Weekend reading links

1. Mint's N Madhavan discovers Kerala's national highways paradox.

The state boasts an extensive network of 11 national highways and 83 state highways. Yet, on the ground, these vital arteries remain choked, narrow two-lane bottlenecks. Traversing the 650-km expanse of National Highway 66 takes an agonizing 14 to 16 hours—double the time required to cover a similar distance between Delhi and Prayagraj in Uttar Pradesh. While the rest of the country races ahead with multi-lane, access-controlled expressways, Keralam is only now pushing through its first six-lane upgrade along National Highway 66—a delayed ₹66,000-crore project that experts note is arriving very late... To test the state of Keralam’s road connectivity and infrastructure—critical for the growth and investment it seeks—I decide to drive from Vizhinjam, near the southern tip, to the state’s border with Karnataka in the north. The distance of 769 km will take 21 gruelling hours. The average speed across the entire journey? A sluggish 33 km per hour.

2. Kerala takes to an ageing society with innovative policy responses like day care cenres and timebanks to address problems of loneliness among the elderly.  

Started in 2021, the Kunduparambu Pakalveedu was the first daycare centre for senior citizens set up by the Kozhikode Corporation. In 2025, it won the best ‘Pakalveedu’ award among the 150 that are operational in Keralam today... Fun trips are arranged periodically... The seven fully funded Pakalveedu facilities the Kozhikode Corporation runs are just one part of its efforts in elderly care. The corporation spends 10% of its ₹132 crore annual outlay on the welfare of senior citizens, who account for 17% of the city’s population... According to a study jointly conducted by the Population Foundation of India (PFI) and International Institute of Migration and Development (IIMD) in 2025, 18.6% of Keralam’s population is today aged 60 years and above as against the India average of 10.8%... By 2051, almost one in three people in Keralam will be a senior citizen. The PFI-IIMD study puts the number at 30.6%. In comparison, the India average will be 20.4%.

The state has steadily strengthened its social safety net for the elderly. The previous Left Democratic Front government pioneered an ‘elderly budget’ to track interdepartmental spending and established a quasi-judicial elderly commission to safeguard senior rights. Backing these policies with substantial resources, the state ramped up its commitment in the 2026–27 budget, allocating 19% of its total outlay exclusively to senior citizens. The new United Democratic Front (UDF) government led by Satheesan is formulating policies to take these efforts forward. It has set up a separate department for elderly welfare... The new Keralam government has adopted an ‘aging in place’ model that allows elderly citizens to live in their neighborhood and social environment rather than shift to an institutional facility or an oldage home. It is the Japanese model and Keralam is studying it closely...

Keralam is just 1.5 children per woman, as against the replacement level (the average number of children per woman needed for a population to replace itself from one generation to the next) of 2.1 children. Life expectancy is also higher at 75.1 years compared to the India average of around 72 years. What complicates the process for Keralam is its high level of migration, especially among the younger population. As per the 2023 Kerala Migration Survey, 2.2 million people have migrated to other countries and another 0.5 million have done so to other parts of India. This means senior citizens are left behind.

3. Good long read on the Rs 2 trillion (initially estimated at Rs 1.08 trillion in 2017) Mumbai-Ahmedabad high speed rail. 

4. Make in India update.

Under the Electronics Components Manufacturing Scheme, or ECMS, ₹69,000 crore of investment has come in, exceeding the scheme’s original investment target by ₹10,000 crore. The government has approved 106 projects, to make speakers, microphones, camera modules, displays, relays, coils, rare earth magnets and so on... Domestic manufacturing now meets India’s requirement for some products, such as plastic enclosures, anode materials, optical transceivers and relays. Local factories meet 60% of lithium-ion-cell demand, 80% of laminate demand and 75% of connector demand. Some components, including networking equipment, relays, LED lighting parts and automotive electronics are beginning to be exported to China, Vietnam, Singapore, Italy, The Netherlands and other countries... But for all the gleaming new production lines, local value addition in India remains modest, at 15–18%, versus 40% in China. Critical chips continue to be imported. Printed circuit boards, sensors, and specialized materials are only beginning to be produced locally at scale. Precision components that go into earbuds, hearables, wearables, smartphones et al. depend on imports... Plastics, heat sinks, shielding covers, battery packs, chargers and cables are already increasingly local. The next round includes PCBs, display modules, camera modules, passive electronic components and semiconductor packaging.

5. It is hard to displace America as the pre-eminent economic power. Sample this, even amidst all the dysfunction.

One Trumpian key performance indicator is what you might call the national cash flow statement. Gross payments entering America of all kinds hit a huge 30 per cent of GDP in the second quarter. Reflecting the aim of monetisation, not autarky, America is more globalised than at almost any point in history other than the prelude to the 2007-09 crisis. Energy exports have exploded. Weapons sales overseas are rising at a double-digit rate. Tech and financial firms are printing money abroad. Capital inflows, mainly from portfolios, loans and firms, are staggering, although exceeded as a share of GDP by the pre-2007 mania. While America is now spending almost as much on AI chips and tech hardware imports as on defence, the current account deficit has eased to 3 per cent of GDP. The payments of all kinds leaving the US must balance those entering, but investment outflows are often orchestrated by Wall Street, boosting the US’s role as the world epicentre of capital allocation.

6. The always excellent Simon Kuper is spot on about French politics.

The French tend to talk radical but act conservative. This is a country where 57 per cent are homeowners, and many people spend their lives looking forward to retirement. They rely on the state. They want it to function. Revolutionary language is in part just a bow to French heritage. Even many of the voters who backed radicals in past elections quietly wanted an overeducated technocrat to win. Then they could spend five years protesting against him. The 1968 “revolution” culminated in the election of centre-rightist Georges Pompidou, product of the École Normale Supérieure. But last Saturday was a dramatisation of a new French political alignment, in which technocrats, with Emmanuel Macron as their final incarnation, risk being chased from the stage...

Macron has governed as a high-handed leader — “Jupiterian”, in his own description — who rarely consults. “Macron’s Achilles heel is that he’s not good at dealing with negotiation,” Philippe Aghion, the French economist who won last year’s economics Nobel, told me. “They don’t know how to deal with social movements. Or they don’t have the patience.” This is a Macronian flaw, but it’s also baked into France’s “vertical” political system, says the philosopher Gaspard Koenig. He pulls out his copy of Tocqueville’s Recollections, about the 1848 revolution, and reads: “But there is one institution that cannot be destroyed: centralisation.” Koenig says that demonstrators typically aspire only to replace France’s mighty leader with a different mighty leader.

And this is a problem for governments across the world, as electorates are unwilling to accommodate.

France’s deficits are becoming a slow-burn crisis. Public debt of 120 per cent of GDP would be manageable if parliament could agree to start cutting the deficit. Jean Tirole of the Toulouse School of Economics, the economics Nobel laureate for 2014, says: “I think what financial markets are worried about is the fact that nothing is happening.” He contrasts France with Greece during its 2010s’ debt crisis: “The Greeks at some point realised that things were very bad. I’m afraid we are not at this stage.” Popular support for balanced budgets appears weak. Government spending is 57.3 per cent of GDP, joint highest in the western world with Finland, and Tirole notes that even with deficits of 5 per cent, many accuse Macron of “austerity”.

7. The shortening of US debt tenors.

US Treasury secretary Scott Bessent appears to be reducing the average weighted maturities of Treasuries. These currently stand under six years (compared to 13 years in the UK, or around eight years in Germany, France and Japan)... One reason, Treasury officials tell me, is that — unlike with credit cards — short-term rates are currently lower than long-term ones. Another is that recent structural shifts in finance are boosting demand for short-term debt. The fast-expanding stablecoin sector, for example, is gobbling up short-term dollar debt — and now holds more Treasuries than Saudi Arabia and Germany combined. The maturity of debt bought and held by the Federal Reserve is also declining. And foreign investors are tilting short-term too, either because they are wary of making long-term bets on the US or because of foreign hedge fund trading strategies. Indeed, Fed research shows that hedge funds doubled their US debt holdings between 2023 and 2025, and now control about 8.5 per cent of the market — more than the official holdings of Japanese, Chinese and Saudi Arabian investors combined.

8. China's battery competitiveness in numbers. 

China's battery manufacturers -- CATL, BYD, Gotion, CALB and Sungrow -- are able to build a gigafactory — the industry term for the plants making cells used in EVs, AI data storage centres and power grid backup systems — in China for about a third of the cost and three times faster than building the same type of facility in Europe.

9. Indian states are paying exorbitant subsidies to attract data centres.

And the investment is all coming from foreign firms. 

10. Rama Bijapurkar points to an important aspect of the battle at Tata Sons and raises pertinent questions.

That a CEO with no shareholding backing, along with board members who do not represent chunks of shareholding, can challenge a promoter with a 66 per cent holding and pressure it to dilute its stake, and not have sway over decisions is a first-time challenge to power structures — which have stood the test of time, tradition, convention, and culture, rightly or wrongly. It brings a fresh round of calibration, especially by promoters, of their terms of endearment and engagement with professional CEOs, not to mention boards. More so, if their shareholding is well below 51 per cent... Given the promoter-friendly, promoter-respectful and promoter-on-top ethos of corporate governance that has existed and continues to exist in India, this departure from the norm against none other than the venerated, iconic Tata promoter group with its track record of trusteeship and larger good over personal gain has rocked the comfort boat all around.

The ripples it will cause are yet to become clear — will promoters be nervous seeing such a coup by the professional hire? How will they respond? Will they pick boards like in the old days, based on loyalty and narrow subject-matter expertise? Especially as the law of the land and the market regulator push more power and accountability in the hands of independent directors? Will boards be now placed under more pressure from external directives on which way to vote, getting trapped between the rock and the hard place of the promoter and the proverbial hand of God? Will CEOs have less freedom to operate and more fetters? And does this add to the bad rap that India has been getting of late as a safe, stable place to invest in for the long term? Probably yes to all.

11. Akash Prakash provides some home truths on India's equity markets.

Since the Indian market’s peak in September 2024, we have seen $65 billion in net outflows by foreign portfolio investors (FPIs). Over the last decade, India has received zero net-foreign flows. The stock of Indian equities owned by foreigners has fallen from $930 billion to about $675 billion, and foreign ownership as a percentage of the market is now at a 15-year low. India is now a consensus underweight for all global investors and our weighting itself has shrunk from 21 per cent in September 2024 to about 10 per cent today (MSCI Emerging Market index). One company, TSMC, has a benchmark weight 50 per cent higher than that of all of India! The three EM heavyweights — TSMC, Samsung Electronics, and SK Hynix — together account for 30 per cent of the index, but have almost three times India’s weighting...

Since the peak in September 2024, Indian equities are down about 25 per cent in dollar terms, even as the EM indices are up about 50 per cent. We have, therefore, underperformed by 7,500 basis points (75 percentage points) in the last two years alone. I have never in my career seen this quantum of underperformance in this short a period. It has destroyed careers and blown up funds. There are numerous funds that have destroyed 10-year track records in the last 24 months by simply being overweight India... for the first time I am now being asked about the need for an India-dedicated allocation. Many allocators no longer think India is important enough to warrant dedicated exposure.

12. India's battery energy storage systems (BESS) capacity is surging. 

On 3 September this year, the CEA proposed mandating two-hour battery energy storage systems (BESS), with capacity equivalent to at least 10% of installed capacity, for all new solar and onshore wind projects commissioned after 1 July 2027. These systems can store solar and wind energy when it is generated for use later. India currently has only 8.6 gigawatt hour (GWh) of BESS capacity. Another 42.53 GWh is under construction, 38.42 GWh has been awarded, and 65.57 GWh is in the tendering process. That amounts to 155.12 GWh of existing and planned BESS capacity, while the CEA projects a requirement of 236 GWh by 2032.

The boom in solar generation is now creating problems like excess supply and the need for curtailment during day times. 

According to Ember, a Norway-based think tank focused on energy transition, transmission constraints led to the loss of 300 GWh of clean electricity in India in the first quarter of 2026 (January–March), particularly at grid pooling stations in the northern and western regions. On 30 March alone, India lost 34 GWh of clean generation, equivalent to the daily electricity use of about 5 million urban middle-class households, Ember said in a report in May. The analysis also found that total renewable energy curtailment in Q1 2026 reached around 470 GWh, of which 300 GWh stemmed directly from transmission constraints. The northern region accounted for 178 GWh and the western region for 122 GWh. The southern region recorded none, reflecting better synchronisation between generation and grid expansion...

Inadequate transmission capacity has left about 40GW of power purchase agreements (PPAs) and power sale agreements (PSAs) unsigned, according to the Ember report... Inadequate energy storage has also led to an oversupply of solar power, primarily between 11 am and 3.30 pm, forcing discoms into distress sales on power exchanges, according to executives with power developers. Power prices fell below ₹0.05 per unit 31 times in the first quarter of FY27, hitting zero on 1 May, according to data from the Indian Energy Exchange. In the year-earlier first quarter, power prices had dropped below ₹0.05 per unit six times... The bulk of India’s electricity is sold under long-term power purchase agreements at fixed schedules outside the exchange. Only about 13% of the country’s power is traded on the market.

13. Weight loss drugs are impacting the economy in unexpected ways.

As of June, roughly 38mn people in the US were actively using them, according to pollster Gallup. In the UK... People on weight-loss drugs are changing what they eat, do and buy, distorting traditional patterns of consumer spending. For certain sectors, such as gyms and healthcare supplements, GLP-1s are creating new customers and opportunities for expansion... Brands from restaurant chains to alcohol are trying to protect their margins by selling less of their product for the same price — or higher... In the UK, GLP-1s have cut grocery spending by an estimated £780mn per year at current uptake rates, according to Worldpanel by Numerator, a research group... Weight-loss drugs are part of what now looks like a broader, permanent shift in consumer behaviour, analysts say, as people fixate on health — on eating protein, taking supplements and tracking nutrition and exercise, while cutting back on alcohol.

And this

A 10 per cent average weight reduction among the 178 passengers on a Boeing 737 Max 8 would shave 2 per cent from the aircraft’s take-off weight, she found. For the four large US carriers combined, these savings could equate to about $580mn per year... The Magnum Ice Cream Company is focusing on bite-size and small portions and ice cream enriched with protein, which users are advised to eat more of to offset the muscle loss associated with the drugs.

14. The evolution of India's capital gains taxation regime for equities.

And STT in various countries.

15. Immigration in Spain under the Socialist Prime Minister Pedro Sanchez.

Between 2019 — the prime minister’s first full year in power — and 2026, the number of foreign-born residents in Spain surged by 3.5mn to 10mn, taking the country’s population to almost 50mn, according to the national statistics agency. Sánchez says immigrants have helped make Spain the rich world’s fastest-growing big economy, although growth in GDP per capita has been less impressive.

Weekend reading links

1. Thanks to inflation global debt burdens have been declining, falling by 27 percentage points between early 2021 and end of 2023. 

2. Rent controls may do more harm than good, except in controlled apartments.

And Spain is a good illustration that immigration is adversely impacting the housing market.

3. Excellent article on ASML, 42-year old, Veldhoven-based, Dutch maker of the $400 million extreme ultraviolet (EUV) lithography machines. 

The size of a double-decker bus, the machine prints circuits on to silicon wafers by firing light generated from 60,000 droplets of molten tin per second at them, using mirrors, lasers and short-wave light in a kind of vacuum-sealed nano-photocopier... ASML’s supply chain is something else. Where a typical industrial product might have a few dozen suppliers, an ASML EUV has more than 100,000 parts provided by 200 principal suppliers and 2,000 companies overall... Rather than trying to make everything itself, ASML outsources to the best manufacturer of each component — Zeiss for optics, Trumpf for lasers, VDL for mechatronics.

4. BigTech AI borrowings have fragmented the US debt market into two parts - AI-borrowing and the rest - and there is a growing risk that the cost of capital for everyone will rise as AI borrowings rise.

The scale of the borrowing will have its impact in squeezing out the rest of the economy and raising cost of capital for everyone. And it is going global.

In June, Amazon sold C$14bn ($10bn) of debt, smashing the Canadian currency’s previous record of C$8.5bn set by Alphabet just a few weeks earlier... Last month Alphabet issued a record A$5.5bn ($3.9bn) bond in Australia, more than twice as large as the previous biggest. The group also holds the record for the largest Swiss franc bond issue, having raised SFr3.1bn ($3.7bn) there in February. Amazon’s SFr2.8bn offering in May is the second-largest... Alphabet sold £5.5bn worth of sterling bonds in February, part of a $31.5bn package that included a rare 100-year £1bn bond that some say rekindled interest in long-maturity sterling debt. Amazon also raised £4.25bn earlier this month, its first-ever sterling issue.

What complicates matters is that the surge in AI borrowings come precisely at a time when government borrowings are also rising and are competing with each other, putting pressure on bond yields. 

5. India equity market facts of the week.

Both the Nifty and the Sensex... have ended in the red for eight straight weeks, their longest losing streak in 25 years. In the first nine months of 2026, foreign portfolio investors (FPIs) have pulled out at least ₹3 trillion from Indian equities, surpassing all annual outflow records.

6. Excellent chronicle by MS Sahoo of the emergence of India's regulatory architecture since 1991.

7. African credit ratings fact of the week.

Of an estimated $4tn regional capital base, less than a quarter is covered by credit ratings, according to the African Union. At the end of 2025, it said, the continent had fewer than 4,000 ratings, compared with 823,000 in the EU and more than 2mn in the US.

8. John Mearsheimer describes the Iran war the "mother of all strategic blunders".

Iran is number one in my opinion, because 1) we went into that war based on the false claim that Iran was on the verge of acquiring a nuclear weapon; 2) we had a theory of victory — air power alone would produce regime change — that has never worked and was not going to work this time; 3) we had no contingency plan for dealing with the likelihood that Iran would close the Strait of Hormuz; 4) we failed to achieve any of our four principal objectives — regime change, ending Iran’s nuclear enrichment capability, ending Iran’s long-range missile capability, and ending Iran’s support for Hamas, Hezbollah, and the Houthis; 5) the Strait was closed, which has already done significant damage to the international economy and could do much more — remember President Trump worries about following in Herbert Hoover’s footsteps; 6) we seriously undermined our carefully crafted alliance structure in the Gulf; 7) virtually all of our bases in the region have either been badly damaged or destroyed, to the point where we have moved most of our military assets out of the Gulf region and will probably not be able to return; 8) we have run down our stocks of key weapons to the point where we have weakened our deterrent postures in East Asia, Europe, and even the Western Hemisphere; 9) we have done enormous damage to our reputation as a reliable and wise ally; 10) we have markedly improved Iran’s strategic position in the Gulf region; and 11) there does not appear to be much chance — perhaps no chance — that we will get a nuclear deal of any sort with Iran, which was once considered of the utmost importance. In fact, there is a reasonable chance Iran will acquire nuclear weapons. President Trump has certainly given Iranian leaders — and other leaders of non-nuclear states around the world — a powerful incentive to acquire a nuclear deterrent.

9. Martin Wolf points to why the Iran war did not disrupt the oil markets and world economy as much as expected, with real oil prices still only around the long-term average. 

Johannes Urpelainen of the Johns Hopkins School of Advanced International Studies notes that: “First, the energy transition has reduced the global economy’s dependence on oil. Second, supply chains have proven resilient and adaptive. Third, producers outside the Middle East have acted fast to produce more oil and natural gas. Finally, drawdowns of global oil inventories have filled the remaining gap.” Flexibility is notably true of the Gulf. As former diplomat Mohammed Elsoukkary writes: “by the end of September preliminary estimates placed regional crude exports at approximately 16.3 million barrels per day, compared with 19.5 million in February, including roughly 9.7 million moving through Hormuz.”

Interestingly, the world entered the War with record inventories, accumulated especially in 2025.

10. French bond yields are higher than Italy's.

Not only does it now cost France more to borrow than it does Italy and Greece; a rising number of big French companies enjoy lower market interest rates than does the French state. Of all the G7 nations, it has suffered most from the debt sell-off triggered by the Iran war... France’s debt has reached €3.5tn, at nearly 120 per cent of GDP, far above the Eurozone average. Servicing costs have climbed fast to become the state’s single biggest expenditure ahead of education or defence. In just a month the additional interest rate that France pays to borrow over ultra-safe German debt — a key barometer of investor concern — has surged by almost two-thirds to around 1.4 percentage points on 10-year debt, heading towards the heights charted during the Eurozone debt crisis... A series of ratings downgrades has helped push up the country’s borrowing costs, which passed Greece’s in late 2024 and Italy’s last year. Investors now label France the “new periphery”... Despite the government’s tax-raising powers, its borrowing costs now exceed those of big French multinationals such as LVMH, the luxury group, and Sanofi, the pharmaceutical company. According to Goldman Sachs, more than a quarter of investment-grade French companies had a lower yield on their bonds than comparable government debt as of the end of September...

Increasing taxes to deal with the rising cost of debt servicing could also be perilous. At 44 per cent of GDP, the tax burden is already among the world’s highest; the average in the OECD club of rich countries is 34 per cent. Almost a quarter of public spending is gobbled up by pensions. French retirees leave the workforce earlier and receive relatively generous benefits by OECD standards. Attempts to push back the retirement age trigger angry protests.

11. US Treasury bonds are now threatening to hit 6% for the first time since the turn of the millennium. 

Borrowing costs for companies with the lowest credit ratings hit their highest level since May 2020 this month at 17 per cent, driven by the rise in Treasury yields to multiyear highs and by investors demanding more compensation for lending to such businesses. The risk premium for companies rated triple C or lower has risen to 12 percentage points, the biggest since 2022. Analysts said companies with floating-rate loans, and those needing to refinance debt in the coming months, were most at risk from the government bond sell-off, which last week pushed the yield on the 10-year Treasury note to its highest since 2002... But a further rise in Treasury yields could lead to broader pain across credit markets, analysts say. When it comes time to refinance existing debt, higher rates risk jarring the many companies that took on debt when interest rates were at rock-bottom levels in the early 2020s. Moody’s estimated last year that a record $1.45tn of US investment-grade corporate debt would come due between 2026 and 2030. Rising rates will put pressure on businesses to increase profits at a similar pace to rising borrowing costs.

12.  S&P quarterly earnings growth to remain above 25% for more than three quarters in a row. 

13. Ethnic cleansing in West Bank and East Jerusalem now. 

14. Interesting analysis of Adani Group's acquisitions through the NCLT process.

Since 2018, Adani Group, its linked entities and consortiums have participated in bids to acquire 26** distressed companies through India’s bankruptcy process. It has won 16 of them, with one case ongoing, though the latest decision went in Adani’s favour. This is a 61.5 percent success rate – meaning it won nearly three out of every five bids. While 14 of these 16 acquisitions came through the Corporate Insolvency Resolution Process (CIRP) to revive distressed business, the other two came through liquidation aimed at winding up operations... Across the 16 Adani acquisitions where tribunal orders disclose both admitted claims and recovery, creditors were owed approximately Rs 1.31 lakh crore and recovered only about Rs 33,000 crore – just 25.4 percent of the total. The loss was estimated to be over 97,700 crore, making the haircut around 74.6 percent. That is slightly higher than the national average of 69.4 percent.

Weekend reading links

1. China's effect on solar power in a graphic.

At the turn of the millennium, solar panels cost $5-$6 per watt of generation capacity. Today, they sell for around 12 cents per watt, a level described as “offensively cheap” by Dave Jones, co-founder of think-tank Ember. That reduction is entirely the result of an explosion in China’s production capacity, which, according to research firm Wood Mackenzie, stands at roughly 1.36 terawatts, even as Beijing tries to rein in output to combat price deflation.

And rooftop solar generation is causing a loss of good customers across utilities, triggering a 'utility death spiral'. 

Shoprite, Africa’s biggest supermarket group, says the company could “power an entire suburb” with the panels it has been installing on its roofs and trucks in South Africa and Namibia since 2015. But what has been good for Shoprite, which now has around 43MW of peak capacity at its disposal and is looking at battery storage, constitutes a problem for state power utility Eskom. It estimates that rooftop solar panels and batteries, mostly installed by businesses and wealthier customers in response to years of rolling blackouts, were responsible for around 7 per cent of the 11.7 terawatt-hour reduction in its electricity sales for the year ending March, compounding a sharp fall in industrial use exacerbated by high prices. 

The lower revenues come as Eskom needs to fund the upkeep of the grid, which allows households to export electricity during the day, and the power stations that fill the generation gap when it’s dark or cloudy, or when power stored in batteries is insufficient to meet demand. “Everyone who has rooftop solar in any major city, they are still connected to the grid,” says its chief executive, Dan Marokane. “Three weeks ago . . . the whole country had to rely on Eskom generation for three days,” he adds, due to prolonged cloudy weather slashing output from rooftop panels... In Australia, operators of the high-voltage transmission system have grappled with too little demand as consumers draw power from their rooftop panels rather than the grid. Very low demand can make it harder to run certain power plants needed to keep the whole system stable.

2. AI is transforming warfare, and the Russia-Ukraine war is the testing ground for these technologies. 

AI technology has changed how the war in Ukraine is fought. At the start of the conflict it could take 20 minutes to identify a target and launch a strike. Now that process can take less than two minutes, sometimes just seconds... When militaries talk about AI, they are not talking about a single system. They are referring to software being used at different stages of warfare — collecting and processing data, helping commanders identify and prioritise targets and allowing drones to keep operating when communications are jammed. AI-enabled software can process “mass data at a scale, a speed that human staff officers can’t do”, says Anthony King, professor of war studies and director of the University of Exeter’s Strategy and Security Institute. Rather than altering the sharp end of a conflict, King says the primary function of AI has been to improve “situational awareness and intelligence”. The technology can help commanders make battlefield predictions, from the sustainability of a campaign to the rate at which munitions are being depleted.

3. What are the fiscal costs of immigrants?

The UK's comparatively low rates of tax and social insurance contributions for low-paid workers plus a relatively flat state pension mean that people (immigrant or otherwise) who do small amounts of paid work or remain on low incomes contribute little to the exchequer but still benefit from robust state support. In Germany or France’s fiscal systems, someone with the same weak employment and earnings patterns would generate much larger receipts from tax and social insurance due to the flatter tax regime, and would receive a comparatively smaller pension since these are linked more tightly to lifetime earnings.

The result is that in order to be a net fiscal contributor over their lifetime, the average couple arriving in the UK at age 30 needs the primary earner to have a salary at the 55th percentile of the overall earnings distribution, compared to the 45th in France and 28th in Germany. This is according to a new working paper on the fiscal impacts of immigration in different European countries by Usama Polani, a researcher at the Stanford Institute for Economic and Policy Research. Put another way, for immigration to be financially beneficial to the state, the UK needs to attract migrants with much higher pay and rates of employment than its peers.

4. The government seeks to restructure the governance of the storied Indian Statistical Institute (ISI). 

The ISI Bill 2026 seeks to repeal the earlier ISI Act 1959, changing the institute’s status from a registered society to a body corporate. This would replace its 1,800-plus-member general body and 33-member board with an 11-member board, with seven members aligned with the government and four representing ISI... The new board will be leaner by a factor of three: the President of India will be the visitor and will appoint the chairperson as well as four experts of her choice, joined by two representatives from Mospi. The four remaining members will come from ISI... The academic council, which discusses general syllabi, the number of students to be admitted, and new courses, has so far comprised all ISI professors, representatives from all constituencies, and the director as chairperson. The new bill changes that. Under it, the academic council is reduced to a small body, mostly made up of government representatives. The dean of studies is not a part of this council in the proposed bill.

5. Oil prices over the last fifty years.

Oil production is also less concentrated in the Middle East. The US is now the world’s largest producer, ensuring it will not have a supply shortage, and Canada, Brazil, Guyana, Venezuela have all increased production during the Iran crisis. More importantly, a barrel of oil matters less to the global economy than it used to. Oil’s share of global energy demand has fallen below 30 per cent from a peak of 46 per cent half a century ago. At the same time, the amount of energy needed to produce a unit of GDP has fallen by more than a third since 1990. Ben May, head of global macroeconomic research at Oxford Economics, says the inflationary impact of the Iran war has been dulled because “we went into the crisis with favourable oil supply” at a time when overall economic demand was “steady rather than spectacular”. When the war began, by contrast with the 1970s energy shock, the world had strategic reserves, an oil glut and growing supplies of liquefied natural gas, and a sophisticated trading system in which thousands of tankers criss-crossed the globe.

6.  NYT has this investigation of how online gambling giant DraftKings is using algorithms to target gamblers who are likely to lose the most.

So in 2023, DraftKings took customer betting records and built a machine learning model, a form of artificial intelligence that seeks patterns in data, to answer the question: Who was more likely to respond to promotions by gambling — and losing — more?... DraftKings makes money when gamblers lose money. And the model sought to identify those it could get to lose the most. It scored each customer based on their habits: The higher the score, the more money a gambler was likely to lose for each promotion offered... DraftKings has continued to hone its methods, using data science, to target losing gamblers with promotions that encourage more betting, according to six former employees who worked on them. 

At the same time, four other former employees said, DraftKings has stalled or squashed efforts to use similar technology to predict who might develop a gambling problem based on their betting activity... documents show how the model... analyzed dozens of data points for each gambler, including how frequently they played, their daily account balances and how much they typically lost compared with how much they bet. It also incorporated another model that calculated how likely a user was to stop gambling. This betting data may also contain signs that a person is headed for trouble. Yet when employees developed a machine learning model that would have assigned users “risk scores,” the company sidelined it, according to two former employees who worked on that project...

Promotions, which take on forms like a free bet, a “profit boost” or a deposit bonus, play a vital role in DraftKings’s business: The company brought in around $8.7 billion in gross revenue from sports and casino gamblers last year, and gave out about $3 billion in promotions, according to research by Citizens Bank... they were effective because they take advantage of gamblers’ psychology. “I feel I’m getting free money,” he said, “but really it’s dragging me back in.” Several gamblers told The Times that promotions fueled their addictions....

In 2018, when the Supreme Court ruled that states could legalize online sports gambling, it ushered in a new era in which betting has moved beyond casinos and racetracks. Professional sports games are now saturated with celebrity advertisements, encouraging people to wager on their phones. DraftKings and its rival FanDuel dominate this new industry, which has expanded into online casino games and, more recently, prediction markets. DraftKings says it has 11 million customers, compared with five million in 2022.... Silicon Valley firms spent years analyzing every digital interaction to predict what will keep users clicking on advertisements. Now, as companies like DraftKings have made gambling accessible to millions on smartphones, they too have collected an extraordinary wealth of data.

7. The imposition of the 0.4 per cent MDR fee on UPI transactions of more than Rs 2000 has generated intense debate. Janak Raj has a very good article. 

8. Some facts about the SpaceX business model assumptions.

Analysts have the company delivering revenues of over $650 billion, with an operating profit of over $335 billion by 2031. The company itself is projecting revenues of $1 trillion by 2030 (that is 25 per cent of India’s current gross domestic product). The models have the company generating no free cash flow through 2031, with capex of over $1.76 trillion from 2026 to 2031. Total annual capital expenditure for listed Nifty500 companies in India is about $100 billion. Such is the scale and ambition of SpaceX.

9. The cost differential between imported and domestically manufactured solar cells is significant, and assumes importance in light of the restrictions on the use of imported cells for grid-scale solar plants.  

The ALMM List-II mandate requiring domestically manufactured cells for utility-scale projects from 1 June 2026 tightened cell supply and lifted prices... The shift to domestic sourcing can sharply increase costs for projects that were originally bid on the assumption that imported cells would be used... Sudharman Ezhil, director and CEO of Natrinai Ventures (NGE Green Energy), said the cost difference between a domestic-cell plant and a non-DCR plant is currently at least ₹70 lakh to ₹1.2 crore per MW. "On a 50 MW project, that is ₹35–60 crore that was not in anyone's bid model," Ezhil said. According to him, projects bid before mid-2025 assumed imported cells at ₹14–15 per watt. The same module using a domestic cell now costs ₹24–25 per watt, he said. "That alone moves the total project cost by 15–20%," Ezhil said. He said the issue is not limited to cost. "Cell manufacturing is far more complex than module assembly, process control, wafer quality, yield, and India's listed cell capacity is a fraction of its module capacity," he said. Developers are therefore dealing with both higher procurement costs and uncertainty over the long-term performance of newly listed domestic cell lines. Projects awarded at tariffs of around ₹2.50–2.60 per unit were bid when costs were lower. Once a power purchase agreement is signed, developers have limited ability to pass on higher project costs through the agreed tariff... The domestic content requirement (DCR) premium alone could increase utility-scale tariffs by ₹0.25–0.40 per unit, even before the cost of storage is included.

Are we saying another round of defaults, restructurings, and consolidation in the solar industry? 

10. China ramps up gold imports in efforts to diversify its reserves.

China has spent a record sum importing more than 1,000 tonnes of gold this year as the central bank and local investors pour cash into bullion amid rising geopolitical tensions abroad and poor returns on local assets. The world’s second-largest economy spent $158.8bn on gold in the first eight months of the year. That compared with spending of $96.5bn for all of 2025 on 886 tonnes of gold... Chinese investors are increasing gold purchases as part of broader efforts to diversify their assets. Chinese holdings of US Treasuries fell to $618bn in July — the lowest level since August 2008...  

Domestic investment options in China are more limited since the country’s property market began collapsing in 2021. The benchmark CSI 300 index is down 1.8 per cent for the year and is still more than a fifth below its peak in early 2021. Meanwhile, yields on Chinese government bonds are close to record lows.

11. The yen carry trade, which has been an important driver of cross-border capital flows and a major buyer of US Treasuries, apart from contributing to keeping down the value of the yen, may be reversing after nearly three decades. 

The yen carry trade is the term for when hedge funds and others use Japan’s currency to access low-cost financing to make bets in markets across the world. For almost 30 years, investors have borrowed the cheap, stable yen in order to fund higher-yielding investments elsewhere, exploiting differences in interest rates and, in particular, the fact that until this month the central bank benchmark rate had not risen above 1 per cent since 1995. But every so often, those differences threaten to shrink, or the value of the yen shifts with unexpected speed. Investors exit carry trades and dump the acquired assets — fuelling spectacular spasms in global markets from emerging economy debt and Nasdaq stocks to cryptocurrencies and luxury property. For this reason, the health of the global economy is deeply connected to the state of the yen, making the carry trade a proxy — albeit an opaque one — for risk...

Even though its true size is extremely hard to gauge, the current value of the carry trade may far exceed $2tn, making it probably the biggest it has ever been, the world’s regulators heard from the experts in Tokyo. The concern that the cheap yen may be anchoring US Treasuries and may have helped inflate a bubble in AI-related shares, they added, leads the list of worries. Many strategists now say that one of the top risks for the year is the danger that the carry trade unwinds... In previous reckonings of the carry trade, the overseas investments of Japanese companies were rarely considered... According to data from Citi, the total outstanding Japanese stock of foreign direct investment, incorporating equity capital, reinvested earnings and debt capital, reached ¥384tn in 2025, meaning it has increased from 20 per cent of GDP in 2014 to more than half today. Citi estimates that non-financial corporations in Japan now hold more overseas assets than banks, pension funds and insurance companies...

For years, the speculative carry trade and the enormous underlying outflow of corporate Japan’s investment created downward pressure on the yen. Now, analysts are wrestling with the prospect of that being reversed - even if many believe that Japanese households and companies are too conservative to move with speed. The mere fear of such an outcome could start a carry trade unwind in motion as investors rethink how safe their current positions really are... A sharp carry-trade reversal, or a massive but gradual repatriation of Japanese capital taking advantage of decades-high yields on domestic bonds, could prove extremely painful to Bessent and other finance ministers across the world. During its era of rock-bottom yields at home, Japan has been a reliable source of demand to absorb record levels of rich-world sovereign borrowing.

12. Anthropic's spectacular pre-IPO valuation run up.

Founded in 2021, the creator of Claude hadn’t even produced a dollar in revenue until 2023. By August, it was making around $65bn on an annualised basis, although such unofficial numbers should be treated with kid gloves. This growth seems to have come as a surprise to Amodei too. Only 18 months ago, Anthropic expected its revenue in 2027 to be just $12bn. Now, some investors predict a revenue run-rate of $320bn by the end of next year. They are not impartial, of course. But if they are right, then $2tn would represent a valuation of just seven times its 2028 sales. That’s a little less than Microsoft, according to LSEG. SpaceX, meanwhile, trades at 16 times that year’s revenue. Take that as the benchmark — they are both companies with wild aspirations and charismatic leaders — and Anthropic could in future be worth $5tn.

13. Big Tech guarantees are surging and risks spinning out of control. Morgan Stanley analysts estimate $3.1 trillion in guarantees issued by the seven hyperscalers and chipmakers.

Big Tech companies are rapidly expanding their use of guarantees to back debt for AI data centres and chips, issuing up to $300bn in commitments in less than a year while recording little of that exposure on their balance sheets... These arrangements, under which tech companies guarantee a minimum future value for chips or data centres, join a growing set of creative financing structures embraced by Big Tech to accelerate the AI infrastructure boom... They typically backstop debt that is issued not by the tech companies themselves but by special-purpose vehicles that own the infrastructure, allowing the tech groups to lend their financial strength to the deals without needing to fully book the liabilities. The rise of guarantees adds a layer of exposure if Big Tech’s multitrillion-dollar bet on AI does not pay off because of disappointing usage, an oversupply of computing power or the failure to build sustainable business models around the technology... Their introduction to AI financing has unlocked cheaper financing for projects with these guarantees, which typically price at just a 100 to 150 basis-point premium to the guarantor’s own debt... Because the guarantor only covers the gap between the sale price and the guaranteed value, residual value guarantees “get more efficient balance-sheet treatment than a typical payment guarantee.”

Resolving the public debt pile facing the developed world

Public debts have soared among advanced economies, with the US leading the way. Their sustainability is now a big risk and casts strong headwinds on economic growth. 

The repercussions are already being felt in the sovereign bond markets, including in the safest of assets, the impregnable US Treasury markets. 

The response, especially the recent actions of the US Treasury, arguably even encroaching into the Fed’s domain, to prevent bond yields from rising are extraordinary. It first announced a temporary swap of the Bank of Japan’s Treasury holdings for dollar cash to pre-empt any liquidation to generate the dollars required to prop up the Yen, and followed up with an announcement to double the purchases of Treasury bonds. More are likely to follow in the months ahead, especially with a President who has announced his intent to wage war against the bond markets. 

Chris Giles has an excellent description of America’s ongoing debt surge.

The most relevant measure of US federal government debt, that held by the public, has risen from $3.4tn in 2000 to $32.3tn now, or a rise from 33.7 per cent to more than 100 per cent of GDP in just over 25 years. More importantly, the burden of servicing that debt has doubled, from 11 per cent of tax revenues in 2000 to 21.5 per cent in the first 10 months of the current fiscal year… With the US on a path to continue running deficits close to 6 per cent a year, even at full employment, the debt-to-GDP ratio is set to rise every year, increasing the call on tax revenues to service that debt and the pressure on the Fed to lower interest rates… 

Since 2000, when the federal government ran a surplus of 2.3 per cent of national income, primary public spending (excluding net debt interest) has risen from 15.5 to 19.9 per cent of GDP. All of this increase can be accounted for by spending on services for an ageing population — social security, Medicare and veterans’ programmes. On the tax side, revenues have fallen from 20 per cent to 17.2 per cent of GDP over the same period, partly a result of a cyclical peak in revenues at the end of the last millennium and partly the result of tax cuts. First came the Bush tax cuts, which were made permanent on a mostly bipartisan basis during the Obama administration, and then came the 2017 Trump tax cuts… It does not need to eliminate the deficit, but does need to put debt back on a downward path, which almost certainly requires a balanced primary deficit — a metric that excludes net interest costs — something the US has not achieved since 2007 and not on a sustained basis since the 1990s.

The combined debt held by the public and federal agencies in the US now touches $36 trillion. The US interest bill has doubled to more than 3% since 2021, and the fiscal deficit is running at nearly 6% of GDP with little prospect of declining anytime soon. 

America does not stand alone. Since the Second World War, as welfare states took hold, public spending as a share of GDP has risen steeply across the developed countries. Further, since the seventies, public debt as a share of GDP has been on a similar upward trend. 

Welfare spending has been rising, and subsidy policies have ratcheted up since the global financial crisis. 

This increase in public spending and borrowings is a political choice made in response to rising expectations from governments among the electorate. 

For measure, in the US, net positive mentions of government support — covering welfare and protectionism — in Democratic and Republican party manifestos have trended higher since the early 1970s, based on calculations from the Manifesto Project’s database. In particular, these mentions have surged since the GFC. This suggests politicians are increasingly pitching policies that extend state assistance to appeal to voters. In the UK, the National Centre of Social Research reported in 2023 that expectations for government to keep prices under control, reduce income differences and provide industry with the help it needs to grow all reached a record, based on the British Social Attitudes survey. Indeed, curbing support hasn’t been easy for governments either. Britain’s Labour party was forced to reverse over £5bn of planned cuts to welfare spending. French politicians are also struggling to agree on how to cut expenditure, given the inevitable pains on the public.

A similar expectation cycle has been set off in the financial markets on monetary policy under the watch of technocratic central bankers like Ben Bernanke and Mario Draghi. These cycles have come to reinforce each other. 

A May 2024 paper by John Cochrane and Amit Seru, senior fellows at the Hoover Institution, concurs. It argues that the expectation of central bank support whenever conditions deteriorate inflates stock prices, fuels leverage and, in turn, raises risks of a self-reinforcing monetary policy intervention and taxpayer-funded bailouts. Central banks have also been cautious about unwinding their QE holdings too quickly, fearing market convulsions. This has left their balance sheets elevated, creating a structurally higher liquidity base in the financial system that props up valuations and market activity today.

The rising indebtedness has close historic parallels. In an FT interview, Thomas Piketty pointed to the experiences of European countries in the 19th and 20th centuries. 

We have a long history of public debt in France and Britain. Britain had more than 200 per cent of GDP of public debt in the 19th century. In the case of France . . . after each of the world wars, it was between 200 per cent and 300 per cent. The good news is that we’ve always found ways to get rid of it, and in each of the three instances I’m referring to, through different mechanisms, it went down to very little — less than 20 or 30 per cent GDP in a few years. It was never repaid, in effect, as opposed to the British solution in the 19th century, where it took basically one century of budget surplus between 1820 and 1914 to reduce the public debt coming from the Napoleonic War period… 

The British approach of the 19th century corresponded with a very aristocratic political system where basically one tier was in power and they wanted taxpayers to reimburse them. Was it the best way to prepare the country for the 20th century? I’m not completely sure, because in effect there was more money put into interest payments than money invested in education. And Britain lagging behind in education with respect to the US or even with respect to Germany or France in the 20th century is the number one explanation for a British decline. I would not recommend doing the same in the future… The most successful experience with large public debt is probably Germany after [the] second world war, where they had this exceptional tax on private wealth which raises a lot of money. This contributes a lot to the reduction of the public debt without any inflation. Of course they were traumatised by inflation in the 1920s, so they didn’t want inflation anymore. The other way, of course, is through inflation, which is a wealth tax on the poor, typically.

A major reason for the surging debt stock since the turn of the millennium has been external wars. It has been estimated that the total cost and future obligations of the post-9/11 wars are about $8 trillion in 2021 dollars, excluding future interest costs on the debt. To put all this in perspective, “the US defence budget in 2025 was over $900bn, equivalent to 35 per cent of total global defence spending and more than three times the defence budget of China, the next most powerful military actor.”

Despite this, the dollar has continued to hold reasonably steady. The exorbitant privilege has ensured the dollar's status as the world's pre-eminent reserve currency and the Treasury market's role as the world's safest haven asset, thereby allowing the US access to unlimited global capital at a low cost. While there are no competitors to the dollar on the horizon, the Treasury's safe-haven status is facing competition. 

For one, the central banks, which accumulated reserves by buying up 63% of the extra debt issued by G-7 governments in 2008-21, are now unwinding their balance sheets by running down the dollar component of their reserves. They are instead pursuing alternatives like gold, commodities and the more liquid currencies of smaller developed countries like Switzerland. As William White has pointed out, this has created vulnerabilities. 

Indeed, a report by the European Central Bank showed this week that gold had now replaced US Treasuries as the world’s top reserve asset. By the end of last year bullion accounted for 27 per cent of all global central bank reserve assets, up from 20 per cent a year before. Treasuries fell from 25 to 22 per cent over the same time. This leaves a gap that has been substantially filled by hedge funds, mainly American owned but often counted as foreign investors because of their bases in tax havens such as the Cayman Islands. Many own Treasuries as part of highly leveraged “relative value trades”, financed by short-term borrowing that has to be constantly rolled over. 

William White, former chief economist of the Bank for International Settlements, points out that this works well — until it does not. White argues that the purchase of government debt by non-bank institutions such as hedge funds depends in turn on their access to short-term financing such as the repo market. He adds: “Should any disturbance interrupt that access, as in March 2020 [during the Covid-19 pandemic] or April 2025 [when Trump announced swingeing tariffs], an intense deleveraging spiral could easily follow.” Recent shocks from hedge fund margin and collateral calls have made the Treasury market more fragile and a potential source of systemic risk.

And there’s more. 

White also worries about fiscal dominance — a phenomenon in which the central bank cannot raise interest rates to meet its inflation target because of the punishing servicing cost of high, short-term public debt. This in turn undermines price stability. Another possible concern is financial repression, where the government forces banks and other financial institutions to buy its IOUs at below-market interest rates.

And with bond yields rising, the debt service costs are increasing. One estimate puts an additional $34 bn in financing costs by the end of the first quarter of next year for G7 nations. And this will only rise. 

Debt reduction can be achieved, as has happened in the post-war era in the UK, France, the US, etc., and more recently in Greece (more on it later). 

It requires that both the stock and flow of debt must be brought down. The former requires that the rate of economic growth (g) must exceed the rate of growth of debt (or the interest rate, r) for a long period, and the latter requires ensuring that the primary balance is positive. 

One can think of some scenarios under which the debt reduction can materialise. The ideal scenario of growth driven by a productivity surprise (say, AI) may be too optimistic, given the need to sustain real GDP growth (g) in the 3-4% range against a real interest rate (r) at 1-2% and the ageing demographics and falling labour force participation rates. Fiscal consolidation resulting in primary surpluses is another possibility, though the very high mandatory spending plus interest (now at 75% of the budget and heading to 80% by 2036) means that austerity alone can only be a marginal contributor. 

There is no historical precedent of grow out of debt at this debt level without either financial repression or fiscal consolidation alongside. The 1990s US surpluses under Clinton were a one-off combining Bush’s 1990 and Clinton’s 1993 revenue measures, the peace dividend, and the dot-com boom’s capital gains windfall. 

Then there are the scenarios of Fed-led financial repression, with moderate or high inflation. However, the inflationary path requires that the debt is long duration, new issuance reprices only slightly, and the social and political consequences are managed. But the US Treasury’s weighted average maturity is only about six years, which sharply limits this pathway to debt reduction, and there may be no political tolerance for sustained inflation beyond, say, 3.5%. In any case, repression and inflation will be important factors eventually in the years and decades ahead. 

They were important contributors to bringing down the debt-to-GDP ratio after the War, and the recent increase in bond buybacks announced by the US Treasury Secretary Scott Bessant are the early steps in a long period of financial repression. 

This brings us to debt restructuring and haircuts, which are unthinkable for the US given that the US dollar is the reserve currency. There is also the possibility of a consolidation forced by a crisis (à la Greece), though it looks unlikely for now and may lie 10-15 years ahead. 

Finally, the option of muddling through, stabilisation without meaningful reduction, is a very strong likelihood for the foreseeable future. Through a combination of mildly negative r-g through soft repression, containing primary deficits, and occasional tailwinds and reforms, debt-to-GDP can stabilise at 110-130%. Japan has run this combination for over two decades with 220-260% of GDP without any crisis, and Italy has done so at 130-140%. 

For debt reduction, the US and others may find Greece an unlikely example. From a peak of 212.6% in 2021, by the end of 2025, Greece reduced its debt-to-GDP ratio to 146.1%, and it is estimated to decline to 125% by the end of the decade. 

This spectacular record-breaking drop of nearly 67 percentage points within a four-year window has been achieved through a combination of strong GDP growth post-pandemic (4-5% real growth), early repayment of its financial rescue packages, negative real rates from the inflation shock, maintaining a primary budget surplus of above 2%, and concessional EU financing. 

This combination of factors is unlikely for advanced countries like the US. In the circumstances, the best hope is a trend of moderate inflation (say, 3%), repression to keep interest rates down, some reversal of the accumulated tax cuts, and some expenditure reduction, all of which will only stabilise the debt at about 120-130%. This would create the conditions for deeper reforms on both the revenues and expenditure sides after a forced crisis sometime in the later part of the next decade.

A scenario which cannot be dismissed is one where the erratic policies of the Trump administration, combined with rising inflation, a supply shock (of the kind in Iran), and an AI-equity market meltdown, spook the bond markets, resulting in a significant spike in bond yields. This could, in turn, force the US Treasury into biting the bullet on revenue and expenditure-side reforms. 

In the meantime, the bare minimum to calm the markets would be to at least ensure that the debt-to-GDP ratio is stabilised by bringing the fiscal deficit under control. But wars and Trump 2.0 policies work in the opposite direction.