An eerie sense of foreboding hangs heavy in the air. The list of known unknowns is growing longer. The past seems safe, vanquished. The future, as Beryl Markham observed, lives in a cloud—formidable from a distance. The sense of drift underlines a dark suspicion: does geopolitics offer a premium on inaction? Amid a vacuum of response to crises, here are a few observations.
At 10.30 am on Friday morning, Donald J Trump celebrated “a great Jobs report” and added “stocks should go up”. By noon, the S&P500 had slid nearly 3 percent and tech-heavy Nasdaq plunged over 4 percent. This column underlined the trillion-dollar systemic risk of AI giants dominating indices. To appreciate the magnitude of domination and risk, consider this: the market cap of the top 10 AI-linked tech stocks, at over $28 trillion, is larger than China’s GDP—and the IPOs of OpenAI, Anthropic and SpaceX are yet to be added.
Between breakfast and lunch, more than a trillion dollars were wiped out on Wall Street. The reason for the slide rule: fear of a rate hike by the US Federal Reserve. It was not just stocks. The entire metals group—gold, silver, copper, platinum—went down with the stocks. The yield of the 2-year bond shot up 11 basis points within minutes. Trump’s darling Bitcoin dipped to $59,000, the lowest since Trump’s re-election. The threat of inflation was not unknown. Inflation is already up across the world and visible across national balance sheets.
Inflation is the foster child of Trump’s war in West Asia. Sunday makes it 100 days since the war began as a dip-in and dip-out operation. It continues although Trump claims the US “obliterated” Iran in the first week. The world is stuck between words and meanings—for instance, are the purported ceasefires in Gaza, Lebanon and across the Hormuz Strait really ceasefires? In a bizarre explanation, Trump says, in that part of the world “ceasefire is when you’re shooting in a more moderate manner”. The US President is boxed with no playbook to end the war. The week is a classic long straddle: it begins with a call on peace and ends with a put on obliteration.
Like the tariff war is similarly endless. It is 432 days since the infamous Liberation Day, and yet, chaos reigns. Much water has passed through the Potomac and the Anacostia. The US Supreme Court has shot down tariffs and forced refunds. An undeterred Trump, as this column predicted, is paving new ways to deploy old laws. He imposed tariffs of 10 percent and 12.5 percent on 60 countries, leveraging Section 301 of the US Trade Act of 1974 to accuse countries of importing “goods produced with forced labour”. Effectively, that is code for import of intermediates from China!
Friday saw India inform the world that its GDP grew at 7.7 percent last year. There wasn’t much cheer. That very morning, the Reserve Bank lowered its forecast for growth in the coming year to 6.6 percent and hiked it for inflation to 5.1 percent. The narrative was trapped in the chasm between the vanquished past and a future wrapped in foreboding clouds. India began the decade as the fifth largest economy, hovered at fourth and slid to sixth. With GDP at around $3.76 trillion, it is a nudge away from France, ranked seventh with a GDP of $3.66 trillion. There is the war effect and there is the fog of unfinished agenda.
The fall in rank and stature is blamed on a plunging rupee—down 10 percent from 86 to a US dollar to 95 in a year. The rupee is the villain and victim of circumstance. Foreign institutional sales lead to its fall and its fall leads to FII sales.
The RBI has unveiled six measures—the big two being opening up long-tenure bonds to foreign investors and a facility to pay for the hedging cost of banks fetching dollar deposits. Will it pay off? It did in September 2013, argue the proponents. The circumstances are vastly different. In 2013, India’s policy rate was at 7.5 percent and the US Fed Funds rate was 0.08 percent. The differential (effectively 7.5 percent) plus the currency risk cover was truly lavish. In 2025, India’s policy rate is 5.25 percent and the Fed Funds rate is between 3.5 percent and 3.75 percent. Is the rate high enough to lure depositors?
Like the rupee’s fall symbolises unattended issues. There is much lament about India lacking an AI story. It is true, but it is not the only cause worthy of lament. India’s private sector is sitting on around Rs 15 lakh crore of cash and not investing; the country has a pathetic record in R&D spend. The Rs 1-lakh-crore Research Development and Innovation Fund could help if disbursed. The Rs 1-lakh-crore Urban Challenge Fund could drive smart urbanisation if allocations are speeded. Two panels were tasked in February 2025 to clear the regulatory quagmire. What have they suggested? Will it take fewer than 116 approvals and permits for a solar project? Is it easier to build a hotel or a hospital?
Finally, nothing speaks to the sense of drift more than the approach to resolve issues affecting the youth–for instance, the saga of paper leaks. In December 2025, a parliamentary standing committee bluntly stated the National Testing Agency did not inspire confidence. In 2026, the NTA proved them right! Why wouldn’t the education ministry reach out to techies who manage billion-dollar enterprises to design a system?
India’s economy is haunted by unanswered questions. Margaret Heffernan famously said, “Silence is the language of inertia.” In India’s political economy, the inertia is nurtured by the politics of complicity.
Read all columns by Shankkar Aiyar
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India
(shankkar.aiyar@gmail.com)