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NEW DELHI: India’s GDP growth for the January-March quarter of FY25 may have surprised on the upside, but a new report warns that the robust headline figure masks an economy still struggling under the surface.Systematix Research, in a sharp critique, said the 4QFY25 growth “continues to be dependent on public spending-led construction,” while key indicators point to deeper structural weaknesses. “The upside surprise in Indian GDP growth makes a robust headline, but it masks underlying weaknesses,” the report stated.Cracks behind the headline numbersAmong the red flags, the report noted that money supply grew much slower than nominal GDP, raising concerns about the credibility of the growth data. Additionally, personal consumption expenditure grew faster than the actual sales volume of consumer goods, indicating a disconnect between reported demand and real consumption.While government capital spending surged, private investment likely contracted. “Public spending is not crowding in private investment,” the report noted, suggesting that the government’s infrastructure push is failing to stimulate broader economic momentum.Demand still fragileHousehold income remains under stress, retail lending growth has slowed, and reduced government subsidies have added to the pressure. Net indirect taxes rose to their highest level since June 2018, which the report said has further squeezed demand.Meanwhile, even as the current account deficit narrowed, the total trade contraction signals weakening domestic and global demand. “There is a growing disconnect between reported GDP figures and the on-ground economic situation,” the report said.Outlook hinges on rural consumptionSystematix points to rural demand revival and agricultural strength as key to future growth. But with private capex still elusive and global uncertainties mounting, a meaningful recovery may remain sluggish.While the Reserve Bank of India may step in with easing measures if inflation stays low, the report warns that low inflation itself reflects weak incomes and demand, not price stability.Global headwinds aheadOn the international front, the report cautioned that panic buying in global trade, in anticipation of possible tariffs under a second Trump administration, could push the US towards stagflation, a risk that would ripple through emerging markets like India. With India’s trade-to-GDP ratio already falling, the country may find itself exposed to external shocks without the cushion of strong export performance.“In the absence of a turnaround in productive employment,” the report concludes, “India’s growth story risks becoming increasingly imbalanced and fragile.”

The Ministry of Heavy Industries has released detailed guidelines for the “Scheme to Promote Manufacturing of Electric Passenger Cars in India” (SPMEPCI), which was originally announced on March 15, 2024. The scheme aims to attract domestic and global investment in electric vehicle (EV) manufacturing and support India’s broader environmental and industrial goals. Below are 10 key highlights from the newly notified framework:1. Lower customs duty for imported EVsApproved applicants will be allowed to import fully built electric four-wheelers (CBUs) with a minimum CIF value of $35,000 at a reduced 15 per cent customs duty for a period of five years from the date of approval.2. Minimum investment thresholdTo qualify, applicants must commit to investing at least Rs 4,150 crore (approximately $500 million) in EV manufacturing infrastructure within a three-year window.3. Mandatory localisation targetsCompanies are required to achieve a minimum 25 per cent domestic value addition (DVA) within three years and at least 50 per cent DVA within five years. These targets will be assessed in accordance with the procedures defined under the Production Linked Incentive (PLI) Auto Scheme.4. Eligibility criteria geared toward large firmsApplicants must demonstrate global automotive manufacturing revenue exceeding Rs 10,000 crore and fixed assets worth at least Rs 3,000 crore, based on the latest audited financial statements. This is likely to limit participation to larger domestic and international companies.5. Import cap and limit on duty benefitsA maximum of 8,000 four-wheeler EVs per year may be imported at the reduced duty rate, with rollover of unused import limits permitted. The total customs duty benefit per applicant is capped at the lower of Rs 6,484 crore or the actual investment made under the scheme.6. Bank guarantee requirementApplicants must provide a bank guarantee equivalent to the greater of Rs 4,150 crore or the total customs duty exemption availed. This guarantee must remain valid throughout the duration of the scheme and serves as a financial safeguard for compliance.7. Scope of eligible investmentOnly expenses on new plant, machinery, equipment, and R&D will be considered toward the investment commitment. Land costs are excluded, while buildings can account for up to 10 per cent, and charging infrastructure up to 5 per cent, of the committed investment.8. Application process to begin shortlyThe scheme’s application window will open following a Notice Inviting Applications (NIA), expected to be published soon. Once issued, the window will remain open for a minimum of 120 days. The government may reopen the window as required until March 15, 2026.9. Alignment with international trade developmentsThe scheme operates alongside broader trade developments, including the India-UK Free Trade Agreement, which is gradually reducing import duties on premium EVs to 10 per cent. Similar trade arrangements with the US and EU may influence future market competition.10. Broader policy objectiveThe government has positioned the scheme as part of India’s push toward net-zero emissions by 2070 and efforts to boost domestic manufacturing. The initiative is expected to generate employment, foster technology adoption, and enhance India’s global manufacturing footprint in the EV sector.The scheme is now operational with detailed guidelines in place, while the application window is expected to open soon. Industry stakeholders are watching closely as the policy moves toward implementation.

Image for representational purpose only. File
| Photo Credit: R. Ragu

The high-value ₹2,000 notes worth ₹6,181 crore are still in circulation after two years of the Reserve Bank withdrawing the currency, according to official data released on Monday (June 2, 2025).

The ₹2,000 banknotes continue to be legal tender.

On May 19, 2023, the Reserve Bank of India (RBI) announced the withdrawal of ₹2,000 denomination banknotes from circulation.

In a statement, the RBI said, “The total value of ₹2,000 banknotes in circulation, which was ₹3.56 lakh crore at the close of business on May 19, 2023, declined to ₹6,181 crore at the close of business on May 31, 2025.”

“Thus, 98.26% of the ₹2,000 banknotes in circulation as on May 19, 2023, has since been returned,” the central bank said.

The facility for deposit and/or exchange of such banknotes was available at all bank branches till October 7, 2023. However, this facility is still available at the 19 issue offices of the Reserve Bank.

Since October 9, 2023, RBI issue offices are also accepting ₹2,000 banknotes from individuals and entities for deposit into their bank accounts.

Further, people can also send ₹2,000 banknotes through India Post from any post office within the country to any of the RBI issue offices for credit to their bank accounts.

Entry-level white-collar positions are likely to be the most affected by Artificial Intelligence (AI) implementation, according to a recent report by Jefferies. The findings highlight growing employment concerns for new workforce entrants in the United States, particularly recent university graduates.Currently, the unemployment rate for recent US university graduates stands at 5.8 per cent- well above the national average of 4 per cent and more than double the 2.7 per cent rate recorded among all university graduates.“We believe AI’s most significant impact for investors will be through labour disruption, beginning with entry-level roles,” said Jefferies, as quoted by ANI.The report claimed that that individuals entering the workforce are encountering greater employment challenges compared to other demographic groups.Anthropic CEO Dario Amodei, cited in the report, projected that AI could replace as much as half of entry-level white-collar jobs within one to five years. Amodei also warned that this trend could lead to a sharp rise in unemployment, potentially reaching between 10 per cent and 20 per cent.Sales, customer support, software development and marketing were identified as particularly vulnerable sectors, with junior-level staff forming a significant share of the workforce in these areas.The report also noted that a degree in technology no longer assures job security. Unemployment rates among recent graduates in Computer Engineering and Computer Science have reached 7.5 per cent and 6.1 per cent respectively.AI’s growing presence is evident across industries. Jefferies’ research shows that out of 419 US companies that discussed AI in their earnings calls since 2021, 40 per cent came from non-tech sectors such as retail, finance and healthcare.Industry leaders present differing views on the impact of AI adoption. IBM CEO Arvind Krishna reported a net increase in employment following AI integration. In contrast, Klarna’s CEO admitted that AI-led staff reductions compromised customer service quality, potentially requiring the company to rehire in the future.The Jefferies analysis positions AI as both a transformative opportunity and a serious challenge. While AI may drive efficiency and growth, it also raises significant concerns for early-career professionals.The report also stressed on the need for a coordinated response from corporations, governments and educational institutions to promote skill development and support workplace transitions in the AI era.

India’s engineering exports are likely to face significant challenges following US President Donald Trump’s decision to impose a 50 per cent tariff on foreign steel and aluminium imports, according to the Engineering Export Promotion Council of India (EEPC).The new tariff, set to take effect from June 4, 2025, will apply to steel, aluminium, and their derivatives, doubling the existing duty. Steel and aluminium products constitute around 25 per cent of India’s engineering exports to the US. “The annual export of steel, aluminium and their derivatives to the US currently stands at around USD 5 billion,” said the EEPC.The EEPC noted that the earlier 25 per cent tariff on steel imports had already created considerable difficulties for Indian exporters.“In case the US goes ahead with its plan and imposes a 50 per cent tariff on steel, aluminium and their derivatives, exports of these key items will become costlier, leading to a likely dip in shipments,” said Pankaj Chadha, chairman, EEPC India.Though India’s direct steel exports to the US are relatively modest, the Trump tariff has disrupted global trade patterns by intensifying international competition and affecting prices.While the UK managed to secure exemptions from the 25 per cent tariff through a bilateral trade agreement, the EEPC urged India to seek similar relief during the ongoing bilateral trade agreement (BTA) discussions with the US.“This is perhaps not the opportune time to introduce such unilateral tariff especially when BTA negotiations are going on. It can make the work of the negotiators tricky. The proposed tariff increase by the Trump administration is likely to impact the engineering exports which are about USD 5 billion under this head,” added Pankaj Chadha added.The Aluminium Association of India (AAI) also voiced concern over the US decision, warning that doubling the aluminium import tariffs would hurt Indian manufacturers already struggling against low-cost imports. On May 30, President Trump announced the increase in aluminium tariffs from 25 per cent to 50 per cent, also effective from June 4.“The 50 per cent tariff announced by Trump will damage the Indian aluminium industry, which is already under pressure from surging low-cost imports,” the AAI said in a statement.Aluminium is a strategically important metal for sectors such as defence, aerospace, telecommunications, energy transition, power and construction. The AAI pointed out the rising influx of primary aluminium and low-quality scrap into India and called for protective measures similar to the recent 12 per cent provisional safeguard duty imposed on certain steel imports.The association highlighted that the aluminium industry has invested over Rs. 1.5 lakh crore to build a domestic production capacity of 4.2 million tonnes per annum (MTPA), and deserves similar safeguards.B K Bhatia, Director General of the Federation of Indian Mineral Industries (FIMI), noted that the US accounted for $946 million of India’s aluminium exports. “We are hopeful that this issue will get resolved during ongoing trade negotiations between India and USA,” he said.In 2024-25, India’s exports to the US under this category comprised $587.5 million in iron and steel, $3.1 billion in articles of iron and steel, and $860 million in aluminium products, totalling $4.56 billion.The latest tariff hike falls under Section 232 of the US Trade Expansion Act of 1962, which allows the US President to impose duties if imports are deemed a threat to national security. President Trump had previously imposed a 25 per cent tariff on steel and a 10 per cent tariff on aluminium in 2018, later raising aluminium tariffs to 25 per cent in February 2025.

Combination image of Union Minister H.D. Kumaraswamy and the Tesla logo on a showroom
| Photo Credit: Special arrangement | Reuters

Global EV giant Tesla is not interested in manufacturing cars in India but keen on establishing showrooms in the country, Union Heavy Industries Minister H.D. Kumaraswamy said on Monday (June 2, 2025).

U.S. President Donald Trump has said that if Tesla were to build a factory in India to circumvent that country’s tariffs, it would be “unfair” to the U.S.

ALSO READ: Telangana making all-out efforts to get EV maker Tesla set up plant in State

“Tesla… They are more (interested) only to start showrooms. They are not interested to (start) manufacturing in India,” Mr. Kumaraswamy told reporters here.

The Minister made the remarks at a press conference to announce the unveiling of guidelines for the Scheme to Promote Manufacturing of Electric Cars in India.

“So far they (Tesla) have not shown interest. A Tesla representative only participated in the first round of stakeholder discussions for the Scheme to Promote Manufacturing of Electric Cars in India. The company’s representative was not part of the second and third round of the stakeholder deliberations,” an official told PTI.

Tesla CEO billionaire Elon Musk had said in April 2024 that his visit to India had been delayed due to the company’s heavy obligations.

Mercedes Benz, Volkswagen-Skoda, Hyundai, Kia interested

Mr. Kumaraswamy added that global automobile makers such as Mercedes Benz, Skoda-Volkswagen, Hyundai and Kia had shown interest in manufacturing electric cars in India.

The said companies have expressed interest during the stakeholder discussions between the government and the industry regarding the ‘Scheme to Promote Manufacturing of Electric Passenger Cars in India’, the detailed guidelines for which were unveiled by the minister.

While the scheme was notified on March 15 last year, its guidelines were issued on Monday.

Officials said the window to apply under the scheme will open in a couple of weeks, and it remains to be seen which companies would actually go ahead and apply.

Approved applicants would be required to make a minimum investment of ₹4,150 crore in line with the provisions of the scheme.

On the price front, in addition to greater material costs, manufacturers also reported greater outlays on freight and labour. File
| Photo Credit: Reuters

India’s manufacturing sector growth fell to a three-month low in May, restricted by inflationary pressures, softer demand and heightened geopolitical conditions, a monthly survey said on Monday (June 2, 2025).

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell from 58.2 in April to 57.6 in May, highlighting the weakest improvement in operating conditions since February.

In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

May data indicated another robust improvement in business conditions across India’s manufacturing industry, but rates of expansion receded to their weakest in three months, the survey said.

Monitored companies linked growth to healthy domestic and international demand, alongside successful marketing initiatives. However, the upturn was curbed by cost pressures, fierce competition and the India-Pakistan conflict, according to panellists.

“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month. The acceleration in employment growth to a new peak is certainly a positive development,” Pranjul Bhandari, Chief India Economist at HSBC, said.

On the jobs front, firms hired additional staff in May, with the rate of job creation climbing to a new series record. Among the 12% of panellists that reported higher headcounts, the creation of permanent job roles featured more prominently than that of short-term positions.

Moreover, sustained job creation enabled manufacturers to stay on top of their workloads in May, the survey said.

On the price front, in addition to greater material costs, manufacturers also reported greater outlays on freight and labour. As a result of rising operating expenses and supported by strong demand, firms increased their selling prices in May.

“Input cost inflation is picking up, but manufacturers seem to be able to lessen the pressure on profit margins by raising output prices,” Ms. Bhandari said.

Meanwhile, new export orders rose at one of the strongest rates recorded in three years. Panel members remarked on favourable demand from Asia, Europe, the Middle East and the U.S.

On the business outlook, Indian manufacturers remained strongly confident of a rise in output over the course of the coming 12 months, the survey said. The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Minister of Heavy Industries and Public Enterprises H.D. Kumaraswamy. File.
| Photo Credit: ANI

India estimates a “minor impact” from U.S. President Donald Trump’s plan to increase tariffs on steel and aluminium products as the South Asian country exports low volumes to Washington, the Union Steel Minister said on Monday (June 2, 2025).

Mr. Trump said last week he intends to increase tariffs on imported steel and aluminium to 50% from 25% currently, spurring declines on Monday in steelmakers’ stocks in South Korea and Vietnam – major Asian exporters to the U.S.

Roughly a quarter of all steel used in the U.S. is imported, the bulk of it from neighbours Mexico and Canada or close allies in Asia and Europe such as Japan, South Korea and Germany. India ranks much lower.

“Minor impact will be there… We are not exporting (to the U.S.) in a big way,” Steel Minister H.D. Kumaraswamy told reporters at a press briefing in New Delhi.

However, ratings agency Fitch said in March that Indian steelmakers and steel prices could be hit if countries with higher exposure to the U.S. redirect their shipments to New Delhi in search of more lenient markets for the alloy.

Representational file image.
| Photo Credit: B. Jothi Ramalingam

India on Monday (June 2, 2025) announced a scheme that includes significant import tax cuts for foreign automakers that commit to investing in manufacturing electric cars in the country.

Under a rewamped scheme, companies will be allowed to import a limited number of electric cars at a lower import duty of 15% versus the current 70% duty if they commit to investing $486 million to build EVs in the country, the Ministry of Heavy Industries said in a statement.

Carmakers including Mercedes Benz, Volkswagen , Skoda, Hyundai and Kia have already shown interest in the new policy, a Union Minister told reporters in a media briefing on Monday.

More details to follow…