indianotes

Most (all?) predictions are useless, but they’re fun to make – so why not join the party?

Here’s my list, in no particular order of importance.

Trump will continue to create mayhem, while getting richer: This is a given. Stealing oil tankers, arbitrary tariffs and sanctions, fights with institutions and friends will no longer be unexpected, but the new norm. Of course, his family will continue to generate massive wealth, and not just through crypto manipulation.

AI stocks will see a shakeout: As investors improve their understanding of business models, expect to see new stars, even as many overvalued stocks lose their shine. History suggests that capital-light innovators will provide better returns than Capex-guzzlers.

The world will normalise instability: In 2026, the defining shift won’t be more war, terrorism and political violence, but that they are no longer treated as exceptions. We will also accept that arbitrary trade wars, tariffs, sanctions and embargoes are the new normal. Markets will adapt, supply chains will reorient, military spending will hit new highs, and the only surprises will be peace deals.

Anti-immigration sentiment will get uglier: Across the Western world, anti-immigration sentiment will boil over more often. Weaker economies will encourage more blame games, and immigrants are easy targets. Isolated, violent acts by Islamic terrorist groups will predictably fuel the narrative, but the anger will reflect on all immigrants of colour.

Reverse migration of Indians: The shifting perception of Indians – from being model citizens to job stealers – will make many NRIs uncomfortable. Across Anglophone countries, including the US, Australia and the UK, several right-wing groups are openly antagonistic to Indian migrants. This will only increase. Expect many NRIs to seek backups – maybe in Dubai, Singapore, and even India.

US and India will settle for a partial trade deal: Given the current red lines, don’t expect a comprehensive free trade agreement, or anything close. A partial deal on non-contentious sectors is more likely, along with a small reduction in US tariffs. However, India will remain at a disadvantage compared to competing countries.  

The Indian economy will muddle along: H2FY26 growth will be weaker, given that the US tariff impact has really kicked in during the last quarter. The GST reduction boost will compensate somewhat, as consumption picks up some of the slack. Inflation will rise in the 2^nd half of 2026, as the lower base effect kicks in. Growth will remain in the 6-7% range, but don’t expect anything spectacular unless various wars (including tariff wars) are settled quickly.

Reforms will accelerate but make fewer headlines: The New Income Tax code is due in 2026, as is the Jan Vishwas bill (to decriminalise economic offences). These complement policy changes like GST 2.0 and the new Labour Codes in shifting the focus to simplification. As Sanjiv Sanyal has articulated, we need more process reform – not just new laws, but a focus on actually getting the system to work better. Implementation will not be smooth (remember GST?), but will reduce friction and regulatory fear — which, in India, counts as real reform.

India will remain a “Stock pickers” market: Predicting markets is hazardous. Reversal of FII outflows can change sentiment substantially, as could a US-India trade deal. However, on the flip side, over-supply of fresh IPO paper, high valuations on many stocks and slower earnings growth in H2FY26 could act as dampeners. Since mid-2024, many small-caps have fallen substantially, even as many hyped companies remain overvalued. This dichotomy will throw up interesting opportunities, as smart money rotates from the expensive to the cheap. While market or index gains will be muted (though volatile), there will be wide disparity in individual stocks, as is typical in sideways markets. Good for serious stock-pickers.

Delhi air quality will remain abysmal: This is kind of a no-risk prediction. Delhi and other Indian cities will continue to face high pollution levels, and the issue is yet to gain political traction. So don’t expect any radical reforms. Some tinkering here and there, but next winter again, every news channel will bemoan the unlivable conditions in our cities. Everybody including farmers, car owners, power consumers, firecracker enthusiasts and others will be blamed, but not politicians.

That’s it. Would love to hear more predictions from readers.