Welcome to India Edition, I’m Menaka Doshi. Join me each week for a ringside view of the billionaires, businesses and policy decisions behind India’s rise as an emerging economic powerhouse.

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This week: Why India investors should brace for more volatility, Tata Motors’ loan deal and Abhinandan Lodha’s “branded land” pitch.

More Pain, Then Gain

India’s most celebrated festival, Diwali, coming up in about a month, marks a symbolic victory of good over bad. A similar but very real battle is playing out in India’s economy and markets. With no quick outcome in sight.

On the face of it the economy seems strong, with 7.8% GDP growth in the quarter ended June. Yet there’s concern some of it is optical. The contrasting effects of Trump’s tariffs and Modi’s tax cuts muddy the picture further. The first could shave 0.5% off GDP, the second may boost it 0.2%, Chief Economic Adviser V. Anantha Nageswaran told Bloomberg.

Similarly, the equity benchmarks are up some 5% in 2025 and closer to the 52-week high than low. Yet India is lagging other emerging markets, foreign investors have withdrawn over $15 billion this year and local flows into equity mutual funds are showing signs of cooling in August.

So I spent the week prognosticating with tax experts, economists and fund managers on what comes next, and found there are at least three reasons investors should expect more pain before gain.

Tax transition.

India’s new goods and services tax rates were announced Sept. 3 and come into effect on Sept. 22. The 20-day transition is expected to distort consumption as shoppers may stock up on items facing tax hikes and postpone purchases of those facing tax cuts. To smoothen this, a few companies are already offering lower prices and may have to absorb the tax differential if any. Several sectors are seeing a deviation from the normal demand cycle and that could impact earnings this quarter and next, Rohit Jain, deputy managing partner at law firm ELP, said to me. 

Jain said there are other stickier issues that need remediation with the tax department or may have a more prolonged financial impact:

• To begin with, companies are scrambling to adjust pricing and pack sizes of existing inventory, so as to pass on the full benefit of lower tax rates on day one with minimal losses.
• The next challenge will be to manage accumulation of credit for higher tax already paid on inputs versus a lower tax now payable on the output. For goods, like certain medicines or insurance, where the GST has been lowered to zero, credit for tax paid on inputs stands disallowed, leading to embedded tax costs. 
• There is no refund for tax paid on input services, at 18%, for goods now eligible for a lower tax rate. Similarly, claiming unutilized credit for “compensation cess,” levied so far on automobiles and other luxury goods, will become a challenge as it is set to lapse.
• Projects that avail of state investment incentives will have to rework costs, as such incentives are typically offered via tax reimbursements, which will decline for goods facing lower GST.

All of these could result in working capital strains and tax losses across businesses in the next few quarters.

Save or spend.

This fiscal the Modi government will forego $17 billion in tax revenue by lowering income and consumption taxes even as it narrows its budget gap to 4.4% of GDP. The tax cuts are not a fiscal stimulus, they simply mark a shift in spending power from the government to consumers. 

Which is principally good, but comes with uncertainty, especially in this economic environment, over what portion of the tax savings will be spent. The fiscal math is predicated on more shopping driving a virtuous cycle of higher tax revenue and growth.

While consumption has picked up across rural and urban India, a recent survey by Worldpanel India underscores the fragility of the recovery. Conducted in April across 6,000 households, the survey found a 15% to 18% year-on-year rise in spending by urban and rural households, primarily on debt repayment, education and medical expenses. That may take time to convert into a broader consumption boom. 

Source: Bloomberg Intelligence

High-multiple trap.

India has the world’s highest proportion of richly valued stocks, according to a Bloomberg Intelligence report. Almost 36% of NSE 500 stocks trade at 50 times trailing earnings or more, whereas only 20% have a price-to-earnings ratio of less than 20 times. The median trailing PE ratio for Nifty 500 stocks has climbed to 38 times from a recent low of 33 times in March this year. Such elevated valuations tend to yield inferior returns compared to cheaper stocks (PE ratio below 15 times), shows a study by Nitin Chanduka and Peggy Lim of BI.

Since the pandemic, Indian equities experienced a robust rally driven by government-led capital expenditure, a Make in India boost for industrials and utilities, premiumization and a surge in software exports. However, momentum is waning: capex growth has slowed due to fiscal constraints, global IT spending is tepid in many areas and tariff risks loom. The market now faces a recalibration as these tailwinds fade, write Chanduka and Lim.

Some say the gloom will be short-lived. Fiscal year 2026-27 will be better for the economy and markets, Harsha Upadhyaya, chief investment officer — equity at Kotak Mahindra AMC, said to me. It will see the full transmission of lower interest and tax rates, while GST transitional pain will have settled and the US trade standoff hopefully resolved. His estimates are conservative though, at 14% earnings growth for Nifty 50 companies in FY27 versus 10%-11% this fiscal.

That may not be enough to boost animal spirits, especially of bulls — unless President Trump and Prime Minister Modi commit to more than light flirtation on social media. Like I said on top, expect more pain and then gain. 

Best of Bloomberg

Wall Street forecasters are rushing to boost their outlook for the S&P 500 after a record-breaking rally.

In China, a world-beating stock market rally has led the recent surge in two-way financial flows to an unprecedented $4.5 trillion.

Meanwhile, KKR, Blackstone and other global asset managers help India become Asia’s private equity HQ.

Also, the IPO market shines as home services tech startup Urban’s offer sold within hours. 

From Nepal to Indonesia, Sri Lanka to Bangladesh, Asia’s youth are furious, writes Bloomberg Opinion’s Karishma Vaswani.

By the Numbers: One of Asia’s Largest Deals

On the Spot: Lodha’s Land Is Drawing Young Investors

In the thick of India’s financialization boom, Abhinandan Lodha is giving an age-old business a new twist. He describes it as “branded land” or ready-to-develop plots in carefully selected locations, with clear titles, plush facilities and security against encroachment. All sold online, with zero pre-sale site visits.

The younger son of Mangal Prabhat Lodha, a billionaire Mumbai-based developer and BJP minister in Maharashtra, Abhinandan founded his venture with one project in the state in 2020 and then identified 48 locations across India that stood to benefit from urbanization, government-led infrastructure creation and expanding construction limits.

The House of Abhinandan Lodha now has projects in 12 of those locations, from Ayodhya to Amritsar, with 12 million square feet sold and another 30 million square feet under development, according to data shared by the company. The privately held business has over 6,000 customers from 27 countries, most of them first time investors in land.

India’s development is now far more widespread, and rising cities are offering higher wealth creation, Abhinandan Lodha said to me in his modest office in central Mumbai. The return on investment in Amritsar has been better than in Mumbai in recent years, he said, adding: “Once local land-buying was the only convenient option, now investors can be sitting in Mumbai and buying a piece of land in Nagpur if they think it will outperform.”

This interview has been condensed and edited for clarity.

Abhinandan Lodha, founder and chairman of the House of Abhinandan Lodha. Source: The House of Abhinandan Lodha

Who are your buyers?

We sell plots priced at between 2 million rupees to 50 million rupees. Our buyers are typically well educated, they tend to have a first home and are purchasing land mostly as an investment. Most of them are are below 45 years of age. Over 60% are salaried professionals and the rest entrepreneurs and business owners. Only one out of 10 borrow for the purchase.

About 30% of them buy to live there and start home construction within the first year after purchase. Roughly 45% are investors seeking long-term wealth creation. They may develop the plot and stay here when they retire but are quite clear they want to own the asset and hold on. About 20% are short-term investors that exit in a few years and reinvest in another location.

Does this change based on location, say Alibaug where Mumbai’s rich may want to own a second house versus Ayodhya which is on the pilgrimage circuit?

Alibaug is probably the only asset we have where most of the buying has happened for consumption. The other locations around Mumbai are being bought more as investments. Ayodhya and Vrindavan draw buyers who understand Uttar Pradesh and land both. Most of them have some history with the state. My understanding is that Uttar Pradesh has been a large wealth creator, where wealth has gotten parked outside the state for a long period of time and is now returning as growth picks up and the law and order situation improves. Vrindavan will actually see a lot of people who will buy, build and stay. In Ayodhya, it’s more social usage, for friends, family and religious gatherings

What’s the minimum project size in each location?

We like to work on parcels of 75 acres and above. But we made two exceptions so far — in Alibaug where we were able to purchase only 25 to 30 acres and in Shimla because it is difficult to get large parcels of land there. But there is a thumb rule around the minimum top line. We believe if an asset does not add between 5 billion rupees to 7.5 billion rupees to the overall portfolio, we are not able to do the qualitative work to develop it.

A 250-acre project in the Anjarle-Konkan region in Maharashtra. Source: The House of Abhinandan Lodha

Your average plot sold has risen from 4 million rupees to 10 million rupees. Is that because land prices have moved up or are you concentrating on larger plots or more premium properties?

It’s a mixture of all three. Our portfolio mix has changed. When we started, we only had plots of up to 4 million rupees to sell. Then we launched bigger projects in Ayodhya, Vrindavan, Alibaug, Shimla, Goa. Selling prices have moved up. And we are now also selling slightly larger plots of land. We started with 1,000-1,200 square feet, now plots go up to 3,000-4,000 square feet.

We are seeing more acceptance across all price points now. When we started, we believed it would be difficult for us to be able to get somebody to participate in a 10-million-rupee plot buy across the screen. In the last four years, the category creation has happened quite strongly in the consumer’s mind. So we now have a clear understanding that 25% of the people want a plot of more than 2,500 square feet.

Has buyer interest been steady or is it impacted by, say, stock market fortunes?

Not at all. Participation is not as large to force people to liquidate stocks to buy land. It’s not like buying an apartment in Mumbai for 500 million rupees which may need you to liquidate part of your stock holdings.

But locational buying interest changes from time to time. Closer to large government announcements, the buying typically spikes. For example, we just had an announcement in Uttar Pradesh for