Iran would establish rules for safe passage through Hormuz.

10. Iran would use Hormuz fees for reconstruction instead of reparations.

Europeans and Japanese Leaders Thank You Letter to Pakistan

These are high-stakes negotiations that could fail but just the fact that the two sides have agreed to talk gives the world some hope of a better outcome. Meanwhile, many world leaders have thanked the Pakistani leaders for stepping up at a crucial time. But many in Pakistan's neighboring country of India are very unhappy about Pakistan's role in it. For example, Indian Foreign Minister Subrahmanyam Jaishankar has derided Pakistan as a "dalal" (pimp) country. He is clearly unhappy that his country's campaign to isolate Pakistan has backfired. In fact, Pakistan's geopolitical profile has particularly risen after the country's robust response to what the Indian Prime Minister called "Operation Sindoor" which he launched against Pakistan last year in May.

Tuesday, October 2, 2007

Alan Greenspan's book tour

Former Federal Reserve Chief Alan Greenspan has been promoting his book "The Age of Turbulence" for the last couple of weeks. Among other things, he is talking about his reasons for supporting the Iraq invasion and his assessment that the Chinese stock market is a bubble waiting to burst. On the question of his support for Iraq invasion, he explains that he was convinced Saddam Husain would block the Strait of Hormuz if not removed from power. I think he's just flat wrong on this reasoning.Other than the US or Europeans, the only power that had the capacity to close the Strait is Iran. The removal of Saddam has, in fact, strengthened Iran significantly and made it more likely that the Strait would be closed in the event of war in the Persian Gulf involving Iran.
On the question of Shanghai bubble, he is more qualified than most but I still think he is wrong. The Chinese economy is very strong and growing rapidly. China is the factory of the world and it is developing a very large consumer class of its own with a pent-up demand not too different from the US consumer demand right after the WW II. So the Chinese markets are backed up a strong and rapidly growing economy to justify high valuation of its stock.