Sep 16: Green Ambitions of Kutch, Gold Shines Bright

Good morning! Google’s Gemini AI has peeled its way to the top of India’s App Store charts, fueled by the absolutely bananas “Nano Banana” trend. The image-editing AI model has already churned out over 500 million edits—from 3D figurines to Instagram’s latest obsession, the ‘Banana AI Saree,’ which turns selfies into retro 90s Bollywood throwback portraits. With 23 million new users in just two weeks, the race for consumer AI is feeling a bit… bananas.

Now, let’s get into the Dispatch! 🚀

Today’s reading time is 6.5 mins.

The Indian stock market ended in the red on Monday, September 15, as investors remained on the sidelines ahead of the US Federal Reserve's policy meeting scheduled for this week.

Adani Sets The Pace: When Adani unveiled its colossal Khavda renewable energy park it was clear the company aimed to redefine India’s energy sector. Spread across 538 square kilometres (five times the size of Paris) the hybrid solar-and-wind facility is designed to deliver 30 GW of green power by 2029, with talk of pushing capacity even further to 50 GW. Electricity from Khavda was first routed into the national grid in February 2024, marking a milestone in India’s clean-energy journey. Already, 5.6 GW is operational, and Adani has expanded into manufacturing solar modules, wind turbines, and even piloting India’s first off-grid green hydrogen plant.

Reliance Joins the Race: Not to be left behind, Reliance announced an even more audacious plan at its annual general meeting in August 2024. On 5,50,000 acres of arid Kutch terrain (three times the size of Singapore) the group intends to build what could become the world’s largest single-site solar park. At peak, it claims it will deploy 55 MW of solar modules and 150 MWh of battery containers every day, a pace few projects globally can match. Anant Ambani declared the park could meet nearly 10 per cent of India’s electricity needs within a decade. Yet, Reliance has kept details like final capacity and timeline under wraps, leaving questions about how quickly such ambitions can translate into reality.

Why Kutch? The Gujarat government has enabled these mega projects by leasing vast tracts of wasteland at concessional rates. The attraction is obvious. Kutch receives over 300 days of sunshine a year, with solar radiation averaging 5.5–6.0 kWh per square metre. Strong, consistent winds make hybrid projects more reliable, while sparse population means minimal displacement. Ports like Mundra and Kandla offer logistical advantages for both imports and exports of equipment and power transmission. These massive bets are tied to India’s larger climate goals: 500 GW of renewable capacity by 2030 and net-zero emissions by 2070.

The Other Side of the Story: Yet, not all is rosy. Environmentalists caution that classifying salt deserts as “wastelands” ignores their ecological richness - flamingos, desert foxes, and migratory birds rely on this fragile habitat. With large projects exempt from environmental impact assessments, concerns mount about unchecked expansion. Locals, meanwhile, weigh disruption against opportunity.

Gold’s Power: For centuries, gold has been the go-to hedge when economies wobble. Inflation, sanctions, financial repression, these are the usual suspects behind price surges. Yet in 2025, as gold breaks a four-decade inflation-adjusted record, neither inflation nor geopolitics is truly to credit. The story lies elsewhere: in real returns and investor psychology.

Not The ‘80s All Over Again: At its January 1980 peak, gold hit $850 an ounce, equivalent to $3,524 today. Inflation was running at nearly 14% and capital controls were tightening after Jimmy Carter froze Iranian assets. Those conditions don’t apply today. Inflation peaked in mid-2022 at 9.1% and has since fallen, with expectations now hovering around 2.3%. Geopolitical shocks like Russia’s invasion of Ukraine and sanctions were largely priced in long before gold began its recent ascent.

The Cost of Holding Gold: Owning gold isn’t free. An exchange-traded fund (ETF) typically costs about 0.5% per year, while physical gold requires storage and insurance. Compare that to U.S. Treasury Inflation-Protected Securities (TIPS), which currently offer a 1.67% guaranteed return above inflation. Choosing gold over TIPS means giving up about $79 a year in potential income on each ounce. For much of 2018 to 2022, investors demanded compensation for bearing these costs. Then, curiously, the tide turned. By 2023, investors were willing to pay as much as $91 a year just for the privilege of holding gold.

What Changed? It wasn’t inflation or war. Instead, it was the fall in real interest rates. As yields on safe, inflation-protected assets declined, the opportunity cost of holding gold dropped. Investors effectively bid up gold, not because it suddenly solved economic risks, but because the alternative, earning shrinking real returns elsewhere, looked less appealing. For investors, the message is: don’t confuse glitter with fundamentals. To understand markets today, look not at inflation headlines, but at TIPS yields and equity valuations. Gold may be breaking records, but the real story lies in what its shine says about the underlying fear of weak growth.

Snub Signal: India is negotiating with Russia to purchase additional S-400 air-defence systems, following their "game-changer" performance in a recent military exercise. This comes as the final two of the five regiments from the $5.5 billion 2018 deal are scheduled to be delivered by 2026–27. Russian Foreign Minister Sergei Lavrov praised India for its resilience in the face of US pressure on Russian oil trade.

AI For Bharat: According to a Niti Aayog report, the adoption of Artificial Intelligence could add $500-600 billion to India’s GDP by 2035 by increasing productivity. The report, titled 'AI for Viksit Bharat: The Opportunity for Accelerated Economic Growth,' projects the financial services and manufacturing sectors to benefit the most. Specifically, AI could contribute $50-55 billion in financial services and $85–100 billion in manufacturing.

Andhra shrimp crisis: According to Andhra Pradesh Chief Minister N. Chandrababu Naidu, US tariffs have led to a loss of approximately ₹25,000 crore for the state's shrimp industry, resulting in the cancellation of 50% of its export orders. Andhra Pradesh accounts for 80% of India's shrimp exports, valued at around ₹21,246 crore annually. The total tariff burden on the industry is almost 60%, including a 25% reciprocal tariff, a 25% punitive duty, a 5.76% countervailing duty, and a 3.96% anti-dumping duty.

Data centre boost: The draft National Data Centre Policy proposes a 20-year tax holiday for developers who meet targets on capacity, power efficiency, and job creation. Subject to Finance Ministry approval, it also offers GST input tax credit on capital assets.

US-India trade talks: The US chief negotiator, Brendan Lynch, is in India for trade talks, continuing negotiations for a Bilateral Trade Agreement (BTA) that started in March 2025. The discussions are focused on a "just, balanced, and mutually beneficial" deal. The talks are taking place despite recent US tariffs, including a 50% duty on all Indian goods, on top of a 10% baseline duty, which were implemented in two phases.