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Current Edge Daily Brief 9th September 2025
Quote of the Day
“Bigotry does not consort easily with free trade.” – PETER ACKROYD
What the Others Say
“Netanyahu is betraying not only the hostages. He is turning Israel into a pariah state in the eyes of Europe, the US and Arab states. Boycotts and sanctions have already started.” – HAARETZ, ISRAEL
Table of Contents
THE BIG PICTURE
- IE Explained: Why foreign investors are not bullish on India (Harish Damodaran)
NEWS IN SHORT
- ‘Not citizenship proof’: SC directs poll panel to accept Aadhaar as 12th document in Bihar SIR
- At BRICS, Jaishankar red-flags ‘linking of trade measures to non-trade matters’
The Big Picture
IE Explained: Why foreign investors are not bullish on India
Syllabus: Pre/Mains – Economy
Why in News?
India’s exceptional GDP growth isn’t matched by foreign capital, which hit a 15-year low in early FY 2025–26—even as growth nearly hit 8%.
Foreign Investors Still Cautious
- Capital inflows dropped by over 40% in April–June 2025 vs. same period in 2024
- Net capital into India in FY 2024–25 was $18.3 billion—the weakest since financial crisis 2008–09
- Foreign investment (FDI + FPI) plunged from $80.1 billion in 2020–21 to just $4.5 billion in 2024–25
- FDI nearly negligible at ~$1 billion
- FPI dominated by debt inflows; equity suffered large exits
- PE/VC investors chasing exits: $24 billion exits in 2022 → $33 billion in 2024, aided by rich valuations
- Domestic investors stepped in, enabling profitable exits but not new foreign bets
Global & Policy Headwinds
- S. imposed steep tariffs (up to 50%) on Indian exports over Russian oil purchases → investor jitters
- Result: Rupee hits record lows; capital outflows accelerate
- Moody’s forecasts GDP growth trimmed by ~0.3 percentage point due to tariffs
- Compare: Foreign flows redirected toward China amid its stimulus-driven optimism
Weak Corporate Fundamentals
- Corporate earnings disappoint, failing to justify asset valuations
- High stock market valuations deter fresh foreign capital
- FPI selling persists despite GST reforms and macro strength
Domestic Buffer, But Not a Solution
- Domestic investment surged (e.g. 53% real estate inflows in H1 2025)
- But foreign capital remains essential for deficits, reserves, infrastructure
What Could Help?
- Clearer GST regime & fairer valuations could revive investor confidence
- SEBI exploring smoother capital inflow channels while maintaining discipline
- Sustained improvements in earnings and policy stability remain key
News in Short
‘Not citizenship proof’: SC directs poll panel to accept Aadhaar as 12th document in Bihar SIR
Why in News?
Supreme Court (on Sep 8, 2025) directed Election Commission to accept Aadhaar as the 12th identity document for Bihar’s Special Intensive Revision (SIR) of voter rolls, clarifying it is not proof of citizenship.
Key Details
Decision by the Court
- Aadhaar now included as 12th document to verify identity during Bihar’s SIR.
- Election Commission (EC) must issue instructions to officials immediately.
- However, Aadhaar cannot be used as proof of citizenship.
- EC retains the authority to verify authenticity of Aadhaar, and request additional proofs.
Court Proceedings
- Kapil Sibal (RJD) highlighted ground-level non-compliance—Booth Level Officers (BLOs) refusing Aadhaar, issuing show-cause notices.
- SC emphasized Aadhaar may serve identity or residence, not citizenship.
- EC argued it has power to verify citizenship, but court held that citizenship decisions must adhere to constitutional process.
- SC urged clear communication: labels like “12th document” necessary to ensure implementation by field staff.
Statutory Context
- Section 23(4) of the Representation of the People Act recognizes Aadhaar as identity/residence document.
- The Aadhaar Act (2016) itself asserts that Aadhaar is not citizenship proof.
- Court stressed identity inclusion shouldn’t lead to over-inclusive rolls, and flagged risks of forged documents—but this applies to all documents.
Implications
- Inclusion benefits: Aadhaar covers ~99% of population—helps prevent disenfranchisement of voters lacking other documents.
- Guardrail: Upholds electoral integrity by enabling verification and preventing misuse.
- Process clarity: Establishes clear framework for ground officers, ensuring prior orders don’t remain unimplemented.
- Final electoral roll scheduled for September 30, 2025.
- Next court hearing on the matter set for September 15, 2025.
At BRICS, Jaishankar red-flags ‘linking of trade measures to non-trade matters’
Why in News?
Jaishankar flagged the risks of tying trade measures to non-trade issues at a BRICS summit, amid the 50% US tariffs on India and Brazil.
Key highlights
Global context & call for stability
- World grappling with pandemic aftermath, Ukraine and Middle East conflicts, climate shocks, SDG slowdown
- Multilateral system appears weak
- Urgent need for constructive, cooperative, fair, transparent trade environment
Warning against protectionism & politicisation
- Increasing barriers and linking trade with political/non-trade concerns are counterproductive
- Advocated open, rules-based, inclusive trading system with special treatment for developing countries
BRICS as a platform for solutions
- BRICS should review intra-group trade to reduce imbalances—India has major deficits with partners
- Can set an example for equitable, sustainable trade among developing economies
Supply chains & resilience
- Need more resilient, reliable, shorter, redundant supply chains
- Democratise manufacturing across geographies to ease regional anxieties and boost self-sufficiency
Broader geopolitical signal
- India balancing relations: Jaishankar substituting for Modi underscores tightrope between BRICS and the US
- Summit hosted by Brazil, with leaders including Xi and Putin, focused on multilateral counter to protectionism
