The Leaky Bathtub Paradox 

Dear Reader,

Two pipes are connected to a tank: Pipe A can fill the tank in X days, while Pipe B can empty it in Y days. If both pipes remain open throughout the year, will the tank be more filled or more emptied by the end of the year? 

We’ve all racked our brains over such questions in high school math class.

Why are we talking about it now? 

Well, the SIP tank saw the inflow tap gushing at over ₹260 billion for the second month straight—a record high! But there’s a leak: SIP account closures are happening faster than ever. 

Speaking of bathtubs, it’s also the Valentine’s week. So, why don’t you grab a glass of your favourite bubbly and dive into the frothy currents of finance, policy, and a dash of geopolitical drama.

Let’s start with the RBI’s tightrope walk between rate cuts and reality checks. New RBI Governor Sanjay Malhotra’s debut has been smooth. In his measured press conference, he sliced the repo rate by 25 bps—the first cut in five years. But was it a strategic nudge or a mere symbolism? Like adding a sprinkle of cinnamon to bitter coffee, the move offered momentary comfort without sweetening the long-term brew. As this analysis notes, global jitters kept the RBI from going all-in.

Then came the real plot twist: a speculated $15 billion intervention to rein in the rupee’s freefall. Governor Malhotra, like a stern parent confiscating candy, reminded markets that “nothing is off-record”. Translation: Speculate responsibly, kids. As Richard Fargose argues, the RBI’s heavy hand is here to ensure markets move, not throw tantrums. Burning reserves? Maybe. But when the house is on fire, you grab the hose first, ask questions later.

Then there’s the great fiscal tug-of-war. Even BJP-ruled states are now chanting the Opposition’s favorite mantra: “Give us our 50%!” The Centre currently shares 32-33% of tax collection with states, hiding behind cleverly-labelled cesses. It’s like splitting a pizza but keeping the toppings for yourself. Why the sudden unity? Answers, TK Arun in this must-read piece. 

TK Arun also makes a compelling case for the government to clarify why electoral bonds have found mention in the Income Tax Bill, 2025. Does the government propose to reintroduce the electoral bond in a different form? If it is meant only to apply to past accounting periods when the electoral bond was a valid instrument, why does the new bill not say so? 

Meanwhile, the government’s gold bond scheme lost its Midas touch. Once a 128%-return darling, SGBs were axed after customs duty cuts triggered a gold import frenzy. As Sreedhar Sattiraju explains, it’s like banning ice cream trucks because everyone’s getting brain freeze. But that’s not stopping us from screaming, “We all want ice cream”. And proof, of course, of fundamental growth indicators. When the RBI cheers “Buoyant demand!”, markets retort “Prove it!”. Despite tax cuts and rate trims, ₹75 trillion in equity wealth has vanished—equivalent to 23% of India’s GDP. Dhananjay Sinha’s take is blunt: markets aren’t buying the growth narrative. Corporate earnings? Underwhelming. Rate cuts? Inconsistent. It’s like promising a fireworks show and handing out sparklers. So, what must investors make of the capital that has evaporated from markets since September? Is there cause for panic or an underlying opportunity in near-reasonable valuations? Market veteran Chokkalingam G lays out a compelling argument. 

And then there’s ESG investing, caught between idealism and greenwashing. Global sustainable funds hit $3.2 trillion, but as Sourav Mishra warns, the sector’s credibility crisis could make it the next Theranos—minus the black turtlenecks.

Amidst all this drama, there are more spicy subplots refusing to fade into the background. For one, Donald Trump is back with his favorite toy: tariffs. Steel, aluminum, and now “reciprocal” tariffs. But Ajay Srivastava argues India holds the cards here. US supply chains rely too heavily on Indian exports—it’s like threatening to boycott caffeine while chugging espresso. And as our Prime Minister boldly declared, MAGA+MIGA=MEGA prosperity. A winning formula or wishful math? Only time will tell. 

Closer home, AI is creeping into courtrooms. Can algorithms replace lawyers? Shruti Mahajan thinks not. Sure, bots can draft contracts, but justice needs nuance—like knowing a tomato belongs in pasta, not (ahem) fruit salad.

So, back to our leaky bathtub. SIP inflows are soaring, but closures hit a five-year high. Are investors chasing quick thrills over compounding magic? It’s like planting a sapling and uprooting it weekly to check the roots. The ₹75 trillion question: Will patience prevail, or will FOMO drain the tub dry?

As the RBI juggles rate cuts, Trump’s tariffs simmer, and ESG soul-searches, one thing’s clear: India’s economy is never boring. It’s a masala chai—spiced with chaos, stirred with hope, and best served with a side of humor.

Stay curious, stay invested (no, seriously)!

P.S. - Remember, patience in markets is like a long soak in a hot tub—uncomfortable at first, rewarding if you don’t bail too soon.

 - BasisPoint Insight