Budget Announcements- Good For Its Capex Increase, Chip Manufacturing, High-Speed Rail Corridors, Sentiment Dampener For Stock Markets

The Budget presentation on Sunday February 1^st, 2026 held few surprises. It made three marquee announcements- raising the Capex budget by one lakh crores to 12.2 lakh crores. This will certainly help to keep the GDP growth on track at around 7% per annum via continued infrastructure development.

However, there are no direct incentives for greater private sector capex unless they choose to take up one or the other of the several incentivised sectors for boosting manufacturing.

The macro-economic markers have been preserved intact by this prudent budget, marked by incremental continuity rather than big bang initiatives.

The fiscal deficit target has been set at 4.3% of GDP for 2026-27. The government will target a debt to GDP ratio of 55.6% of gross domestic product for 2026-27 and the intention is to lower this going forward. Total government debt stands at 85% of GDP with the Centre accounting for 57% of it. This, as it stands, compares well with most other developed countries.

Second, there is an allocation of Rs 40,000 crores for electronics manufacturing, namely semiconductor or chip manufacturing. It is a second tranche to promote this vital sector, its R&D efforts, and training.

Third is the plan to develop 7 high speed rail corridors between major growth-oriented cities. These are Mumbai-Pune, Pune-Hyderabad, Hyderabad -Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delh-Varanasi, Varanasi-Siliguri.

Religious and pilgrimage tourism which has become a significant economic contributor in recent  times, with visitors to Ayodhya contributing 1% of GDP, and Varanasi proving to be a magnet with the largest number of visitors in the country, received careful attention in the budget. There will be new pilgrimage tourism circuits developed not only for Hindus but also Buddhists.

Several neglected ASI designated monuments will also receive restoration funds and initiatives. Other circuits for trekking in Himachal Pradesh and Uttarakhand will also be developed. Yet more for bird watching will be developed in Kerala, Assam and other states.

Many of the other announcements were intended as long-term structural adjustments to various sector incentives and duties towards the Vikshit Bharat targets for 2047. One example of this are the customs duty exemptions on components and parts to boost civil and defence aviation. India is keen to make its military and civilian aeroplanes in India now, along with  commercial ships and containers. This is in addition to a big push for military oriented ships and submarines, even another aircraft carrier, for the Indian Navy and Coast Guard. India is expanding its ports, container handling facilities, transshipment facilities along with setting up new ports along both coast lines and in the Andamans. Rs.10,000 crores will be invested in container manufacturing.

There is also a boost for inland waterways expansion for rare earth mining corridors in several states such as Odisha, Kerala, Andhra and Tamil Nadu to aid its transportation via these waterways. 

There was a boost given to the intended establishment of Data Centres by foreign entities with a tax exemption provided till 2047 juxtaposed with encouragement for them to provide cloud services internationally and to Indian entities via Indian intermediaries. 

Likewise, another Rs. 10,000 crores was set aside as incentive to develop the bio-pharma space. India will also use Rs 20,000 crores to develop carbon capturing facilities. Seaplane manufacturing will be facilitated. Fishing at sea is being incentivised with no tax, and dropping off the catch abroad will be treated as an export.

There were incentives announced for education and skilling. There are a large number of small incentivisation for a variety of items in this budget. Tax compliance process too has been eased.

Given a fragile stock market that has underperformed other emerging markets, plagued by FII abandonment and heightened volatility, it could have done with some encouragement. A lot of money was sucked into a slew of IPOs in the primary market over the past year and a pronounced rupee weakness too has not helped.  A capital gains tax easing and removal of withholding tax on FIIs would have greatly enthused the market. But it was not to be. Instead, there was a 50% hike of STT on futures and 150% on options which is estimated to raise a modest Rs 25,000 crores.

These impositions, on the face of it, therefore are not big in their impact on F&O traders, but sharply damaged the market sentiment, at least in first reaction.  The market fell hardest in the last six years. But it could drive more FIIs away in the short to medium term towards freer markets elsewhere and reduce liquidity even in the cash market.

There was a pre-budget expectation for a boost in defence spending particularly for aatmanirbhar manufacturing.  This did come in the budget with a 15.3% hike to 7.84 lakh crores in the budget of which only  2.19 lakh crores  is for capital outlay. This did not please the street, with profit taking on defence stocks which had risen some 16% in the run up. It could also be that some further purchases will happen on an ad hoc basis going forward, as and when negotiations finalise. There is probably a case for most important and even reformist initiatives being taken off-budget in the future.

In the end, this union budget was a continuity budget signalling stability within the constraints of a tight fiscal situation and geopolitical turbulence.

 

(881 words)

February 1^st, 2026

For: Firstpost/News18.com

Gautam Mukherjee

 

Why the EU President Calls The Imminent FTA with India The Mother Of All Deals

The 27 member EU, supported by its neighbouring countries, mostly in Eastern Europe, who also want to join it, is a very large and influential economic unit. Croatia was a recent entrant after many years of adjustments and preparation. The EU is a $22.52 trillion conglomerate on a nominal basis or $30.18 trillion on a PPP basis. Great Britain, no longer in the EU after Brexit, has already signed its own separate FTA with India recently.

The 32 member NATO, also largely European, are intertwined in many ways with the EU. The EU rivals the United States in heft and size, and as India’s negotiations with both approach closure, the FTA with the EU is likely to be signed first. It will no doubt have a knock-on effect on the Indo-US interim trade agreement too.

Agricultural products have been left out of the draft agreements in both cases because of Indian red lines. It employs large numbers working in, and dependent on, this sector, who cannot be allowed to be adversely affected by foreign, often highly subsidised competition. But for long, this area of possible business was keenly debated between the negotiating teams and took up much time.

As the old structures of the World Trade Organisation (WTO) and similar bodies including those associated with the United Nations (UN), fall into disrepute, ineffectiveness and disuse, these FTAs between countries and groups of countries are gaining massive importance. India as the leader of BRICS at present and with strong ties with the  G-20/21, the Global South and the African Union, is pursuing many other bilateral agreements and cooperation.

The advanced countries, many hampered by low population and sluggish growth, are also looking for stimulation for the technological prowess in their economies, and an alternative to excessive dependence on China. India is an obvious alternative in principle as demonstrated by US giant Apple, though it will have to be built up, just as China once was.

The current European Commission President, German and a woman, Ms Ursula von der Leyen, in the top job as of 2019, recently called the imminent Free Trade Agreement with India the ‘mother of all deals’.

Coming in the backdrop of an aggressively tariffing United States, the prospect of trading freely with nearly 2 billion people representing almost 25% of the world’s GDP, is an exciting prospect indeed.

Long years in the negotiating, the India-EU FTA is likely to be signed on the 27^th of February, after the President of the EU Council, Mr Antonio Costa, and President of the European Commission, Ms Ursula von der Leyen grace the occasion as chief guests on  India’s 77^th  Republic Day on the 26^th of January 2026.

The world has changed a great deal in President Donald Trump’s second term  emphasis on ‘America First’, and added some urgency as well as flexibility to the FTA negotiating process.

 The EU has also just announced this week in Brussels that it will also proceed with a security and defence partnership with India as per the EU Foreign Policy Chief Kaja Kallas. Both France and Germany are negotiating mega deals in fighter aircraft and submarine collaborations presently amongst other things. India is also favoured in the defence and other related and unrelated spheres by the United States, Israel, Russia, Brazil, Spain, Japan,  South Korea, and Britain, with various projects underway and under consideration.

India is also keen to make its own civilian aircraft, ships and tankers, its own computer chips in collaboration with Taiwan, other electronics manufacturing and assembly, rare earth mining and development, nuclear energy, railway and metro modernisation and development, in addition to a massive defence manufacturing push encompassing the army, navy, air force, space, satellite, deep sea,  and intelligence sectors.

From the Indian point of view, an FTA with the EU will boost technology absorption under its aatmanirbhar programmes in diverse fields, double the exports to Europe, lead to greater employment opportunities and exchanges including education and medical science, robotics, drones, UAVs, and progress in IT and AI adoption all to an unprecedented degree.  Indian trained and educated manpower is a strength not only in India but in Europe as well.  The EU-India FTA will be the biggest for India so far, representing a decisive entry into a global value chain.

The prospect of India signing the interim trade agreement with the US, recently endorsed by President Trump at Davos, despite the 50% tariffs imposed on India, will redouble India’s position in the global value chain with many leading American companies choosing to set up development centres in India. These include Google and Amazon. Once the EU-India FTA becomes a reality, the Americans will be keen to proceed with the Indo-US interim trade deal at the earliest too.

India’s multilateral approach has paid good dividends in terms of diversification of its collaborators and markets, and kept its growth trajectory intact and expanding, despite punitive tariffs imposed by the US. These tariffs are likely to be reduced shortly to no more than 15% even as other countries in the littoral who have been granted lower tariff rates compared to India, have not managed to keep pace with it.

It now seems certain that not only will India become the third largest economy in the world after the US and China by 2028 or 2030, but it will also become a middle-income economy with a per capita income of over $ 4,000 despite its massive globe beating population.

India is also edging closer to China in economic matters as its border tensions come under better control. This is important from the point of view of not being allied to any power blocks, but pursuing its strategic and national interest first. This is favoured, of course, by India’s long-term friend and ally Russia for balance, and makes it clear to those inimical to India’s progress that dogma is not a guiding principle for India.  As India strengthens its relationship with countries in West Asia, Greece, Cyprus, Israel, Egypt, Oman, Saudi Arabia, Armenia, Nigeria, Ethiopia, and with those in the Asia-Pacific such as Malaysia, Indonesia, the Philippines, Vietnam and Thailand, it gains rich dividends from its non-discriminatory and independent foreign policy. In time, India will be featured in most geo-political and strategic crossroads as a viable and valuable  partner.  

(1,045 words)

January 22^nd, 2026

For: Firstpost/News18.com

Gautam Mukherjee

 

Amit Shah And The NAFCUB COOPKUMBH 2025 Seeks to Bring Cooperative Banking to Every Small Town And Hinterland Village

Home Minister Amit Shah who is also the Union Cooperation Minister  inaugurated the NAFCUB-COOPKUMBH 2025 in New Delhi on 11^th November. NAFCUB is the acronym for the National Federation of Urban cooperative Banks and Credit Societies. Amit Shah has held the Union Cooperation portfolio ever since it was formed in 2021, and retained it when the NDA government embarked on a new term in 2024. This is a testament to his imagination and dynamism that has greatly helped to boost this sector.

The conference, inaugurated in New Delhi, was an international pitch on the future of India’s urban cooperative banking sector. The international cooperative movement likes to learn from each other’s initiatives and success stories.  

The conference adopted a Delhi Declaration 2025, designed to serve as a guide for the expansion of Urban Cooperative Banking systems in India. The idea is to serve every town with a population of just 2 lakh people across the country within 5 years. This, while India has a population of more than 1.4 billion, the largest in the world.

 The international cooperative movement, called the International Cooperative Alliance (ICA) was established in 1895 in Britain, and has survived both the world wars despite sharp political differences amongst some of its member countries. It counts over a billion people in its ranks, members of three million cooperatives. The ICA also enjoys consultative status representation at the United Nations (UN).

The objective of the November 11^th conference is to provide cooperative banking in every nook and cranny, so that people in small towns and villages too have access to suitable and responsive banks. The cooperative construct creates a rootedness in the community that has been a hallmark of the movement. The endeavour is to provide inexpensive credit to agriculturists and MSMEs in small towns.

There will be early adoption of digital initiatives such as Sahkar Digipay and Sahkar-Digiloan apps. NAFCUB, which has been in existence since 1977 as an apex promotional body and multi-state cooperative society, has been directed to have 1,500 banks onboard Sahkar Digipay within two years. It has also been directed to upgrade as many thriving credit societies into urban cooperative banks (UCB) as possible. The Indian cooperative sector UCBs have improved their viability by bringing down their non-performing assets (NPAs), from 2.3% to 0.6% since 2023.

Internationally recognised organisations such as Amul and the Indian Farmers Fertilizer Cooperative (IFFCO), are shining examples of success stories in the Indian cooperative sector. So why not excel also at last-mile banking?

The Ministry of Cooperation under Amit Shah has recently introduced a National Cooperative Policy 2025 which outlines a plan for modernising the cooperative sector over the next two decades. India has been a key member of the ICA ever since it established a regional office in New Delhi in 1960.It has been a driving force in shaping cooperative models that have had a favourable impact on other organisations particularly in the Asia-Pacific region.

Efforts in the ministry are ongoing to strengthen Primary Agricultural Credit Societies (PACS), dairy and fisheries cooperatives, through both digital and policy reforms. The Cooperation Ministry has already established multi-state cooperative societies for organic products, exports, and traditional seeds. All three are currently much fancied globally in the face of criticism of too much use of chemical fertiliser, and the use of genetically modified seeds.

 The Ministry of Cooperation has also set up the Tribhuvan Sahkari  University to strengthen  cooperative education and turn out skilled personnel for the sector.

 

578 words

December 5^th, 2025

For: Firstpost/News18.com

Gautam Mukherjee

 

Delivery, Not Disruption & Drama, Is What Parliament Is  For

Are the all too familiar wasteful and almost non-functional parliamentary proceedings in India a mirror to the fact that liberal democracy has proved to be a failure here? That seventy-five years of this subversion of the intent of our founding fathers is quite enough?  That which is enshrined in India’s bulky omnibus constitution may have been, after all, an imposition too far? That a guided democracy that does not brook anarchy and deliberate subversion needs to be ushered in now?

If this cannot be done overnight, the serious efforts at reforms must begin urgently. Does this unwieldy and out-of-date constitution need to be amended or replaced by one that serves the times we live in? Is wasting hundreds of crores to run parliamentary sessions that end up hurriedly passing bills into law without discussion worth it? It seems to be the only recourse available, and that by virtue of a ruling alliance majority. Where is the proper representation of the people in all this? Is this a sham with no accountability that is merely playing at democracy?

Prime Minister Narendra Modi launched the winter session of parliament on the 1^st of December with the customary opening remarks from the head of government. His strong admonitions and appeals to the opposition to not vent their frustration at their recent rout at the Bihar Assembly elections, fell quite predictably, on deaf ears. The wrath is not only directed at the ruling NDA alliance, but the Election Commission, a constitutional body; at the courts, including the Supreme Court, for not supporting the spurious Congress and TMC allegations.

This is a time when we must act. Expulsions will work better than persuasion. Nothing short of it will make any difference to parliamentarians, enamoured of extra constitutional methods, bent on stopping the work of the house. Methods that instigate mobs and riots, arson and violence, on the streets.  

But since such people are thankfully in a minority in parliament, they can, and must be firmly dealt with. Suspending them for a day or two, or even a week, has not worked in the past. They need to be sent out for the whole session. Their terms as members of parliament need to be cut from five years to four or even three, till they decide to behave appropriately in the house. It remains to be seen whether the government has the determination to do any such thing. Judging from past sessions of parliament, this does not seem likely. Helplessness is also a political strategy.

It must be said that not all parties in the opposition at this time are of one mind, and some want to proceed with the business at hand. The prime minister’s remarks occasioned strong reactions from the Congress, though it has won only 6 seats out of 243 in Bihar. There is no acceptance of reality. No urge to change its ways. Instead, its anger was wrapped in an assertion that the conduct of the elections was unfair, followed by a clamour for an immediate discussion on the ongoing SIR process. This, even if the discussion was held under the broader category of ‘election reforms’.

However, several other opposition parties were markedly more interested in pursuing other issues, including the legislative agenda first.

A clear division in the ranks of the I.N.D.I.A opposition alliance is evidently forming, and the leadership of the alliance by Congress might well be under review. The Trinamool Congress (TMC) from West Bengal, for example, was already moving on its own and not attending meetings called by Congress. There is also disquiet within the Congress on the leadership of Rahul Gandhi and indeed the Gandhi family.

That the recent ‘Vote Chori’ campaign in the media and the tour in Bihar undertaken by Rahul Gandhi and Tejaswi Yadav pulled a blank, and possibly harmed their cause, must be still rankling. And yet, Congress is determined to continue the campaign. But others in the I.N.D.I.A. alliance, including Tejaswi Yadav of the RJD, are not convinced. There is apparently no Vote Chori except as a fantasy in Rahul Gandhi’s mind!

 The prime minister urged the sections of the opposition who are busy accusing the EC to get over their obsession. Parliamentary Affairs Minister Kiren Rijuju was more conciliatory, and assured the protestors that the government would consider the demand for a discussion on SIR, but the timelines for it could not be dictated by the opposition.

Through the noise, a bill was passed in the morning of day one in the Lok Sabha. It was to implement the GST law in Manipur. But another two bills, also tabled by the Finance Minister Nirmala Sitharaman, to rejig levies on tobacco, pan masala and related goods, could not proceed in the face of constant slogan shouting. This resulted, as usual, in the Lok Sabha being adjourned for the rest of the day. Every expensive session of parliament functions in this chaotic manner.

The Rajya Sabha fared no better, with the opposition Congress, CPM and TMC demanding immediate discussion on SIR and eventually walking out when it was not agreed to.  The plan is to keep it up for days, and taking it to the entrances and lawns outside as well.

The real fear is that the SIR process now to take place in just 12 states at first, will catch and out many illegals. The process, to update and sanctify the electoral rolls may weed out lakhs of illegal Bangladeshi immigrants. If found out, they have been added with the likely connivance of parties who use them in their vote banks. That the SIR has been regularly conducted every few years since independence is conveniently ignored.

In his opening remarks before the start of the session, Prime Minister Modi said the opposition should avoid disruption so that debate and discussion can take place on important legislation. Nor should sections of the opposition use the winter session as a political ‘warm up’ tool for the approaching poll campaigns in West Bengal and Tamil Nadu that will go in for elections in the first half of 2026. This, followed by those in Kerala and Uttar Pradesh in 2027.

There is every attempt to bring state politics to the highest legislative body in the land, remarked the prime minister.

Everyone knows what is going on, but how far is the government prepared to go in order to stop it?

(1,064 words)

December 2^nd, 2025

For: Firstpost/News18.com

Gautam Mukherjee

 

Two Hundred And Eight  Out Of 243 Seats For the NDA In Bihar Assembly Elections Consolidates Its Power In State And Centre

The June 2024 Lok Sabha election results gave the BJP 240 seats, short of a majority on its own, and occasioned the formation of the NDA government with the support of Nitish Kumar led Bihar, and Chandrababu led Andhra Pradesh. The centre in return poured in investment to strengthen the hands of both allies.

The Opposition, unrealistically, predicted that this troika would last only a short season, and made strenuous efforts to topple the central government. Of course, it could not, and the NDA is going strong nearly a year and a half later.

After this thumping victory in Bihar for the NDA, the stability of the centre till the next general elections in 2029 seems assured as friend and foe acknowledge its import. The last time the NDA won more than 200 seats was in 2010.

An elderly but astute Nitish Kumar will take the oath as Chief Minister of Bihar at the head of his Janata Dal United Party and the NDA for yet another five-year term. This, after 20 years on and off at the helm of Bihar. Any other move will be destabilising.

The Opposition Mahagatbandhan has received a severe drubbing with RJD vastly diminished and Congress practically wiped out. The reasons for the NDA victory are several. When Tejaswi said change is coming, he did not mean a total rout for his own ambitions.

In addition to very effective welfare policies, the female vote for Nitish Babu spoke clearly. His development politics along with help from the centre, including roads, metros, bridges, airport and railway improvements, other infrastructure, have been appreciated. Nitish Kumar has been a clean Chief Minister. There is absolutely, no anti-incumbency seen.

In addition, this win demonstrates a very successful coalition of all the electoral elements in Bihar with the partial exception of the Yadavs and Muslims. This is remarkable, because when a traditional vote bank breaks ranks, the game tends to be over, even for the future.

Within the NDA, the ground work for the elections was  extremely well done including the micro-management, and constituent parties plus influencers like the RSS. None worked at cross purposes.

Despite constant and insidious suggestions that the BJP might want to replace Nitish Kumar as chief minister it is most unlikely. This speculation comes from BJP having won about a dozen more seats than the JDU. The electoral result mathematics this time does not offer sensible alternatives, even if Nitish Kumar wanted to switch sides. Nitish Kumar himself has shown no inclination to do so, but he is an astute politician, and would not take kindly to any move to push him out. But quite apart from the real politics involved, the BJP can be believed that it is not interested in doing any such thing at this time.

A section of the Rashtriya Janata Dal (RJD’s) traditional vote bank too seems to have deserted it, despite many first-time voters. The opprobrium of the ‘Jungle Raj’ associated with the Lalu Prasad and Rabri Devi years in power, appears to have drastically brought down the tally of the Tejaswi led RJD. His estranged brother is losing his seat, and so apparently, is he, struggling against the BJP candidate in RJD bastion Raghopur.

The old attitude of issuing threats of violence if the RJD/Mahagatbandhan loses has been prominent during the campaign, and even after the results, with accusations of ‘vote chori’ and allusions to chaos engendered in Bangladesh and Nepal. But this is more wishful thinking.

The erstwhile grim situation in the pre-Nitish Kumar years, has been largely replaced with law and order. Women feel safe. They drive buses and the metro. They can go out after dark. They are happy with the prohibition against alcohol.

And quite possibly, there has been a consolidation of the Hindu vote in the backdrop of an Islamic terrorist attack in New Delhi’s Red Fort area. This could carry over to other forthcoming assembly elections. Some commentary from the redoubtable Union Minister Giriraj Singh of the BJP points towards the hope of a NDA success next in West Bengal.

Further afield, foreign efforts from The US and Europe in addition to the usual Islamic and Communist suspects, have been ongoing to weaken the Modi government. This is unfortunately aided by sections of the Opposition, particularly the Congress Party with nefarious funding from abroad.  There have been moves afoot to engineer regime change, as in Bangladesh and Nepal, and even threaten the life of the prime minister.

This resounding win in Bihar however  reinforces the NDA and underlines its continued popularity and legitimacy. Bihar is an important state, often read alongside Uttar Pradesh as essential for any party that wishes to rule at the centre.

The foreign elements are also upset with India’s rapid economic and military progress, its strategic autonomy, its nationalist, bilateral and multipolar stance in dealings with other countries. The West has been long used to patronising and dictating terms to India before Modi.

India is also a leading light of the G20 or actually G21 now, which it will chair once again in 2026. It is also prominent in BRICS, viewed by the Trump administration as anti-American and the universal use of the US dollar in international trade. India is also a leader of the Global South and very well regarded in Africa, West Asia including Israel, Russia, Iran, Afghanistan, Central Asia and South America. By 2028, India will become the 3rd largest major economy in the world largely based on its substantial domestic market. This fact makes it difficult to restrict and bully.

The imminent India-US interim trade deal is likely to be inked shortly without further efforts to pressure fresh concessions out of India. Perhaps more so now. India’s determination to punish those responsible for the latest terror attack and conspiracy has also been duly noted by Pakistan, China and globally.

The Trump administration has also been indicating that the punishing tariffs at a total of 50% are likely to be reduced to about 15%. But in the intervening months, India has found and increased its trade with a number of other countries including the UAE and Britain with which countries it already has free trade agreements. It has also stepped up its efforts to collaborate with countries such as France, Russia and Israel in defence matters, and increased its exports of defence equipment since Operation Sindoor attracted a good deal of foreign interest.

India on its part, enjoying a period of very low inflation, is likely to cut its interest rates further by another 25 bps in December 2025. This will boost the domestic economy and spur investment.

Once the trade interim deal is signed with America, the ones in the pipeline with the EU, New Zealand, Oman and increased bilateral business with Japan, South Korea, Nigeria, Brazil, Guyana and others will no doubt go much faster.

Vladimir Putin of Russia is going to visit India on December 5^th. A number of defence and technology deals are likely to be signed in addition to greater people to people cooperation.

Even the restrictions placed on the American H1B visa for IT personnel in the main are being loosened afresh as realisation dawns in America that they cannot do without Indian know-how in this field.

A lot of this international change of heart is to do with the old adage: ‘If you can’t beat them, you had better join them’. In this endeavour, the Trump administration may be rolling back its strictures, but other countries, perhaps more visionary, have been ahead of the curve for some time.

(1260 words)

November 14^th, 2025

For: Firstpost/News18.com

Gautam Mukherjee

 

Warm Bhutan India Ties Reinforced By Modi Visit

Strategically located but land-locked, Bhutan is bordered by both India and China, with the latter regularly negotiating land concessions from the tiny kingdom.

India has traditionally been a  non-predatory support to the kingdom with regular concessionary loans, electricity purchases, and a defence protection pact with it. India and Bhutan also have long-standing cultural ties, and at present has loaned it some sacred  Piprahwa relics of Lord Buddha for a 10 day period during a special Peace Prayer.

Bhutan has always favoured its autonomy and unique ways, including emphasis on its world famous ‘Gross Domestic Happiness’.

 In this current two-day visit, not postponed, despite an Islamic terror attack in New Delhi’s Red Fort area by JeM and ADuG inspired operatives, Prime Minister Narendra Modi of India and King Jigme Khesar Wangchuk, the fourth Druk Gyalpo, jointly inaugurated the 1020MW  Punatsangchhuu-II hydroelectric project. The occasion also marked the King’s 70^th birthday.

The project inauguration was hailed as a milestone in the vibrant and growing mutually beneficial partnership between India and Bhutan. India also announced a new concessional line of credit of Rs 4,000 crores for Bhutan to fund other energy projects.

Bhutan currently produces all its electricity from renewable energy and has a negative carbon footprint. This latest hydroelectric project will increase electricity production from hydro sources by 40%. India will also assist in the resumption of work on the main dam structure of 1200 MW at Punatsangchhu.

To promote connectivity for Bhutan and give it easy access to India’s vast markets a new initiative is about to unfold. The Bhutanese border towns of Gelephu and Samtse will be joined with India’s vast railway network shortly. Bhutan intends developing the Gelephu Mindfulness City as a consequence. India will establish an immigration check post at Hatisar, just across from Gelemphu and develop infrastructure on its side of the border.

The two countries signed 3 MoUs during this visit of 11-12 November 2025,  on renewable energy, mental health services, and healthcare.

India had earlier also announced a contribution of Rs 10,000 crores in 2024, towards Bhutan’s Five-Year Plan of development in areas such as roads, agriculture, finance, healthcare.

The railway connectivity with buffer state Bhutan will also help strengthen infrastructure to protect the so-called Chicken Neck  and the Siliguri Corridor overseen by China from the Doklam plateau. India has already strengthened its military presence in the area of the Chicken Neck including the revival of a WWII airport in the area, the placement of troops, missiles, fighter aircraft and other items. It has also been conducting elaborate military exercises in all its border regions to ensure preparedness and smooth coordination between the different arms of the military

This is important because, in addition to China, Bangladesh and Pakistan have also been taking a renewed interest in the Chicken Neck and Siliguri Corridor area, vital for India’s communication and connectivity with its North Eastern States.

Bhutan is not very comfortable with Chinese attention and blandishments towards development and trade, because as a hereditary kingdom it is wary of the powerful Communist dictatorship. However, there are some in its population and political makeup that favour closer ties with China. Bhutan therefore has to perform a careful balancing act between India and China.

Matters have improved somewhat because of China’s rivalry with the US and the weakening of its economy. It is preoccupied with its own troubles and less interested with outside adventurism abroad. Much of the billions it has spent on its belt and road initiatives plus its string of pearls strategy has gone bad.

India, on its part, has identified two chicken neck like areas in Bangladesh with access to the Bay of Bengal in both cases, which makes it vulnerable to outside attack and capture. This could restrain its ability to seek any misadventure against India. India also controls much of the water that flows into Bangladesh and could cancel its water sharing arrangements just as it has with Pakistan. Likewise it is dependent on India for electricity to a large extent. A misadventure could nevertheless happen, because of jingoism and miscalculation, egged on by Pakistan and China.  However neither country may in the end get directly involved nor will any other Islamic country Bangladesh might count on, such as Turkiye.  Myanmar is also going through a troubled relationship with Bangladesh.  So if a military misadventure goes wrong for it, it could trifurcate Bangladesh territory as it stands.

The fact that India is rapidly improving its defences and aatmanirbhar defence preparedness is important. In a demonstrator by way of its highly successful showing in  the  short Operation Sindoor against the combination of Pakistan assisted by China, was most telling. Nobody in the neighbourhood including a China that prefers to use proxies in conflicts, is left sure of itself in any future conflict with India.

India’s exports of armaments and the demand for them has risen sharply since Operation Sindoor. Meanwhile new systems are being added that extend its range, speed, surveillance and technology. A possibility of Operation Sindoor 2.0 in kinetic mode is hovering in the air and could do substantially more damage to Pakistan than the earlier one. The Taliban in Afghanistan are already at war with Pakistan but have mended fences with India.

All this is also not lost on tiny Bhutan as it weighs its options.

(885 words)

November 12^th, 2025

For: Firstpost/News18.com

Gautam Mukherjee

 

US Keen To Sell Its Armaments To India Via Freshly Minted 10 Year Defence Framework Agreement

Is the tide turning with the GOP itself voting against President Trump’s tariff policy? The Indian Commerce Minister Piyush Goyal and President Trump himself are both suggesting that a framework trade agreement may be agreed upon between India and the US very soon. It would also probably reduce the punitive tariffs to no more than 15% overall. But, with the mercurial Trump administration one never knows till the signing and the drying of the ink.

While the 50 percent trade tariffs on India persist in the meantime, one of the highest in the world, peppered with constant and diplomatically offensive pressure, a freshly minted agreement on defence cooperation offers unexpected hope. Is this a first step to the classic Trump roll-back or just the sniff of a parcel of deals?  

The framework agreement signed at the Defence Ministers Meeting in Kuala Lumpur, the ADMM-Plus, by Indian Defence Minister Rajnath Singh and US Secretary for War Pete Hegseth was accompanied by many feel-good statements on the importance of the US-India defence relationship, the rule based order, international maritime security, the Asia-Pacific and so on. But this was at the level of the defence ministers and offers a platform for a U turn.  Because the Indo-Pacific strategy to contain China is no longer a Trump administration priority. Neither is QUAD from all indications.

It does cover real-time intelligence sharing but let us remember America refused GPS coordinates during the Kargil War. The formation of a joint task force for the Indo-Pacific, joint naval patrolling, technology transfer, joint manufacturing of advanced military systems in India are all in the document.

It says America will manufacture drones and the F414 fighter engines in India with partial if not full technology transfer. Stryker armoured vehicles will begin to be produced in India in 2026. This one has been in the air for years and meanwhile India has made a number of good armoured vehicles of its own. The plan is to manufacture the 31 Predator drones on order in India by 2027. America will work with India on Hypersonic missile technology by 2027. It will start developing KN engines in India, and by 2035 America will transfer  complete 5^th generation fighter technology. Can  all this be believed? Why did America decide to draw up such an agreement for the first time ever? Is India meant to cross over into the US camp in delight?

As far as India’s defence cooperation with the US towards its aatmanirbhar programme and technology transfer needs go, the possibilities have always been vague and undefined. This, particularly in contrast with its progress made with France, Israel, and Russia.

However, America is not enamoured with India’s policies of strategic autonomy in order to suit its own national needs. It prefers docile allies who do as they are told. So this is a persistent hindrance to the Indo-US relationship unlike its progress with an apparently compliant Pakistan. Now the Americans are saying Pakistan is only useful for short term goals. But how can one defence agreement turn a persistent more or less anti-India policy on its ear? Americans have been good at saying one thing and doing another rather like the Chinese. Written agreements mean little to both.

America is also busy finding ways to cooperate with China, as the Trmp-Xi meeting in South Korea demonstrates, after its attempts to bully it into submission failed.  

With India, the same thing applies in the minor register, we too won’t be bullied, but India does not enjoy the points of leverage thar China does. So America tends to renege on commitments with impunity, and drag its feet generally. It does not want to lose India altogether from its sphere of influence and so keeps agreements like this one going. If it means business it could start with delivering the F404 engines quickly for a start.

Purchases of American defence equipment by India, often necessary for their technology and quality, have to bear with interminable delays and sometimes renegotiations of cost. The American system has many barriers and checks that take time for high technology equipment, not helped by America not being in a hurry to execute them on time lines agreed.  America does not part with its codes for defence equipment and has been known to use them to cripple aircraft and other weapons at critical times.

Nevertheless, we do have several new defence deals on the anvil and ongoing, in addition to the $25 billion in American military equipment purchases made by India since 2007.  Right now there is a $ 3.8 billionMQ9B armed Predator drone on order for 31 of them, being executed for completion by 2029-30. They say these will now be made in India. The last three of six Apache helicopter gunships are being flown over in a transport aircraft for the Indian Army after a long delay. The order for 99 GE F404-IN20 engines for the Tejas MK1 A executed in 2021 for $716 million is proceeding very slowly after a two-year stoppage in supply.  Only four engines of the 99 ordered have been delivered so far. Another follow-on order for 113 engines worth $ 1 billion is being negotiated and almost ready to be signed.  Yet another order for hundreds of  the GE F414 engine intended for the Tejas MK2 along with an 80% technology transfer and manufacture in India is also being negotiated. Is this defence agreement saying it is through? At what price? To be built in India starting when?

This snail’s pace in these orders and negotiations suggest a strategic dimension in which America is apparently not keen on seeing India make its own fighter aircraft any time soon. But perhaps it also wants to lure us away from the competition.

India is working on alternatives of its own manufacture  for UAVs,drones and fighters and in collaboration of Safran of France even as its fit-for-battle fighter squadrons are much below comfort levels.

India is also advancing a cooperation with Brazil for its Embraer C-390 Millenium transport aircraft in a possible barter deal for an equivalent value of Tejas fighter aircraft and Prachand helicopters.

A collaboration with Airbus is already ongoing for H125 helicopters and C295  military transport aircraft in partnership with the private sector Tata Group.

Russia is very eager to offer its latest Su- 57E stealth fighter aircraft with full technology transfer and production in India in addition to the Sukhoi 30s made under licence in India with the Su-30MK1 largely customised to Indian needs.

Very recently India has signed an agreement with Russia to jointly produce medium sized commercial aircraft, the SJ-100 with full technology transfer in India. The message to America is that India is clearly not restricted by American sanctions imposed on Russia. This again in the context of massive delays in supplying Boeing aircraft to the Indian aviation industry as well as quality concerns highlighted by the tragic Dreamliner crash in Gujarat.

India is already very successful with its BRAHMOS missiles jointly developed with Russia. It extensively uses the Russian S 400 air-shield with more sets on order. Other cooperation with the UK, Russia, Germany and France in the naval engines, propulsion units, nuclear engines, submarines and specialised naval ships are a precursor to more in commercial shipbuilding as a new thrust area.  While American Cummins engines are used in our light Zorowar tanks, India is trying to develop its own as well.

So, it is clear that America is not our only mainstay, even as the Indian aatmanirbhar defence industry is growing very fast and is reflected in more and more export orders as well.

Perhaps America realises these are favourable results of India’s strategic autonomy and wants to ensure it stays in India’s procurement and technology demand game.

In the overall scheme of things however, and on the face of it, this 10 year defence framework agreement is most welcome.

(1312 words)

November 1^st, 2025

For: Firstpost/News18.com

Gautam Mukherjee