India’s Lithography Moment and the European Tilt

ASML-Tata MoU

On 16 May, with Modi and Dutch Prime Minister Rob Jetten present, Tata Electronics and ASML signed a Memorandum of Understanding to equip Tata’s $11 billion fabrication plant in Dholera, Gujarat. ASML will supply its deep-ultraviolet lithography tools and support talent development, local supply-chain build-out, and R&D for what is set to become India’s first commercial fab, targeting roughly 50,000 wafers a month. Taiwan’s Powerchip is licensing the process technology, spanning the 28nm to 110nm nodes.

It is historic. India currently has no front-end wafer-fabrication capacity; securing the world’s leading lithography supplier gives the Dholera project credibility and a functioning backbone. The 28nm is a mature node, valuable for automotive, industrial, and many consumer chips, but several generations behind the leading edge. The deal lays a foundation stone. Schedule, yield, customer retention, and the pace at which Tata develops local expertise will determine whether the fab becomes economically viable. In this industry, the gap between investments and the profitability is uncomfortably wide.

What makes the deal strategically significant is the larger pattern it represents: a deepening India-Europe collaboration spanning economy and defence. The fab follows the India-EU Free Trade Agreement concluded in January, the India-EFTA trade and economic partnership, and the India-EU Defence and Strategic Partnership; alongside bilateral defence arrangements with Italy and a newly elevated strategic partnership with Sweden. Currently, lithography is ASML’s domain, but the surrounding fab ecosystem is where Japanese suppliers lead. India’s ambition to join the top tier of chip-making nations already has a Japanese angle. Renesas is building a OSAT facility in Gujarat and Tokyo Electron is partnering with Tata Electronics.

Two Bilateral Milestones with Japan

On 6th May, Japan and India signed agreements on quantum science and healthcare innovation. The headline outcome was a Memorandum of Cooperation on health and medical devices linking Japan’s Agency for Medical Research and Development with the Indian Council of Medical Research and the Department of Science and Technology, alongside expanded cooperation under India’s National Quantum Mission covering quantum computing, secure communications, and sensing. The two sides framed the agreements as opening a new phase of science-and-technology cooperation, pairing Japan’s advanced capabilities with India’s research talent.

Five days later, on 11th May, the 2nd India-Japan Economic Security Dialogue convened in New Delhi at vice-ministerial level. The dialogue advanced cooperation across the five pre-agreed priority sectors (critical minerals, semiconductors, ICT including AI and telecom, clean energy, and pharmaceuticals) with particular emphasis on 6G, Open RAN, and “trusted connectivity,” and on the public-private partnerships needed to build resilient supply chains.

The Quad Foreign Ministers’ Meeting

The Quad (comprising India, Japan, the United States, and Australia) held its foreign ministers’ meeting in New Delhi on 26 May. The focus was on the integration of maritime surveillance capabilities and real-time information sharing across the Indo-Pacific, supply-chain resilience, and critical minerals. The more important signal concerned the grouping’s evolving character: a shift away from the appearance of an anti-China military bloc toward concrete deliverables in maritime awareness, energy, and minerals. That orientation suits New Delhi, which has long resisted a hard-alliance framing, and it aligns with Tokyo’s Free and Open Indo-Pacific vision. For Japanese firms, the Quad’s minerals and supply-chain workstreams are the elements to watch, dovetailing directly with the bilateral dialogue held a fortnight earlier.

 The Third India-Nordic Summit

The diplomatic centrepiece of Modi’s five-nation tour (15–20 May) was the Scandinavian leg. After the Netherlands, he travelled to Sweden, where ties were elevated to a Strategic Partnership and the two sides launched a Joint Innovation Partnership 2.0 and an India-Sweden Technology and Artificial Intelligence Corridor, with a goal of doubling bilateral trade within five years. He then arrived in Oslo for the 3rd India-Nordic Summit on 19 May joined by the leaders of Norway, Sweden, Finland, Iceland, and Denmark.

The summit’s highlight was the elevation of India-Nordic ties to a “Trusted Green Technology and Innovation Strategic Partnership,” a formal upgrade pairing each Nordic country’s specialism — Iceland’s geothermal and fisheries, Norway’s blue economy and Arctic navigation, Sweden’s advanced manufacturing and defence, Finland’s telecom and digital technologies, Denmark’s cybersecurity and health, with India’s engineering scale. Leaders agreed to leverage both the India-EU FTA and the EFTA partnership to expand trade and investment, with the EFTA bloc reiterating its $100 billion investment target. The visit ended in Italy (19–20 May), where cultural-heritage agreements were announced. The strategic logic: India is broadening its base of tech partners, energy suppliers, and export markets.

Rubio’ Olive Branch and the Post-Beijing Recalibration

US Secretary of State Marco Rubio’s first official visit to India (23–26 May) is best understood against what preceded it. On 14–15 May, President Trump’s summit with Xi Jinping in Beijing produced a stabilising framework but little of substance: bereft of a trade deal or a joint communiqué. The widely shared verdict was of a ceremonious encounter that returned Washington to the reality of a difficult relationship in which Beijing holds considerable leverage.

Rubio arrived in New Delhi a week later in the manner of an olive branch. He called India-US joint defence production “ideal,” described India as one of Washington’s most important strategic partners, conveyed President Trump’s invitation for Modi to visit Washington, and expressed confidence that the bilateral trade deal would close soon. The plausible reading is that the underwhelming Beijing summit has sharpened American appreciation of its partners. New Delhi’s response, however, has been muted: still wary of an unpredictable white house.

Economic Headwinds Intensify

The macro backdrop darkened on several fronts. The India Meteorological Department’s (IMD) updated forecast put the 2026 southwest monsoon at 90% of the long-period average, with a 60% probability of deficient rainfall and rising El Niño risk. With nearly half of India’s farmland rain-fed, a weak monsoon threatens crop sowing, reservoir levels, rural incomes, and food inflation, while elevated heat strains power and water systems. The effects would be felt across both rural and urban India.

Simultaneously, the costs of the West Asia war continued to accumulate into inflation. The rupee weakened to nearly 96 against the dollar by mid-May, down more than 6.5% since January, as Brent crude stayed elevated and foreign investors withdrew over $20 billion from Indian markets between January and May. There was, however, a clear bright spot: domestic demand for automobiles. Following the GST 2.0 rate cuts of late 2025, passenger-vehicle sales have run at double-digit growth across several months, with the industry on course for record volumes. The principal beneficiary is Maruti Suzuki, the market leader.

The $4 Billion Bet on Turning Coal into Gas

On 13 May, the Union Cabinet approved a ₹37,500 crore (roughly $3.9 billion) scheme to promote surface coal and lignite gasification, converting India’s vast domestic coal into synthetic gas for power, fertilisers, and chemicals. The programme targets the gasification of about 75 million tonnes, on the way to a national goal of 100 million tonnes by 2030 and offers capital incentives of up to 20% alongside 30-year coal-linkage guarantees. The government expects it to mobilise $26–31 billion in investment and create some 50,000 jobs across roughly 25 projects.

With the Hormuz disruption stranding cargoes and inflating the import bill, the scheme aims to cut dependence on imported LNG (over half imported), urea, ammonia (almost entirely imported), and methanol. India holds an estimated 401 billion tonnes of coal reserves, and the government’s focus is on self-sufficiency. The environmental case is more solid: gasification is cleaner than direct combustion but remains carbon-intensive, which is where Japanese firms could find a role, given that clean energy is one of the five priority sectors in the India-Japan economic-security framework.

Looking Ahead

June opens with the India-US trade deal in its reported final stretch, a negotiating round scheduled for 1–4 June, and the monsoon’s actual onset about to test the IMD’s cautious forecast.

In the meanwhile, many prominent economists are warning that the oil-price shock from the West Asia war are yet to set in; WPI inflation is elevated, the current account deficit is set to widen, foreign investment has turned net-negative, and forecasters from Morgan Stanley to the IMF now see FY27 growth sliding toward mid 6%. Yet the same economy continues to be called the world’s brightest spot, posting record car sales and $120 billion in private capex even as the gloom mounts.

If there is one safe prediction about the Indian economy, it is that it remains too large, too informal, and too contradictory for anyone to forecast with confidence.