Good afternoon, lovely people, and happy hump day. We are midway through the week with an issue that highlights how the ongoing regional conflict is forcing both the government and corporates to adjust their playbooks.

In our big story today: Gulf SWF-backed Reliance Jio is exploring a major push into the low-earth orbit (LEO) satellite communications market to rival global players like Starlink, right as it gears up for a record-breaking public listing.

Plus: The Indian government is stepping in to cushion the economic fallout of the war, rolling out a USD 2.6 bn credit support, a much-needed lifeline to small businesses and airlines buckling under mounting operational costs and supply chain disruptions.

ALSO- India's top gas importer, Petronet LNG, is flying blind on June deliveries from Qatar just as summer power demand peaks. Engineering giant L&T is also feeling the pinch, reporting flat fourth-quarter earnings as the conflict threatens its Middle East revenue targets.

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POLICY — A USD 2.6 bn lifeline for war-hit businesses: India’s federal cabinet greenlit a fresh INR 255 bn (USD 2.6 bn) credit guarantee scheme to throw a lifeline to small businesses and airlines buckling under the financial strain of the ongoing regional war in the Middle East, as per a Finance Ministry press release.

The nitty-gritty: The package is designed to provide credit support for firms affected by the war, with USD 52.5 mn specifically ring-fenced for the aviation sector. Micro, small, and medium enterprises will receive 100% coverage on incremental working capital loans, while larger firms, including airlines, will receive 90% coverage. Eligible borrowers can access support for loans worth up to 20% of their peak working capital utilization from January through March.

PLUS: Indian carriers will be eligible to borrow up to INR 15 bn (USD 157 mn) with a seven-year repayment tenure as Indian airlines are on the verge of stopping operations over prolonged fuel-price volatility and persistent airspace disruptions across the Middle East.

Why it matters: By backing additional loans of up to 20% of existing working capital limits, New Delhi is trying to cushion businesses from the rising cost of operating across an increasingly volatile India-Gulf trade corridor. The support package effectively serves as an indirect subsidy for sectors like textiles, aviation, and glass manufacturing. These sectors have been facing mounting pressure from higher freight rates, rising war-risk ins. premiums, shipment delays, and currency volatility — all exacerbated by the prolonged disruption of commercial activity between India and the GCC.

AUTO — India’s automotive dealerships are bracing for spillover risks from the war, even as April retail sales hit a record 2.6 mn units, up 12.9% y-o-y, Reuters reports. The sector has so far avoided widespread disruption, but early signs of stress are emerging, particularly in parts supply and cost structures, the Federation of Automobile Dealers Associations told the newswire.

Some disruptions have already surfaced in shipments of auto components from Europe, especially in the aftermarket and service segments. These bottlenecks could persist for months even if the conflict eases, reflecting the lagged nature of supply chain adjustments.

Why it matters: Rising prices of steel, aluminium, and freight are expected to compress margins across the value chain. Carmakers, including Maruti Suzuki, have flagged potential price hikes as input costs climb. While domestic prices of petrol, diesel, and cooking gas have held steady, increases in industrial LPG and aviation fuel point to underlying pressure. Any sharp hike in pump prices could dampen consumer sentiment, particularly in entry-level segments that have driven recent growth.

ECONOMY — India’s services sector regained pace in April as domestic demand helped offset weaker overseas business, according to the S&P Global’ India Services Purchasing Managers’ Index (pdf). The Services PMI Index rose to 58.8 from 57.5 in March, marking the strongest expansion since November 2025. A PMI reading above 50 indicates growth, while anything below the threshold signals contraction.

Domestic lift: Growth was supported by stronger local demand, ecommerce activity, and higher new orders, with firms also citing strong demand for relocation and logistics services. In addition, a shift from international to domestic suppliers due to the war aided transport activity.

Why it matters: External demand weakened, with the New Export Business Index falling by more than five points to its second-lowest reading in over a year. Surveyed firms cited the Middle East war and subdued inbound tourism as factors weighing on overseas sales. “Activity and new orders strengthened, even as new export orders eased, suggesting that demand is rotating from overseas markets to domestic consumers amid the Middle East conflict,” Chief India Economist at HSBC Pranjul Bhandari said.

CURRENCY — The INR weakened to a record low of 95.4 against the greenback on Tuesday, breaching its previous low of 95.3, as escalating US-Iran tensions rattled global markets, Reuters reports. The currency has declined about 4.5% since late February, reviving concerns over India’s vulnerability as a major oil importer. As of today, the currency stood at INR 94.6 against the USD.

The Reserve Bank of India (RBI) has stepped up intervention in spot and forward markets, with traders citing USD sales near the 95.4 level. The central bank drew down reserves and accumulated a large short-USD forward position to defend the currency in recent months, the newswire said.

Why it matters: The RBI is considering reviving high-interest deposit schemes for non-resident Indians and may cut the withholding tax on overseas bond investments to make Indian debt more attractive to foreign investors. Removing withholding tax could sharply improve post-tax returns on Indian fixed-income assets for diaspora investors, particularly those living in the Gulf region.

Oil surge pressure: Brent crude’s sustained USD 100 / bbl price has significantly worsened India’s macro outlook — fuelling concerns over inflation and current deficit and prompting agencies to trim growth forecasts.

The big story abroad

The wavering ceasefire in the US-Iran conflict is in the headlines this morning. Despite Iran's strikes on the UAE, US Defense Secretary Pete Hegseth has maintained that the truce still holds. President Donald Trump announced a “short” pause on US efforts to escort ships out of the Strait of Hormuz “to see whether or not the Agreement can be finalized and signed.” Echoing sentiments of de-escalation, State Secretary Marco Rubio confirmed that the offensive stage of Washington’s campaign is over.

Could we bid farewell to quarterly earnings? The Securities and Exchange Commission isconsidering dropping the mandatory requirement of quarterly reporting, opting to keep disclosures a semi-annual occasion. The move by the US regulator coincides with Trump’s call for deregulation for Wall Street.

Meanwhile, in the world of AI: Meta is developing a personalized AI assistant designed to streamline daily tasks for its global user base, the Financial Times reports, citing sources it says are in the know. The sources compared the initiative to services offered by OpenClaw, which enables users to deploy autonomous agents capable of executing complex tasks independently.

But isn’t AI a bubble waiting to pop? JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink say no. They have argued, in separate comments, that Wall Street’s massive investments in AI tech and infrastructure are justified. Fink argues that AI spending is the “opposite” of a bubble, saying that “we have supply shortages; demand is growing much faster than anyone has anticipated.”

Market watch

CAPITAL MARKETS — India’s capital markets regulator is moving to contain cyber risks from AI tools before they spread across market systems, according to an advisory note. The Securities and Exchange Board of India (Sebi) set up an expert team to study threats linked to AI-driven vulnerability detection tools and frame a common mitigation framework for regulated entities.

AI risk watch: The tools are meant to detect system vulnerabilities at scale and speed, but Sebi flagged risks around their possible exploitation, data confidentiality, application integrity, and output reliability. A coordinated approach to vulnerability management, information sharing, and monitoring is needed to prevent “a cascading impact” across the securities market, Sebi said.

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