Sep 24: US Banks Are Turning East, The (Vietnamese) Sneaker Shift

SRK fans rejoice. Three decades and 100+ films later Shah Rukh Khan has finally won his first-ever National Award for Jawan, sharing the Best Actor prize with Vikrant Massey for 12th Fail, at India’s 71st National Film Awards. Take a second today to do the open-arms pose to honour the King.

Now, let’s get into the Dispatch! 🚀

Today’s reading time is 7 mins.

The stock market ended lower on Tuesday extending losses to a third consecutive session amid concerns over a potential H-1B visa fee hike and uncertainty surrounding India-US trade talks.

The Global Chip Race Heats Up: In 2022, when the U.S. blocked exports of advanced AI chips to China, it triggered a worldwide scramble for semiconductor self-reliance. But for India, it opened a window of opportunity. A country that consumes vast amounts of electronics but has no homegrown chip industry suddenly had reason to chase its silicon dream. With the global supply chain shifting away from China, New Delhi launched the India Semiconductor Mission - a bold bid to build everything from chip design to fabrication, testing, and packaging on Indian soil.

A $18 Billion Push: As of this month, India has approved 10 semiconductor projects worth $18.2 billion, including two fabrication plants and several testing and packaging units. The crown jewel: Tata Electronics’ $11 billion fab in Gujarat, built with Taiwan’s Powerchip Semiconductor Manufacturing Corp. This plant will produce chips for AI, automotive, data storage, and more - a huge leap for India that, until now, had little role in the global chip map. Add to that the U.K.’s Clas-SiC Wafer Fab tie-up in Odisha, India’s first compound semiconductor fab for defense and EVs, and the ambition starts looking formidable.

The Roadblocks Ahead: But the road is anything but smooth. Experts warn that India needs more than “a few shiny fabs.” Building a deep, sustainable ecosystem is the real challenge. From ultra-high purity chemicals to specialized suppliers, infrastructure that avoids floods and vibrations, and robust IP laws, India must tick hundreds of boxes before it can dream of rivaling Taiwan or South Korea. Even incentives have their limits. While New Delhi is offering to cover 50% of project costs across fabs and testing units, analysts caution that subsidies alone cannot guarantee success.

Policy Pivot & Local Talent: The government has started to plug gaps. A new scheme encourages electronic component manufacturing, creating domestic demand that chip fabs can cater to. India also shifted from chasing only advanced 28nm chips to supporting all fabs, regardless of node size, a pragmatic move to build a foundation first. On the talent side, India has a rich pool of semiconductor engineers, especially in chip design. Global giants like ARM are expanding design work in Bengaluru, even talking about 2nm chips. Yet, much of this remains limited to validation work, as the core intellectual property is held abroad. Strengthening IP protection and enabling deeper design innovation will be crucial if India wants to move up the value chain.              

From Washington Policy To Mumbai Strategy: In a surprise move, U.S. President Donald Trump has imposed a hefty $100,000 fee on new applications under the H-1B visa program. Intended to regulate immigration and protect American jobs, the policy may have set in motion a game change for global banks and financial institutions. With visitor and work permits becoming more costly and uncertain, many U.S. lenders are recalibrating their global operations. Banks such as Citigroup, JPMorgan, and Goldman Sachs - already with substantial Global Capability Centers (GCCs) in India, are now eyeing even greater expansion of roles in Indian hubs to offset visa constraints.

India’s Global Centers: India’s appeal isn’t simply about replacing expensive U.S.-based workers. The country already has over 1.9 million people employed in its GCCs, with cities like Mumbai, Bengaluru, and Hyderabad housing operations for trading support, risk management, technology, accounting, and quant roles. These centers offer a potent mix: skilled talent, familiar processes, and infrastructure. For banks dealing with visa bottlenecks, India offers a ready-made backup: offshore but closely integrated. Also, it helps them maintain continuity when moving people globally becomes prohibitively complex or expensive.

The Catalysts & Challenges Ahead: Analysts believe that unless stricter bans on offshoring are enforced, the pull toward Indian tech hubs will only intensify. But this shift will depend on more than just policy. Key factors include clarity on regulatory frameworks, labor laws, compliance burden, cost structures, and protection of intellectual property, as banks are not just hiring; they’re embedding critical business, compliance, and technology functions. Another hurdle: uncertainty. As of now, the fee hike doesn’t apply to existing H-1B holders but future visa policy changes or trade and immigration law shifts could alter the ground. Banks are said to be proceeding carefully, avoiding rash decisions without clearer visibility into what comes next.

What This Means for India’s Workforce & Economy: For India, this is a moment of opportunity. More job functions are likely to be offshored, especially ones that are technology or data-centric. Revenue and investment in India’s GCC ecosystem are expected to jump. This not only strengthens the case for upskilling in tech, analytics, finance, and compliance but also for robust infrastructure in Indian cities to support this traffic: internet, reliable power, regulatory clarity, real estate, etc. Still, it’s not all upside. Competition will rise, both domestically among Indian cities, and globally from other low-cost hubs. India’s GCCs will need to ensure quality, data security, process maturity and cost discipline to stay attractive. Moreover, there’s a political dimension: New U.S. policies could swing again, affecting how secure India’s gains are in the long term.

GST 2.0 Bonanza takes effect: India’s new GST 2.0 reform, implemented on September 22, has slashed rates to boost consumer spending. Essentials like milk and butter now have the lowest or nil GST, while processed foods and beauty services drop to 5% from 18%. This change accounts for approximately 28% of rural and 26% of urban spending. Autos have won big, with small cars now at 18% GST and entry-level bikes becoming up to ₹7,000 cheaper. Additionally, insurance premiums are now exempt from GST, and hotels under ₹7,500 per night have a 5% GST.

Navratri Auto Boost: The new GST 2.0 reform and the start of Navratri have fuelled a sales boom for major automakers. Maruti Suzuki saw over 25,000 deliveries and received 80,000 inquiries. Tata Motors delivered 10,000 vehicles, and Hyundai recorded its best single-day performance in five years with 11,000 billings. The used-car market also saw a sharp increase, with Cars24 reporting a 400% jump in deliveries. Overall, the Nifty Auto index rose by 2%.

JLR Extends Its Halt: Tata-owned Jaguar Land Rover extended its production halt until October 1 following a September 2 cyberattack claimed by "Scattered Lapsus$ Hunters". The company, which had a prior £800 million cybersecurity deal, is working with UK authorities to restart securely. The incident has caused delays in repairs and parts supply, and adds to existing pressure on profits from US tariffs.

Atmanirbhar Goes Global: Tata Advanced Systems, a Tata Group arm, is setting up India’s first overseas defence manufacturing plant in Berrechid, Morocco. The facility, inaugurated by Defence Minister Rajnath Singh on September 22-23, will produce the Wheeled Armoured Platform (WhAP) 8x8 amphibious infantry combat vehicle. This move marks a shift from “Make in India” to “Make for the World,” with the new unit targeting the production of 100 vehicles annually.

Blinkit's Market Dominance: According to a report from BofA Securities, Blinkit has surpassed a 50% market share in the quick commerce sector, expanding its lead over competitors. This growth from a 40% share a year ago is attributed to a slowdown in expansion by rivals like Zepto and Swiggy's Instamart, as they focus on profitability. Blinkit continues to expand its network of over 1,750 dark stores, with plans to reach 2,000 by year-end.

Flipkart's Super.money: Walmart-backed Flipkart India plans to invest $300 million to expand its fintech arm, Super.money. The UPI app, now India's fifth-largest, is moving into lending and stock broking. The platform has already disbursed over $700 million through partners and is building a stock-trading platform to capitalise on India's booming retail investor base.

Easier Foreign Investment: SEBI and the RBI are in talks to streamline the entry process for foreign investors. The goal is to reduce registration time from six months to 30-60 days by standardising documentation. This initiative follows a period of weak foreign investment, with overseas investors selling a net $10 billion in Indian equities and bonds so far in 2025.