1. K-shaped growth in the Indian car industry?
Hyundai Creta, a premium feature-laden mid-segment SUV with prices starting at Rs 11 lakh-plus, has emerged as the country’s top selling car in June 2025. With Maruti’s Ertiga, a Multi-Utility Vehicle, the two accounted for almost two-thirds of all cars sold in the month. What is also remarkable is that nearly one in three Creta buyers is a first-time car owner. Officials in Hyundai said the contribution of first-time buyers in Creta’s customer base has gone up sharply to 29 per cent in 2024 from just 12 per cent in 2020. The car market has had a mixed year in 2024-25. While it hit a new sales peak at 4.3 million, the growth was sluggish at just around 3 per cent, primarily due to the continuously declining sales of entry level cars... The entry-level car segment is in a bad shape, primarily due to two factors: higher price tag of Rs 4 lakh-plus due to better safety norms including six airbags, and sluggish income growth in the lower end of consumer base. The bigger problem is that an entry-level car costs nearly four times the prices of a scooter or motorcycle...According to industry data, sales performance of entry-level cars priced below Rs 5 lakh – a crucial indicator of demand in the economy given that this segment largely attracts first-time buyers – is dire. This segment used to account for nearly a million units a decade ago – 9,34,538 to be precise in FY16. It has since declined to just 25,402 units in FY25. The Maruti Suzuki Alto, for instance, sold more than 18,700 units in June 2019, and was the best-selling then. In June 2025, the Alto and S-Presso combined sold a little over 6,000 units... The two-wheeler segment sales dropped 6.2 per cent to 46.74 lakh units in April-June 2025, pulled down by motorcycles and mopeds. When juxtaposed, suggests a dwindling of purchasing power at the lower and middle-class segments...According to data collected by the NGO People Research on India’s Consumer Economy – which some carmakers refer to internally – car penetration in Indian households that have a yearly income of less than Rs 4 lakh reduced to 1.4 per cent in FY20, from 1.9 per cent in FY16. Car penetration in households that earn between Rs 4 lakh to Rs 7 lakh annually also reduced to 8.3 per cent from 12.1 per cent in the same time period. Families with incomes of less than Rs 4 lakh and between Rs 4 lakh and Rs 7 lakh are said to make up for around 80 per cent of all Indian households. Though FY20 was the latest data available with a carmaker, they said the trend has not changed in the subsequent years.
2. Cafes are another illustration of the lack of consumption depth in the Indian market.
Running a cafe in India is something that even the boldest players have struggled to perfect, even after decades. Mid-market physical coffee chains like Cafe Coffee Day have collapsed, premium brands like Starbucks are fighting an uphill battle, and artisanal chains like Blue Tokai are facing steady losses. The truth is nobody has cracked the profitability code. The challenges are easy to spot. India may be the world’s seventh-largest coffee producer, but its per capita coffee consumption stands at a minuscule 70g compared to the global average of 1.3kg. “The math simply doesn’t add up when you factor in rental costs, labour complexity, and consumer price sensitivity,” said Abhinav Mathur, CEO of Kaapi Machines, a firm that supplies and services high-quality coffee machines. Cafes cough up 15–20% of their sales as rent at prime locations. For instance, Starbucks reportedly pays Rs 25 lakh ($29,000) per month to operate in Mumbai’s prime spots. The company needs to sell over 500 cups a day just to break even on rent.
“Rent is what makes or breaks a cafe brand in India,” said Mathur. “For Starbucks, rent makes up about 15–20% of its revenue... Even Blue Tokai spends about 15% of its sales on rent, said Chitharanjan. This is “reasonable” for its business model, he said... The investment in equipment adds another layer of complexity to running a cafe. For instance, opening a 1,000-square-foot Blue Tokai outlet costs Rs 85 lakh–1 crore, said Chitharanjan. And espresso machines cost Rs 2.5–5 lakh, depending on whether it’s a semi-automatic or an automatic one... Moreover, Indian consumers have been conditioned by decades of affordable commodity coffee pricing. For instance, a traditional filter coffee in South India costs Rs 15–30, creating psychological barriers to premium pricing. “People find it culturally difficult to pay Rs 200 for coffee,” said Mathur.
As a result, every major chain in the country—from Cafe Coffee Day to Third Wave Coffee—is currently loss-making. For instance, Starbucks’ losses have gone up by more than 5X to Rs 136 crore in the two years to FY25. Similarly, Third Wave Coffee, a chain launched in 2016, posted losses of Rs 110 crore in FY24—almost double the previous year... Despite the industry’s growth, sustainable profitability remains elusive for most players. The successful brands have generally followed one of two strategies: premium positioning with high margins but limited scale (Blue Tokai, Third Wave)—still leading to losses, or ultra-low-cost operations with minimal infrastructure (delivery-only players like the now-struggling Zepto Cafe).
Some comments on the article offer useful insights.
The psycographic-lifestyle-income gap between cafe coffee consumer and filter coffee consumer is very huge. So for any given locality (physical or qcomm) the market size has a unpenetratable celing. And that market that pays 200-400 for a coffee won’t be happy with just coffee – so the need for complex menus and costly ambiences. The tea shop culture is so broad based in India (which also offers filter coffee and instant coffee with snacks) – the cafe culture stands in isolation or should I say has painted itself in to a corner. So before entreprenuers study economics and business scaling, they should first study culture... These coffee chains expect American levels of coffee consumption when their prices are relatively 5-10x higher making it an extremely premium product. The average person in US spends between 0.1-0.2% of their monthly salary on a single cup of coffee (assuming $5 per coffee). Applying the same multiplier means a cup of coffee in india should not cost more than 50-100 rupees, far cry from the 250-400 being charged currently.
3. An assessment of the India-UK FTA here.
4. As the IMF revises global (and US) growth rates upwards, Ruchir Sharma points to the problem with the models used by economists.
Many economists had assumed that, by lowering imports, tariffs would strengthen the dollar almost automatically, as an accounting identity. Instead, it suffered its worst fall over the first half of a year since the early 1970s. This unexpected turn is now attributed to the fact that the dollar started the year historically overvalued. Many foreigners were heavily exposed to dollar assets. Of late, they have been hedging those risks and investing more outside the US. Many countries are increasingly attractive places to park money, in part because tariff threats inspired them to push economic reform and cut trade deals with non-US partners.The bigger mystery is why the stagflationary impact of tariffs has yet to materialise in the aggregate data. Is the US really enjoying a free lunch, taking in $300bn a year in tariff revenues with none of the expected heartburn? By some estimates, foreign exporters are indeed absorbing 20 per cent of the costs — a much larger share than they did in response to tariffs in Trump’s first term. The remaining 80 per cent, however, is still getting paid in roughly equal shares by US corporations and consumers. The likely answer is that the negative economic effect of tariffs is being countered by other forces, including the mania for artificial intelligence and more government stimulus. Since January, estimates of what the big tech companies will spend this year on building out AI infrastructure have risen $60bn to $350bn. Smaller businesses are scrambling to catch the wave too, further boosting growth. And all this excitement is neutralising the fear that trade policy uncertainty would dampen animal spirits and freeze new capex. AI-driven bullishness is also lifting growth by keeping financial conditions loose, even with higher interest rates... Meanwhile, the promise of tax relief makes it easier for US corporations to absorb a larger than expected share of the tariff costs, rather than pass it all on to consumers. Trump’s “big, beautiful bill” is expected to save US businesses around $100bn this year and more than that in 2026, mainly in tax breaks.
5. Rama Bijapurkar makes an important point about the current Indian middle class. She writes that the older middle class was dominated by government jobs that offered decent salaries, job security, health care, pensions, etc. With government job recruitments slowing and formal large private sector jobs not compensating, the current middle class is far less secure.
The majority will be in quasi-formal or quasi-informal small private company employment, small entrepreneurs with limited business scalability and ability to withstand environmental cycles, and self-employed gig workers with varying levels of skills and low levels of stability... They are exhausted from generating the energy needed to find meaningful work and navigate their way up the socio- economic ladder in the absence of facilitating structures. They are in search of white-collar respectability, stability, security, predictability, social mobility, recognition (which the old middle class had). Their holy grail, ironically, is a “government job”. Their deepest desire is a less exhausting life (lower aspiration levels, dreams that are “bonsai”), with little struggle and uncertainty. Is India’s famed aspirational middle class giving way to version next, the exhausted middle class? The stability and homogeneity we assume in the growing numbers of the middle class actually is a mass of heterogeneity and has inbuilt income and occupation volatility... Perhaps we should change our conceptual frame of a single middle class to a two tiered one – an economic development-driving “genuine” middle class that has the attributes discussed earlier; and a consuming capable class with purchasing power at the moment.
6. Art of the Deal in international trade diplomacy.
The president clearly has a winning formula for getting his way. First make shocking demands to stoke panic. Then pull back for time-limited negotiations. Having a mix of economically vulnerable, retaliation-shy, and pliable trade partners helps. Finally, strike an agreement below the initial threat level, and sell the result as a win-win.
7. Canada's prized export, maple syrup, 73% of its global output comes from there, is facing 35% Trump tariff.
Over 45mn kilogrammes of Canadian maple syrup — enough to smother 3bn American pancakes — went across the border in 2024, amounting to almost 60 per cent of the country’s total demand... For years, syrup flowed freely across the border. But in 1909 US tariffs were imposed to protect American production. In 1972, when those tariffs were cut back to zero, the US Department of Agriculture released a research report which found that the maple tariff was “never very effective in protecting the domestic maple industry from foreign competition”. After this, Canada made its own efforts to protect the industry. In 1996, a maple syrup federation was created in Quebec — where 90 per cent of its syrup comes from. The cartel (known formally as the Quebec Maple Syrup Producers) sets a floor on global syrup prices and smooths out variable harvests. Once processed, Canadian maple syrup can sit in the federation’s enormous warehouses — which have 53 Olympic swimming pools’ worth of storage capacity — for years without degrading. The federation says that it any unsold inventory can be added to this strategic reserve. It also points out that it has made strides diversifying away from US buyers in recent years, reducing the proportion of production that goes there by roughly 20 percentage points over the last couple decades.
8. A snapshot of US imports and exports from India.
This is on the great walk back on China, whose tariffs are only slightly higher than India's and much lower than Brazil's.
12. FT long read on how Eli Lilly's Mounjaro and Zepbound came from behind to overtake Novo Nordisk's Ozempic and Wegovy as the leading obesity drugs.
13. Good graphic about the scale at which AI's consumption of computing power and electricity is growing.
14. Robin Harding points to two contrasting facts about the Japanese economy.
Number one: the yield on 30-year government bonds hit an all-time high of 3.21 per cent earlier this month after a series of weak auctions — a sign, perhaps, that markets are finally becoming concerned about the country’s enormous public debt. Number two: according to Morgan Stanley, Japan’s budget deficit was almost completely eliminated in the first quarter of this year, putting the public finances in their best position for almost three decades.
15. Desalination of water is a rapidly growing industry. Global desalination industry is expected to exceed $20bn in 2027, from less than $15 bn in 2024. And annual growth in desalination capacity is 6-12%. Middle East and North Africa account for 70% of the global capacity.
16. Finally, the progression of Trump tariffs since April 2, 2025.
